If Solar Is So Cheap/Good, Why All The Tax Credits? State and Federal

Another solar story with lots of story lines. Link to PewStates.com.

Solar is surging in Hawaii. There’s no disputing that.

Solar power installations have sprouted all across the islands, helping the state move toward its ambitious renewable energy goal and adding some 2,000 “green-collar” jobs to local economies. The projects account for an estimated 15 percent of all construction statewide.

Hawaii more than doubled its solar capacity between 2010 and 2011, making it one of the top 10 solar producers nationally. That’s an impressive feat for a small state whose solar industry barely existed as recently as 2006.

But that's not the only story. Here are some of the other story lines:

• state tax credit of 35% right off the top; another 30% from the federal government; those aren't deductions; those are credits; straight off one's tax bill
• the state of Hawaii has lost millions in taxes
• solar will result in increased cost for conventional utilities
• lost millions in dollars that would have gone toward safety social net, education, and transportation 

Tax losses to the state:

During the 2010 tax year, Hawaii residents claimed $42.8 million in renewable energy credits, mostly for solar projects. In just six months of 2011, they claimed $54.9 million in credits, according to data provided to Stateline by the Hawaii Department of Taxation. This year, the price will soar to $173.8 million, the state estimates. That’s out of an overall state budget that hovers around $12 billion each year.

Hawaii will cut the credit in half starting next year.

Hawaii is not alone, the story at the link goes on:

Of the 24 states that offer renewable energy tax credits, several have already had to deal with larger-than-expected fiscal impacts.

In 2011, Oregon repealed a credit that worked too well, at one point costing 40 times its projected price tag. Over five years, the state’s Business Energy Tax Credit spurred huge growth in the state’s wind industry, but even its supporters admit it subsidized large-scale projects that would likely have gone forward without the state incentive.

Oregon has continued investing in renewable energy, but it has shifted its focus to policies that receive more scrutiny, such as revolving loans for small-scale projects and reverse auction grants for larger utilities.

Meanwhile, in oil-guzzling Louisiana, the number of solar installers has grown from a mere handful in 2007 to almost 200 today, according to Tucker Crawford, executive director of the Gulf States Renewable Energy Industries Association. And that’s in a state that has no renewable energy standard.

So, that raises the question: if solar is so good, why do 24 states have to offer energy tax credits?

Other story lines: solar will actually cost conventional utilities more -- manage the smart grid; install systems that can shut down / start up almost instantaneously when the sun unexpectedly quits shining. Yes, it happens. Go to the link.

Most of the solar is being bought by well-to-do and not paying taxes that would have gone toward social safety nets, education, and transportation.