Will the End of Solar Subsidies Kill or Strengthen the Solar Industry?

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by Scott Thrill. Originally posted on SolarEnergy.net 

The scorching solar industry needs a shock doctrine to stabilize its forthcoming deflation, once the Obama administration’s Investment Tax Credit is repealed. Stanford has the sloppy manual.

“Instead of falling off a cliff, the industry would instead have to weather a series of smaller shocks as it works through a critical developmental phase,” explained Stanford Graduate School of Business professor Stefan Reichelstein’s new study, co-authored with research associate Stephen Comello, offering an three-stage alternative to solar’s suicide dive. “The researchers’ findings suggest that the industry should be able sustain its momentum through those smaller shocks, leaving it poised to achieve true cost competitiveness by 2025.”

Of course, like all economic shock doctrines — deregulation, austerity, ad nauseam — this medicine would be better if it wasn’t delivered at all.

Repeal of the American ITC that sparked the solar sector’s accelerating success over the last few years is all set for the end of 2016 — which helps no one. Especially when global fossil fuel subsidies are reaching $550 billion annually, an imbalance specifically designed to suppress renewable energy momentum and funding. Using that easily available math, a 30 percent tax credit for U.S. solar subsidies — an industry that  still only accounts for one percent of national energy generation — suddenly adds up to less than zero.

Although Stanford’s heart is in the right place when it fears solarization’s runaway train could roll right off the tracks once the ITC is killed, its argument for gradual electroshock therapy just isn’t the answer, according to the Solar Energy Industries Association.

“Unfortunately, the report looks at the solar Investment Tax Credit in a vacuum, without any consideration given to the 100-year history of preferential tax treatment enjoyed by fossil fuels,” countered SEIA CEO Rhone Resch, recalling the century-long tradition of generously propping up the oil and gas markets . “The discussion in Congress should be about extending the ITC at current levels, not ending it.”

It’s something of a no-brainer, although Resch agreed that SEIA and Stanford were both worried about withdrawal of the ITC slowing solar’s future as a green power player. But the fact that Stanford’s Graduate School of Business fails to mention the $100 billion in subsidies the fossil fuel industry will continue to receive over the next decade is something of a sticking point, if it wants the American people to take its reports seriously. Once you factor in that Reichelstein ended his uneven study with a reminder that the rest of Earth will still exponentially solarize, no matter what the U.S. does, and you have another indication his scholarship could use some polish. Back to class, professor.

[DISCLOSURE: This analysis was written (and edited) by UC Berkeley graduates. Go Bears!]

Solar installers photo courtesy of Grid Alternatives.