"Solyndra" may be a synonym for scandal in Washington, DC, but in
California could it become a synonym for reform?
Solyndra, of course, is the now-bankrupt Silicon Valley solar energy
manufacturer that received more than a half-billion dollars in federal loan
guarantees. The Washington fascination is with What Did the White House Know
and When did they Know It? This search for a political fall guy is a set piece
in the Washington merry-go-round, but obscures the more important issue of a politicized national industrial policy.
Solyndra also received up to $34 million in California
sales "tax breaks" to encourage development of clean energy manufacturing in
California.
This "incentive" was one of the few economic development initiatives enacted by the Democratic-controlled
Legislature at the request of Republican Governor Arnold Schwarzenegger. But
closer examination of this program shows that it is less a jobs booster
than it is a subsidy for a favored industry
Solyndra claimed that 225 of its 2,084 estimated total jobs would be
attributable to the sales tax exclusion. That adds up to about $154,000 in
state subsidies per job. But that doesn’t make Solyndra unusual. To date, the
committee handing out these subsidies, headed by the State Treasurer, has
authorized up to $104 million in exclusions for a grand total of 653 jobs,
coming to more than $159,000 per job.
Make no mistake – these are government grants masquerading as tax
credits. The Treasurer’s committee votes up-or-down on the applications; the
payments are time limited and controlled by an agreement. A tax credit this is
not.
The sales tax incentive is of a piece with other well-meaning but
essentially bureaucratic attempts at picking winners and losers in the clean
energy and "green tech" space.
Another example is the surcharge levied for the past 15 years on utility ratepayers
to pay for energy-related research and subsidize renewable and energy
efficiency projects. Amounting to one to two dollars-a-month per family, the
so-called "public goods charge" has raised billions of dollars in subsidies
handed out by, you guessed it, government agencies picking and choosing among
projects.
The nonpartisan Legislative Analyst reviewed the energy research component of the
surcharge, and concluded that energy regulators had "not demonstrated that
there has been a substantial payoff to date from the state’s investment of more
than $700 million in ratepayer funds." While budgets have been slashed for the
state’s premier research institution – the University of California –
legislators would raise taxes to subsidize second-tier energy research.
The renewables program financed by the public goods
charge has collected more than $1.5 billion from ratepayers since 1998. During
that time it has funneled money to a wide variety of renewable projects,
including biomass, solar, wind, geothermal and other boutique fuels. Several
hundred MW of new capacity have been attributed to subsidies from this program,
the equivalent of a couple large power plants.
Since 1998 the renewables program has also lent
to the General Fund more than $200 million, plus designated another $50 million
for a program in the Treasurer’s Office that will
probably never be used, and spent more than $18 million on public relations,
public awareness and public outreach programs.
Subsidies for
the renewable energy industry are questionable, to say the least. This industry
is large, sophisticated and diversified, and has raised billions not just from
federal programs and tax credits, but from Wall Street investors and Silicon
Valley venture capitalists. No policy rationale has been developed for
ratepayer subsidy for these projects in California.
What’s more,
state law already requires investor-owned utilities to buy renewable products –
the goal was recently changed to one-third of all power purchases by 2020,
giving renewable generators the best business model possible, a guarantee that
a buyer will pay you for your product. Competitive subsidies – amounting to
tens of millions of dollars every year – only serve to insert politicians and
bureaucrats into the marketplace; they don’t reduce the cost to ratepayers,
increase the supply of renewable energy or create a single new job in
California.
The more
accurate and politically relevant point is that government agencies simply
aren’t well-equipped to be economic players, and that political decisions will
always drive government investments.
Legislation to re-authorize the funding for these
programs failed passage in the Legislature this year, needing a two-thirds vote
because it is an extension of an expiring tax. Nonetheless, Governor
Brown is urging the Public Utilities Commission to "take action under the Commission’s authority to
ensure that programs like those supported by the Public Goods Charge are instituted-and
hopefully at their current levels."