WASHINGTON – Recently I read a very good piece on the future of solar power in the United States. Very informative. And yet, there is something really odd about it. The piece has not been written by a solar power expert, or by an industry analyst. It has been written by a lawyer.
Not market-driven
And this detail sheds light on what is really going on with renewable energy in the United States. Whatever the merits of the technology, whatever the progress in improving performance, lowering costs and therefore prices for would-be consumers, the fortunes of renewable energy are not market-driven.
They are driven by laws, regulations, mandates for power generation companies, tax subsidies, set-asides, and what not. In other words, many if not most people in America base their decision on whether to buy or not to buy solar panels for their homes not on the merit and cost-effectiveness of the technology but on the tax advantages, rebates and/or subsidies that come with purchasing solar panels.
Lawyers are the real experts
And this is why the “go to people” when you have questions are lawyers and not engineers. Lawyers are indeed the most qualified experts. They can go through the thicket of laws, regulations and tax exemptions. They can tell you whether or not solar energy will be financially rewarding for you.
Renewable energy’s fortunes dictated by regulations
And here is the problem. We have a large new industry coming along whose future is not dictated mostly by the inherent strengths of its products, but largely by the inducements provided by many policy makers who believe that renewables are “good”, while carbon based energy is “bad”. For this reason they encourage consumers to embrace renewable energy through a variety of fiscal inducements.
Sadly, regarding power generation and distribution, it is true that even before renewable energy came along there was no level playing field. Electrical utilities are highly regulated and already subjected to all sorts of restrictions, obligations and mandates. But adding to this bloated regulatory environment by favoring a new industry (at the expense of others, such as coal-fired power plants) is hardly a way to improve things.
Bad public policy
This is a really bad way to conduct public policy. Of course, we have to acknowledge that taxation and regulations are commonly used to favor other industries as well. Still, the fact that we accept policy-driven market distortions in some sectors of the economy (housing for instance) is not a good argument for extending this bad practice to new technologies affecting other key sectors, already heavily regulated or not.
Market economy, different rules
In a real market economy, consumers would choose products based on their value, and not on tax advantages.
But if we do believe that we are no longer in a market economy, then we should accept as “normal” the absurdity of getting advice on solar power (and many other products) from lawyers and other regulations experts.
However, if we accept this as the new “normal”, then we also kiss good-bye to capitalism and to its ability to allow the best companies to emerge and thrive on the basis of the value they offer.
What we are getting now is that too many companies and/or sectors do well or at least survive because they are in political favor, or because they can hire the best lobbyists who will help them get the most favorable tax regime.
This non-market economic system may work well for the well-connected; but it is a disaster in the making for the overall US economy and for its overall future competitiveness. Be it in Soviet Russia or statist France, politically mandated economic choices never work. And I really mean “never”.