Public Service Commission Right to End Solar & Wind Energy Subsidies

August 22, 2013

by James Wigderson
Special Guest Perspective for the MacIver Institute

Wisconsin’s Public Service Commission (PSC) decided earlier this month to temporarily stop subsidizing home solar and wind power projects through the Focus on Energy program. The subsidy is discontinued through the end of the year pending a final decision by the PSC.

Unfortunately, liberal special interest groups are attempting to push the PSC towards a misguided position of restoring the solar power subsidies. Not only are the subsidies wrong because the funding comes from higher energy rates, but the subsidies may actually be counter-productive to the solar industry.

The Focus on Energy program is funded by a requirement that investor-owned utilities spend 1.2% of their annual operating revenues on energy efficiency and renewable resource activities. Those costs are passed along to the consumer in the form of higher energy rates. In 2011, the Legislative Audit Bureau said the Focus on Energy payments represent approximately one percent of an average residential utility bill, although that number varied depending on the energy utility.

Focus on Energy spends that money on renewable energy projects and energy efficiency projects. For example, Focus on Energy offered State Fair attendees an opportunity to win “a free home energy assessment.” Focus on Energy is also sponsoring an “oldest refrigerator contest” through the end of August, offering $1000 to the owner of the oldest refrigerator. The Green Bay Press Gazette reported Focus on Energy has collected about 11,000 refrigerators in an industrial park in Franklin.

Focus on Energy has its corporate beneficiaries, too. Newark Recycled Paperboard Solutions of New Jersey received $75,000 for an energy efficiency project at Newark Wisconsin Paperboard Mill.

Of the $10 million in renewable energy project funding available annually, the PSC said last year that 75 percent of that funding is for biofuels, and 25 percent is for solar and wind projects. This is because the PSC determined that biofuels have a greater return for use of renewable fuels.

However, biofuels usage has been slower to develop. Keeping the PSC’s desired balance for renewable energy project funding required them to suspend the funding for solar and wind projects for the year.

Now special interest groups are attempting to get the PSC to change its mind and renew funding of solar energy projects. Renew Wisconsin, an environmentalist group, has been active in encouraging people and businesses to call the PSC to support bringing back funding for residential solar projects. Complaining about the “on again, off again,” nature of the grants, Renew Wisconsin Executive Director Tyler Huebner told the Capital Times, “Businesses need predictability and certainty to flourish and hire more employees.”

However Doug Stingle, the Development Director at Midwest Renewable Energy Association, said customers shouldn’t wait for the PSC to renew grants for solar panels. In an op-ed for BizTimes, Stingle said that consumers do not need the Focus on Energy subsidy.

“The MREA has been actively involved in the Wisconsin renewable energy market for nearly 25 years. And, without reservation, we can say that in all of those years, there has never been a better time to buy a solar system for your home or business. This remains true without the meager incentive offered by Focus on Energy.”

Stingle said that when Focus on Energy began providing incentives for solar, the price per watt installed was $8-$11. Now that cost is down to $4 per watt, with some projects as low as $2.14 per watt.

However, the number of solar electric systems installed are down from 267 in 2009 to 47 in the first six months of 2013. Stingle blames the uncertainty of the Focus on Energy subsidies, claiming that California’s system of defined subsidy phase-out is better.

Stingle’s belief that solar is now competitive should be put to the test. Rather than continue to allow the PSC to turn on and off the spigot of solar subsidies creating uncertainty in that market, the legislature should require the PSC to phase out the subsidies entirely.

As Assembly Speaker Robin Vos pointed out in 2011 in an interview with the Wisconsin Radio Network:

“The way Focus on Energy works, especially for residential customers, everyone in this room pays higher electricity costs so that some people can get things for free. That’s the way Focus on Energy works primarily. There are a small number of people who will get that grant and if you are lucky enough to be one of them, perhaps it is a good deal for you.”

The legislature took that to heart and eliminated Doyle-era planned increases in the contributions to the Focus on Energy program by the utilities and their rate payers, overruling the PSC at the time. By doing so, the legislature prevented a 4.3% increase in energy bills in Wisconsin.

Here is another opportunity for the legislature to provide guidance to the PSC. Government interference in the marketplace is causing undesired uncertainty. Eliminate the subsidies, end the practice of rate payers subsidizing their neighbors’ solar panels, and allow the free market to work. In the process, the legislature will reduce the indirect taxation on energy rate payers, lowering everyone’s utility bills.