Stealing Sunshine

David Bergeron, the founder and president of a company that makes solar powered refrigerators, thinks that subsidies for on-grid solar power are a bad idea:

Here is the real problem: Subsidies make solar appear viable today, so where is the motivation for an entrepreneur to risk money, or even focus on developing real energy alternatives when solar is “almost” there? How can an inventor justify striving with the effort it takes to really develop something great when he is competing against a straw man technology which can provide power at almost the same cost of traditional power sources today? But of course it really doesn’t.

The answer is he can’t justify the effort, so the next great thing is not developing, at least not with the sense of urgency it should be. Why enter a contest when you are competing against someone with an unfair advantage? You may be the faster swimmer, but your competitor is using flippers.

Solar subsidies are a placebo which is giving the general public a sense of security about our energy future and is robbing the motivation of those entrepreneurs that could actually address our energy problems. Subsidies are much worse that just wasteful, they’re diabolical. They lull us into thinking we have almost solved the problem and they hinder us from seeking the real solutions.

Bergeron believes that Solar PV systems are hopeless and explains his views here.

I got this link via Dave Schuler, where the commenters come down on the side of a carbon tax, which I have historically been quite amenable to. I say “historically” not because I’ve changed my mind, but because some of the comments have me thinking about some stuff. The goal of a carbon tax of the revenue-neutral variety would be that it would actually take comparatively little money out of the economy while rewarding desirable behavior and condemning undesirable behavior.

Commenter TastyBits points out the potentially deleterious effect this would have on manufacturing. Manufacturing would likely be one of those areas hit the hardest. Previously, I’ve mostly thought of this in the context of “higher prices”… but that would be okay because we’d have more money. Those items that require more energy and result in more pollution would become more expensive, while other prices wouldn’t, and it would all even out to some degree due to the tax rebate or lower taxes.

Except that an obvious solution, from a manufacturing standpoint, would simply be to move more of the manufacturing offshore where they would not have the higher energy costs. The solution to this would be a carbon-based tariff. Which maybe is a good idea! But I don’t know what ramifications that would have on all sorts of trade agreements. Maybe it’s quite worth doing anyway, but a lot of it is out of my depth. A lot of the market sorts that think that a carbon tax (or cap and trade) is the best way to handle this seem to be steadfastly against tariffs of any kind. I don’t know if they make an exception here, and it seems like failing to make an exception would be problematic.

The other issue is how much decreased demand in the US would affect global demand and pricing. Assuming that the oil will be explored anyway, and that it will be refined somewhere, if they get more of it and we get less of it, what difference have we made? Maybe something in terms of air quality, or something else in terms of national security, but we could lose ground if (for instance) refining practices in China actually produce more emissions than refining practices here. If they’re buying, refining, and using more of it, that could be a net loss.

The next area of further thought involves coal. If we ween ourselves off of coal, will we still be mining it for export? If so, have we made any environmental gains? If not, and some relatively people in some relatively hard up places are sitting on a lucrative mineral that they can’t use, how exactly is that going to fly? On the other hand, if we push emission costs up high enough, perhaps clean coal burning would become more economically worthwhile. Or it might be more profitable for the miners to simply sell it abroad and let them burn it where such things aren’t so taxed.

Two of the primary arguments for taxing carbon, or subsidizing non-carbon, remain:

First, the extent to which we subsidize fossil fuels. This is an oft-made claim, though a lot of the things included are subsidizing something else which uses carbon. This is a distinction with a difference when roads, for instance, subsidize a Volt just as much as it subsidizes an Explorer (and the latter pay more in gas taxes). I also don’t consider “We accept money in exchange for them being able to explore on public lands” to be a subsidy, even though it is sometimes cited as one. Others we should consider correcting regardless of what we do elsewise, if I had a clearer idea of what they are (note: I am disinclined to include any tax breaks we give other industries as that becomes a business tax break/subsidy rather than an oil/coal one).

Second, carbon taxes simply internalize the externalities. The problem here is that we have comparatively little idea what the externalities are. It would seem more than fair, for instance, to tax the coal industry in accordance for what we spend cleaning up the environmental damage we do. A lot of it, though, is guesswork. Even if we agree that AGW is happening, man-caused, and a serious threat, we don’t completely know what the end-result will be. We have estimates that range from the optimistic to the pessimistic, and even within those estimates seem to be a variation on the particulars. There are no disinterested parties here. We don’t know how much of the damage can be mitigated with how much of a reduction in fossil fuels.

This isn’t my long way around of suddenly saying that I am against carbon taxes. I have, however, shifted away from my enthusiasm for them as one of the more obvious solutions involved. If subsidies are also problematic, and I have issues with the next round of CAFE standards, I haven’t a clue where that would leave me.

Will Truman

Will Truman is a former professional gearhead who is presently a stay-at-home father in the Mountain East. He has moved around frequently, having lived in six places since 2003, ranging from rural outposts to major metropolitan areas. He also writes fiction, when he finds the time.

17 Comments

  1. I don’t think we can ever really quantify the costs of global warming. Many of the counter-factuals for comparison are simply unknowable. And many of the effects aren’t strictly speaking economic costs in the first place. What is the value of a species?

    What it seems to me that we can do is go technocratic (Hi, Murali!) and base our actions on the best judgments of the scientific experts. What is the highest level of atmospheric CO2 we can live with before we start to see Really Bad Things Happen? From what I’ve read we’re already at or beyond that point, so our ultimate goal should be zero net emissions. And the “net” part of that sentence is the really important thing to keep in mind.

    I’m somewhat encouraged by the link TVD posted (thanks, Tom!) to some university research into sequestering atmospheric carbon. I’ve seen similar things in Scientific American mag. Apparently it’s economically feasible to suck a ton of carbon out of the air for less cost in energy than you get from burning the fuel to make electricity in the first place. It sounds a little like a perpetual motion machine but apparently the thermodynamics can actually work out.

    So… this suggests to me a path forward if we were to politically decide that carbon-neutrality was a worthy goal. The government should issue carbon permits at a level equivalent to current usage and they would be required to pump, mine, or import carbon fuels. These would be auctioned with the proceeds distributed pro-capita, probably through a refundable tax credit. The government would then, over a period of several years, probably a couple of decades or so, reduce the yearly allotment of permits that are issued. And this is key: Permits could also be earned by permanently sequestering carbon by whatever means. This would create a market opportunity for carbon-sequestration as an industry in it’s own right.

    Eventually, we would reach a point where the only permits available are the ones earned by companies doing sequestration and the price of carbon fuels would accurately reflect the cost.

    Of course there are going to be trade issues, but they’re not insurmountable. Given the political will. That’s always the problem though, isn’t it?

    • Truth be told, I am half-way to simple nihilism on all of this, at least when it comes to any centralized solution. I know that in the eyes of some this makes me an anti-government maniac who should just go ahead and move to Somalia, but I don’t actually want it to be true. I also don’t want to make all of these sacrifices and then have to deal with the fallout anyway, or to find out it was unnecessary because the solution was there all along (sequestering atmospheric carbon, nuclear fusion, whatever). But mostly, I found our inability to nail down specifics to be highly disconcerting. Or maybe it is more nailed down than I think. I just know that it varies greatly between one person and the next who believes that something must be done and who I assume know more than I do.
      • It’s all a scatterplot. You draw a general trend, and you’re probably right.
        This isn’t one of those things that is super easy to predict, as you have MANY tipping points. When do we lose England, for example? (england is only warm because of ocean currents — if they divert north, England gets cold in a hurry).

        OTOH, we are pretty certain of a good deal of stuff ..

  2. There are a couple presumptions underlying subsidization of non-oil power sources that I think make sense, at least to me.

    1. New technologies that are bound to become as widespread as energy source tend to scale up rather dramatically. Photovoltaics have come down in price by 95% over the last 20 years. Toyota lost thousands of dollars on every single first generation Prius that they sold. Windmill farms, which were an environmentalist wet dream 10 years ago, are now cost-effective in many places. It makes perfect sense to subsidize the initial development of technologies that will predictably come down dramatically in price as they are mass-produced.

    2. Due largely to the centrality of energy consumption to industrial America, current energy sources are subsidized on million different levels: oil depletion allowances, our military presence in the Persian Gulf, federal waivers and limitations on nuclear power industry liability–all of these are direct and indirect subsidies on energy sources. When it is so vital to our common long-term interest that we find different energy sources, asking entrepreneurs to overcome these inbuilt subsidies is making it a task too difficult for small entrepreneurs to confront.

    Part of where the government can be particularly useful is in recognizing our long-term interests, and providing the structure and incentive system to align the short and medium-term interests of individuals with the long-term interests of all of us. To my mind, incentivizing the development of new energy sources and techniques this bill perfectly.

    • Forgive the prose above. I tried dictating it on my iPad, and the results have convinced me never to try it again.
    • What you say makes a degree of sense, but Bergeron makes a couple following counterpoints:

      1. Investment in solar PV is a dead end (follow the second link to see why). Now, this may be true or may not be true. He gives what seem like good reasons to believe it is true and I can only assume he knows a heck of a lot more about it than I do. However, I am half-inclined to say “What’s the harm in trying?”

      2. His answer to that makes a disturbing amount of sense. The more we subsidize solar, the more it provides an illusory solution. If it’s not a solution, it sucks the oxygen out of things that might actually have more impact and be economical. What you say about inbuilt subsidies inhibiting entrepreneurialship, he says about Solar PV subsidies.

      Some of it depends on how much solar is being subsidized. He makes it sound pretty significant – in a different ballpark from the subsidies we grant other forms of energy on a per-kwh basis.

      (Hey, I think you dictate to the iPad better than I actually type!)

      • I think the question is, “other than solar, what IS there? Forget what might be viable after twenty years of technology development. What have we got RIGHT NOW?”
        • Interesting, Duck. Not the position I would expect you to take.

          I’m not sure the extent to which we can demand RIGHT NOW, though. Even solar’s boosters agree that solar’s viability right now is limited. The argument is that it will be more viable in the future.

          • The problem is that we’re hearing that this is a RIGHT NOW problem. We hear that carbon reduction needs to happen RIGHT NOW. That weather effects are occurring RIGHT NOW. That we’re doing RIGHT NOW things that are changing the world RIGHT NOW.

            So, okay, the world will die RIGHT NOW unless we do something RIGHT NOW. And the only right-now thing is solar. Nuclear fission is something something Fukushima SOLAR IS THE ANSWER okay?

          • DD,
            stop talking with the nutcases. anyone who doesn’t want some sane nuclear stuff…
            *nun nun nun*
            Oh, wait… So even the people who DO want nuclear energy should be willing to say we don’t secure our nukes at all well???
            Outsourcing, Contracting, Consultants that aren’t listened to.

            And you wonder why people are upset?

            Now I’m getting sidetracked. DD, nuclear isn’t the answer. But it’s part of a comprehensive strategy.

        • Without subsidies? Hardly anything. Lots of people like to point to nukes but that’s ALWAYS been subsidized via the Feds taking responsibility for any big accidents. Otherwise they would never be able to get insurance and without insurance Wall Street won’t touch the things. (They’re not particularly enthusiastic as it is.)

          Wind is actually pretty good anymore depending on location.

          Want to make a fortune? Figure out some good mass storage tech.

    • If they returns to scale are really predictable, then they don’t need subsidies. If the returns to scale are speculative, then subsidies will probably be done badly, as they tend to be driven more by politics than by economics.

      Part of where the government can be particularly useful is in recognizing our long-term interests

      What?

      • Government can take on long time-frame projects. Not saying they always (or even often) get it right, of course. Just that corporate America is particularly focused on the next-quarter results.

        The really speculative, long time-frame, stuff that you do see being done privately is likely as not a pet project of some Internet billionaire. Like Space-X, for example. Not terribly different than the old royal patronage model.

          • Yeah… I seriously wonder if we have it in us anymore to do something like the Interstate Highway System.

            I guess I should say “start” something like that. We’re actually still building new segments (I-26… or is it I-22? from Memphis to Birmingham, and I-69 from Memphis to Shreveport).

          • Military gets its priorities. We got neural prosthetics now (neurally based artificial limbs)

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