Live by subsidies, die by subsidies

Michael Schaus

By Michael Schaus

January 07, 2016

According to the apocalyptic rhetoric coming out of SolarCity’s executive offices, the state public utilities commission’s decision to increase fees and lower rebates for solar customers might well devastate Nevada’s alternative energy economy.

In truth, the only devastation that might ensue would be for that of companies already incapable of surviving on their own merit.

Industries, such as solar, that depend so heavily on a crony-socialist schedule of perpetual subsidies fail — by pretty much every business metric available — to meet the definition of “sustainable.” After all, relying on an endless parade of taxpayer-funded handouts to prop up an industry’s very existence isn’t a profoundly dependable way of fostering a healthy or sustainable business climate.

In other words, as we’re seeing from SolarCity’s solar-powered pity-party, if a company’s survival depends on government handouts, their long term viability is far from certain.

In most industries, earning a profit means more than simply making a product or providing a service that is innovative or imaginative — it must also be offered at a price consumers are willing to pay.

Many automobile companies, for example, are relearning this nuance of business first-hand with their forays into electric vehicles. The Chrysler-Fiat 500e — an electric version of the classic Fiat 500 — seems to “work” just fine, but is far from being a viable contribution to the automaker’s profit margin. The CEO of Chrysler actually admitted in 2014 that the company takes a nearly $14,000 loss on every single 500e it sells. Clearly, Chrysler-Fiat’s venture into the electric vehicle market isn’t based on viability — it’s subsidized by consumers who buy the automaker’s gas guzzlers.

Solar power, it seems, remains plagued by similar inabilities to turn a profit without politician-granted taxpayer-funded subsidies. The state and federal government handouts have allowed solar companies to successfully entice people to purchase their still unreliable and economically unviable product. Faced with the challenge of attracting consumers without government handouts or artificially inflated NV Energy rebates — subsidized by traditional, non-solar ratepayers — SolarCity threatens to leave the state altogether – this after collecting $400,000 of taxpayer funded-subsidies in the past year.

Such a business model hardly seems likely to survive the test of time. 

What government gives away, it can just as easily take back. That’s the lesson SolarCity — and all the solar customers who are about to see their formerly subsidized energy bills go up — are about to learn. When businesses depend for their survival on deals concocted by their cronies in government, unpredictable and unforgiving political games naturally result.

Far better to simply provide a service that people actually want, at a price they can actually afford when, and only when, such can be accomplished above cost.

Michael Schaus is communications director of the Nevada Policy Research Institute, a nonpartisan, free-market think tank. For more visit http://npri.org.

 

Michael Schaus

Michael Schaus

Communications Director

Michael Schaus is communications director at the Nevada Policy Research Institute and is responsible for managing the organization’s messaging with the public, the media and NPRI’s membership. He is also currently a policy advisor for the Heartland Institute.

Prior to joining NPRI, Michael worked in media as a national columnist, a political humorist and a conservative talk show host in Denver, Colorado. Active in both print and radio, he shared his insights and free-market economics perspective with large local and national audiences.

Michael became interested in economic theory earlier in life while employed in the financial sector. As the liaison between a local community bank and the Federal Reserve, he acquired an in-depth understanding of just how manipulative big government can be toward industry and enterprise. It was that experience with big-government intervention that initially led him into public-affairs commentary.