by Dr. Roy Cordato
Senior Economist, Emeritas
If an industry can only provide its product by using the state to force others to deal with them it is not a industry that can be functional in a truly free market. And this is the case with third party solar power sales. In a recent News and Observer article Rep. John Szoka plugs his so-called “energy freedom” legislation allowing off-the-electric grid third part sales from solar farms directly to consumers by saying “I believe in free markets and I believe in property rights. This allows property owners to use their property as they see fit.” This is not just about single family homes with panels on their roofs but, as the N&O points out, big consumers like Walmart, Lowes, Target, and Macy’s.
Here’s the problem, users and producers of solar power benefit from a huge number of government granted privileges all of which are necessary in making electricity from solar a viable option to consumers. There are state and federal tax incentives and mandates that the utility companies buy any excess power generated by solar at retail prices, i.e. the same price that it sells it for. But what might be the biggest subsidy stems from the fact that solar panels can only supply electricity when the sun is shining. It requires back-up electricity generation from regular power plants in order to have any chance in the market at all. The next time someone says that solar is a reliable form of energy ask them if, using only the panels, you will be able to light your house at night–other than with a kerosene lamp–heat your house during a blizzard, or cook dinner after 7 in the evening. This is where the forced subsidy comes in. If you are a user of off-the-grid solar power, the electric company is required by law to connect you to the grid and has to provide you with power during what amounts to more than half of any given day. This imposes a number of costs on electric companies, which I wouldn’t typically care about, but these costs will all end up as rate hikes for utility customers generally.
Whether or not this arrangement is a good or bad thing should be debated on its own merits, carefully looking at who benefits and who loses. But one thing this arrangement is not even a distant cousin to is the free market. In fact, third party sales of solar power can only be sustained in a market dominated as it is by utility regulations and government subsidies.