Do Solar Power Subsidies Mainly Benefit Rich People?

The NY Times tells a story about a “green death spiral” for the subset of electric utilities who pay solar households retail rates per unit of power the solar households sell back to the grid. The utilities are concerned that as more households sign up for solar panels and generate their own power and then sell their surplus power back to the grid at retail prices that there are fewer non-solar households who will pay for the fixed cost of the the grid and basic transmission infrastructure and for the total cost of the solar subsidies. This means that the non-solar households will be charged more for power (average fixed cost rises). So, solar power offers social benefits of 0 GHG emissions but it is also transferring money from households who live in multifamily buildings (i.e renters) to home owners who opt to have solar panels installed.

Who are the solar households who have taken advantage of government incentives to “go green”? In my 2012 paper using data from the City of San Diego, we documented that more educated households were more likely to have residential solar panels. We also document political differences between who installs solar panels. Can you guess which political party member has a higher probability of installing them? It would interest me if in other states such as Arizona whether this finding also holds. Are there other sunny places where a more representative slice of America installs the panels? As the upfront costs of installing panels declines thanks to market competition, and new financing models such as leasing the panels, hopefully this will be the case but this is an empirical question. Right now, this policy appears to be reducing our GHG emissions and raising energy prices for the poor and middle class.

[Cross-posted at The Reality-based Community]

Matthew Kahn

Matthew Kahn is a professor at the University of California, Los Angeles's Institute of the Environment. He specializes in the environmental consequences of urban growth and related quality-of-life issues.