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Colorado Solar Industry’s Insatiable Appetite for Subsidies

With a quivering voice, Jim Walsh, owner of Bella Solar Energy, described his business troubles to the Senate Agriculture, Natural Resources, and Energy Committee. His message, if not his tears, was repeated yesterday morning by six other solar power representatives. They presented a compelling case that “the New Energy Economy is dead,” in the morbid words of Sol Source’s Jim Burnett.

Ex-Governor Bill Ritter spent 4 years entrenching expensive energy policies collectively known as the New Energy Economy, and he’s been out of office for all of a month, which begs the question: What threat so quickly killed the New Energy Economy?

Was it competition from abroad? Or rising gasoline prices? Or the deflated credit market? These are the sorts of problems that endanger most American businesses, but they weren’t mentioned by the solar industry representatives before the State Senate yesterday. Rather, they said that their companies faced imminent bankruptcy…due to the abrupt elimination of one state subsidy.

They had been invited by Sen. Gail Schwartz, who, in a fit of green grandstanding, convened a snap hearing to investigate Xcel’s February 17 suspension of its Solar*Rewards program. I explain the nitty-gritty of the Solar*Rewards imbroglio here. Suffice it to say, Coloradans will pay $97 million–about 4 percent of projected sales to obtain about .3 percent of their electricity. That’s a bad deal. The solar execs before the Senate were demanding more of this bad deal!

I sympathize with anyone who loses his or her livelihood. It’s a horrible thing. But so is expensive electricity, because higher energy prices harm economic production, which leads to lost jobs.

The Solar*Rewards subsidy is a renewable energy cost that counts against the 2 percent annual rate cap that Colorado lawmakers established for annual green energy expenditures. According to Xcel projections, it will sell $2,661,436,903 in electricity this year. Two percent of that is $53,228,738. That’s the statutory limit for total green energy procurement in 2011. The Solar*Rewards program, which is designed to meet an on-site solar energy target of .1% of total electricity sales, is projected by Xcel to cost almost $97 million, or double the limit for total renewable generation. Clearly, the program’s budget is out of whack. Enough is enough.

More fundamentally, what does it say about the health of Colorado’s solar industry if its fortunes are predicated on one subsidy? To me, this seems to be a poor business model. Before the subsidy spigot is turned back on, the solar industry should provide some sort of evidence that it won’t be forever on the dole.

William Yeatman is an energy policy analyst at the Competitive Enterprise Institute