Thanks for Giving Me Your Tax Money
Now that tax day has passed, I must thank you, my fellow federal taxpayers. You all are the wind beneath my solar panels.
Pardon me for mixing energy metaphors, but it’s only appropriate that I express appreciation for the generous subsidy you provided for the 28-panel, four-array, 8,540-watt photovoltaic system I installed on my metal roof last year. Thanks to the investment tax credit, I slashed my 2016 federal tax bill by $7,758.
Before going further, let me be clear: I’m opposed to all energy subsidies—unless, of course, I’m the one collecting them. And thanks to the incentives for rooftop solar, I’ve snared three subsidies.
In addition to the federal subsidy, Austin Energy (our city-owned utility) paid $6,593 of the cost of my system. Thus, after subtracting local and federal subsidies, the net cost of my 8.54-kilowatt system was $18,100, or about $2.12 per watt of installed capacity. I’m also getting an ongoing subsidy that pays me far more for the electricity I produce than what other generators get in the Texas wholesale market.
My panels are producing about 12 megawatt-hours of electricity per year. In 2016, according to the Electric Reliability Council of Texas, the average wholesale price of electricity was $24.62 per megawatt-hour. But Austin Energy pays me $106 for each megawatt-hour my system produces. Therefore, I’m getting more than four times as much for my solar electricity as other generators in Texas. I get that price regardless of whether the grid needs the juice from my panels or not.
In the 12 months since I installed the system, half of my monthly electric bills are showing up with a negative balance. I figure my solar panels will pay back their cost in 14 years and that the return on my investment is about 7%.
Recently, one of my neighbors also had panels installed. But fewer rooftop solar projects are being installed in low-income neighborhoods. That’s true in California, which leads the country in solar-energy capacity. According to a study done for the California Public Utility Commission, residents who have installed solar systems have household incomes 68% higher than the state average. Ashley Brown, executive director of the Harvard Electricity Policy Group, calls the proliferation of rooftop solar systems and the returns they provide to lucky people like me, “a wealth transfer from less affluent ratepayers to more affluent ones.” It is, Mr. Brown says, “Robin Hood in reverse.”
Do I feel bad about being a solar freeloader? Yes, a little. As Mr. Brown and others have noted, I’m now paying less to maintain the electric grid. That means that the local barista or school janitor—people who likely can’t afford solar panels—are paying incrementally more for the grid’s maintenance and operation. And the more that people like me install panels, the more those baristas and janitors have to pay.
But don’t trouble me with all that. I’m doing my part for the polar bears. Indeed, I’m a prime example of the “green” economy: I’m socializing the costs of my scheme and privatizing the profits. And I’m feeling virtuous while doing so.
It doesn’t get much better than that.
Mr. Bryce is a senior fellow at the Manhattan Institute and author of “Smaller Faster Lighter Denser Cheaper: How Innovation Keeps Proving the Catastrophists Wrong” (Public Affairs, 2014).