Quantum Windbag
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- May 9, 2010
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I have to admit I hadn't thought of this.
Freakonomics » Is There a Rooftop Solar Bubble? And Is It About to Burst?
Government efforts to boost affordability and expectations of unsustainably high investment returns generated a booming market thats destined to crash.Im talking, of course, about the market for rooftop solar, which has grown exponentially in recent years.
Most people are aware of the government subsidies that offset 30 percent or more of commercial and residential rooftop solar more than $10,000 for a typical solar home in California. Less known is that those up-front savings, as big as they are, still arent enough to generate the double-digit investment returns that solar promoters promise. In fact, for residential solar panels to pay for themselves over their 20-25 year lifespan, households and businesses must receive a second, hidden subsidy for their solar electricity generation that is far too high to be justified by economic fundamentals, and that cannot be sustained in the long run. In California, some residential solar electricity fetches a price nearly four times its energy value.
Much as the recent housing boom was undone by the sudden stop of seemingly interminable home price appreciation; so, too, will the collapse of rooftop solar follow the fall of residential solar electricity prices to levels that can be justified by the value of energy and environmental benefits that residential generation provides.
The exorbitant prices for residential solar generation arent determined in an open market. Instead, they are typically the product of historical electricity rate structures set by regulators and net-metering laws enforced in at least 43 states that obligate utilities to buy residential solar electricity at the same rates they sell electricity to their customers. With net metering, solar households can essentially spin their electric meters backward, subtracting their electricity generation from their electricity consumptiongetting paid retail rates for solar electricity they export to the grid.
Freakonomics » Is There a Rooftop Solar Bubble? And Is It About to Burst?