Thursday, August 14, 2008

Accounting for Solar's Positive Externalities

Some have pointed out that my previous post on subsidizing solar power didn't account for the positive externalities that solar power generates. So let's have a look at what those might be. From the story:

Craig Sherman, president of Hope Pharmaceuticals, said the panels have been a good investment.

"We feel good, the tenants feel good, they can tell their customers that they're green," Sherman said.

Rick Kidder, Scottsdale Area Chamber president, accompanied Mitchell. "If we can start to use more solar here and reduce our carbon footprint in the process and save a little money, it's a win-win-win," Kidder said.

Mitchell said that solar panels will have many benefits for the country.

"The more publicity this gets, the more research that is done, I think it's good for our economy, it's good for national security and it's certainly good for jobs in Arizona," Mitchell said.

So the possible positive externalities listed are, 1) We feel good, 2) We reduce our carbon footprint, 3) More research is done, 4) It's good for the economy and jobs, and 5) It's good for national security.

Let's take them in reverse order.

5) The project has no effect on national security. Although electric power is energy, almost all of it is generated from resources produced here in the US - coal, nuclear, and most of the natural gas. The national security argument works for imported oil, but oil is far to valuable as a transportation fuel to use to generate electricity.

4) It's only good for the economy and jobs if we don't have something better to do with the expenditure. If you have to subsidize it at 77 cents on the dollar, then we obviously have better things we could be doing.

3) More research will get done if the output of the research is expected to make money in the marketplace. It would seem to me that subsidizing existing technology, which is used for today's implementations, would actually reduce the incentive to do research. Said another way, if they'll subsidize today's stuff so that we can make a profit, why not focus on current production rather than research. It pays better.

2) If we generate power using solar rather than coal or natural gas, we will reduce carbon dioxide emissions. If the alternative is nuclear power, this argument doesn't hold. If the offsetting power is coal, which generates 2.1 pounds of CO2/ kWh then we have reduced emissions by about 92 tons per year or 1,380 tons over a 15 year service life. With natural gas at 1.25 pounds/kWh it's 876 tons over the life of the panels.

The Chicago Climate Exchange is currently selling a metric ton of CO2 offsets for $3.80. That makes this positive externality worth between $3,000 and $5,000. (The total subsidy for the project is $138,000.)

1) Finally, we feel good. As best I can tell, the taxpayers and SRP customers are paying about $133,000 so that some people can feel good.

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