Solar tax credits a form of corporate welfare

Recently, solar tax credits have been advocated under the guise of costless, risk-free economic benefits for everyone.

Despite the claims, these initiatives are simply corporate welfare under a different name and should be opposed for both moral and economic reasons.

Steve Jobs once said, "A lot of times, people don’t know what they want until you show it to them." Out of this philosophy came revolutionary products such as the iMac, iPod, iPhone and iPad. Possibly seeking to emulate the late Jobs’ approach, government has been trying its hand in predicting the industries of the future.

The difference is public errors come at the taxpayers’ expense and government hasn’t exactly been a prudent investor — see Solyndra and the electric car experiment.

The state has offered solar credits since 1976 and renewable energy proponents are quick to point out the industry’s great technological advances, but solar energy accounted for just 1.3 percent of primary energy consumption in 2010.

If a private business makes a major error, it loses investors and may even go bankrupt. If government makes one, it takes money from the productive sectors to try again. The housing bubble that triggered the financial crisis was largely built by overlending and irresponsible practices on the parts of both government and the private sector.

During his State of the State address, Gov. Neil Abercrombie alluded to legitimate concerns about solar tax credit benefits going primarily to the wealthy. His solution: Provide easy credit for the financially unqualified, too. See the pattern yet?

The costs incurred by this manifestation of corporate welfare are manifold. Some are highly visible. A recent UHERO study estimated solar photovoltaic (PV) tax credits could cost the state up to $1.4 billion for residential units alone. Perhaps this figure is a bit lofty, as it assumes all single-family residences install enough PV to become net-zero users of electricity. Still, the direct costs will be considerable — tax credits grew fivefold between 2010-2012 to $173.8 million.

Other costs are subtler. We see the solar industry being stimulated and the shiny panels put on homes accounting for an ever-larger share of construction projects, but we don’t see the taxpayers and industries that suffer. We don’t see the lost savings and misallocation of credit that would have gone toward tourism jobs and entrepreneurial ventures. We don’t yet see the extra costs consumers and businesses will have to pay to maintain a base-load technology grid (designed to run continuously) to meet reserve demand. After all, there are cloudy days even in Hawaii.

With an abundance of natural resources, Hawaii can be a great marketplace for renewables, and solar energy investments may indeed be sensible for many individuals. But why not let consumers and creditors use the information delivered through the price system to decide on their own, rather than distorting market signals and artificially propping up an industry?

If the solar market is ready to boom, simply let it stand on its own. Government should not be partaking in the picking of winners and losers on the backs of taxpayers. When left alone, investors will bear private risks and also allocate capital more efficiently. Policies such as the unaffordable and unjustifiable solar tax credits turn the expression "the price of living in paradise" into a self-fulfilling prophecy.