COMMENTARY: Several member of the state House of Representatives have recently been the subjects of an Op-Ed piece claiming that we are mathematically challenged for our opposition to renewable energy tax credits. For the record, we believe that these credits should be allowed to expire and will present here the mathematics on which we base our opinions.
Heath Haussamen / NMPolitics.net
A statue outside the Roundhouse in Santa Fe.
Comments will be restricted to the rooftop solar photovoltaic systems, although SB 391 dealt with both solar photovoltaic and solar thermal systems. Unless otherwise noted, the information sources were several articles published by the Brookings Institute, the Heartland Institute, and the Rio Grande Foundation.
Here are the numbers:
The unsubsidized cost of a rooftop solar system installation is approximately seven times the cost per kilowatt of the most efficient (read lowest cost) power generating technology. In New Mexico, a state with abundant sunshine, usable power is generated by these systems approximately 20 percent of the time. This capacity factor accounts for nightfall, the low efficiency of the panels when the sun is low on either horizon and the occasional rainy days.
Because most consumers have become accustomed to power “on demand,” the other 80 percent of the time power must be supplied by what the utility company calls dispatchable sources. This is rotating machinery that is driven by a power source that can be brought online as demand warrants — rotating machinery fueled by one of three sources in our neighborhood: coal, natural gas, or nuclear power.
This is an important point. For every kilowatt of installed solar capacity, somewhere in the background another kilowatt of either fossil or nuclear-fueled generating capacity must be available. If you want solar, you must buy two kilowatts of capacity to get one that is usable on demand.
Little bang for taxpayers’ bucks
Now to the economics. The State of New Mexico has mandated via the renewable portfolio standard that 20 percent of the power generated in the state must be from renewable sources by the year 2020. This mandate has contributed to electricity rate increases of over 30 percent in the last seven years as the utility companies have added wind and solar capacity on the “buy two get one” economics described in the preceding paragraph.
The New Mexico Legislative Finance Committee spreadsheet lists some 14 incentive and subsidy programs, which cost the state last year almost $90 million. It was represented during the floor debates on SB 391 that renewables are directly responsible for some 2,500 jobs. $90 million divided by 2,500 jobs equals $36,000 per created job.
The LFC also maintains statistics on the number of jobs created vs. state expenditures for a number of the job creation programs. $36,000 per job would be among the very least efficient.
The point here is that there is very little “bang” for the taxpayer’s “buck” with this program.
Rooftop solar panels are expensive. They are expensive with or without the subsidies, making these systems affordable only to those in the middle- and upper-income brackets. An owner of a solar system must find it very gratifying to watch her power meter spin backwards during the periods of bright sunshine, selling the power that she is generating on her system back to the utility company.
Because utility companies are regulated monopolies, they are allowed by the Public Regulation Commission to recover their capital costs along with operations and maintenance costs plus a profit from their customers. These costs are not reduced when rooftop systems are installed because all of the rotating machinery, distribution systems, operations and maintenance costs are still being incurred.
New Mexico is a “net meter” state with no access or infrastructure fees for utilization of the grid. The utilities still have the obligation to supply reliable on demand electricity and traditionally have recovered their costs through the sale of kilowatt-hours. To the extent that these costs are spread over fewer ratepayers, or perhaps more accurately, the same number of ratepayers with the privileged few paying less, everyone else will be obligated to pay more.
Utility rate increases
The renewable energy lobby has held the floor during debates of these technologies for many years now with little discussion of costs vs. benefits. The solar industry is large and mature with the resources to hire roomfuls of lobbyists to provide testimony during committee hearings on subsidies.
Absent from these hearings have been advocates for John Q. Taxpayer and Mary B. Ratepayer, with the result of substantial and continuing increases in utility rates.
We have voiced our opposition to these energy policies in an attempt to start a discussion purely on the technical and economic merits. Economic prosperity in this or any state is entirely dependent on abundant supplies of affordable energy.
We believe that American ingenuity, entrepreneurism and the free market will allow the most promising technologies to rise to prominence without the heavy hand of government intervention. Our objective is clean, reliable and affordable energy not just for the favored few, but for all New Mexicans.
Scott represents District 62 in the House. Strickler represents District 2. Townsend represents District 54. All three are Republicans.