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Death to PV Subsidies

Unsubsidized solar photovoltaic (PV) systems already produce electricity – in some parts of the world – less expensively than coal and gas-fired power plants. As PV system prices decline it's inevitable that subsidies will end. Rapid decline or outright disappearance has already been seen in all the major solar markets except China and India.

The usual strategy for subsidized industries is to fight to increase or extend their subsidy. I suggest that the opposite approach is the right one for the U.S. solar industry to take in the run-up to the 2012 elections. The PV industry should ask candidates for President and Congress to pledge to end all Federal subsidies for all forms of electricity generation by the end of 2016.

The truth is that the subsidies the nuclear and fossil-fueled generators receive — and have received for years — are the only things that make their product “affordable.” Those subsidies take many forms, but the most significant are their “externalities.” Externalities are REAL costs, but they are foisted off on all of us instead of being paid by the companies that caused them.

Earlier this year the">Annals of the New York Academy of Sciences published an article by Dr. Paul Epstein, director of Harvard Medical School Center for Health and the Global Environment titled “Full Cost Accounting for the Life Cycle of Coal.” The article presented measurements of the health and environmental impacts of coal, including: mining, transportation, combustion in power plants and the impact of coal’s waste stream. The authors found that the life cycle effects of coal and its waste cost the American public $333 billion to over $500 billion dollars annually. This study outlines the costs thecoal industry is not paying and what everyone else is paying! What would eliminating that subsidy do to the price of coal-fired electricity?

The math isn’t hard. The United States generated 1,755,904GWh of electricity from coal in 2009, the last year for which figures from the EIA are available. That means each kWh from coal burdened our nation’s people and environment with $.28 of costs. Eliminate the subsidy and coal-fired electricity doesn’t cost six cents per kWh, it costs thirty-four cents. Unsubsidized solar can beat that price anywhere in the U.S.

I believe a carbon fee and dividend is the fairest, most transparent and politically viable method to de-externalize the costs of using fossil fuel to generate electricity. Under this approach, a fee is levied on coal, oil and natural gas based on the costs of remediating their environmental and health impacts. That’s the “fee” part.

The dividend part is that all the fees collected would be paid out to the American people, with every citizen and permanent resident getting an equal share. This would be virtually identical to the way Alaska’s Permanent Fund has been paying each state resident an annual dividend based on their fair share of the state’s oil revenue. The 2010 Permanent Fund Dividend was $1,281.

If we divided $500 billion among 300 million citizens and permanent residents, the annual dividend would be $1667 per person or $6667 for a family of four. Americans could choose whether to spend this money on expensive coal-fired power – or to switch to solar, wind or other non-polluting sources of electricity. I’m confident that most Americans would do the right thing. Within a year of getting that first dividend check, a million new solar installers would be working in every corner of the country. Let’s demand a level playing field for all generation technologies! Death to subsidies by the end of 2016!

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