Federal Support For Solar Is Relatively Small, But Provides ‘More Jobs Per Megawatt-Hour Than Any Other Energy Industry’

by Adam James

The myth is that solar energy has achieved little despite huge subsidies. The reality is that solar has achieved a great deal despite relatively low subsidies.

new report from the Baker Center for Public Policy just released a fabulous new analysis comparing incentives for solar with historical incentives for fossil fuels, including this chart:

The report, commissioned by the solar industry’s trade group, has a number of interesting conclusions:

  • Solar has had relatively small subsidies. That’s right, incentives for solar have been small compared to fossil fuels
  • Incentives are working. Long term, stable incentives have ‘bridged the chasm’ to get solar past early adoption stages and to market.
  • The employment potential for solar is even better than anticipated. Solar can create between 200,000 and 430,000 jobs in 2020.
  • Solar power will not only be competitive, but will be a robust addition to America’s energy portfolio. Expanding the use of solar would limit the impact of price volatility and supply disruption- just rooftop solar could provide 20 percent of America’s energy needs.

These arguments are even more persuasive in light of the recent paper from McKinsey showing how dramatically the market for solar photovoltaics will grow in the coming decade. Taken together, these analyses show that we are clearly reaching the dawn of a new age for solar.

Let’s explore some of the most important takeaways from the Baker Center report:

Solar has not received a disproportionate amount of Federal Subsidies

Critics often claim that solar is unfairly subsidized. The Baker Center report squashes this claim with some nuanced analysis on the necessity and purpose of subsidies:

“Diffusion of solar energy technology in the energy markets is consistent with the less-than-smooth paths that many American industries have traveled as they entered the mainstream of commerce.”

No energy technology goes from laboratory to market overnight. As the report puts it, innovators and early adopters only constitute 16 percent of total technology adoption. Then there is a ‘chasm’ before mainstream adoption by the remaining 84 percent. What subsidies do, in bridging this chasm, is ensure that while “not all companies that enter the market early flourish … the industry itself can succeed.” Federal incentives have classically supported new energy resources during the average 30-year period between early adoption and full technology adoption.

The Baker Center found that “federal investment in solar technologies has been modest in a long-term historical context relative to other energy technologies.” As the above diagram shows, solar has not only received far less total subsidization, but it is receiving it at the point where technologies are supposed to be receiving support:

Incentives are working

How do we tell if incentives are working? The Baker Center rightly argues that the basic purpose of subsidization is to bring a technology across the “chasm” and into mainstream adoption. This being the case, the best policies are stable and long-term, giving investors strong policy signals that build confidence in the technology. As their findings show, the incredible growth rate in solar capacity over the last few years (see below) all took place while the federal investment tax credit and state renewable energy standards were in place. Tack on falling prices for PV, and you get a 77 percent growth rate in the period over the last five years. This growth is spurring more innovation in manufacturing and deployment, helping push solar PV toward grid parity at a rapid rate.

Growth in Solar PV will create jobs

Did I say jobs? I meant hundreds of thousands of jobs. The report finds that between 200,000 and 430,000 direct, indirect, and induced jobs will come from the solar industry in 2020. A recent solar jobs census found that there are already 100,000 Americans working in the sector. The connection is clear: more demand and lower costs are accelerating employment in the installation, maintenance and manufacturing of solar PV.

According to this report, solar gives you more bang for your buck — providing “more jobs per megawatt-hour than any other energy industry.”

There are also implications for global competitiveness. In 2010, the United States was a net exporter of solar PV to China, with a $1.9 billion trade surplus. If we can keep our stake in the global PV market, we will create an additional 67,000 jobs by 2030 through increased exports.

Solar is a crucial component of the US energy portfolio

Solar’s impact on the energy mix will depend on what kind of support the industry gets during this critical period. For the optimist, the report outlines a “Solar Grand Plan” projecting the technology could “provide 35 percent of total U.S needs by 2050 and 90 percent by 2100.” According to the below estimates, there are 3.9 million terawatt-hours of recoverable solar resources available through a combined set of compressed air storage and solar generation technologies.

The potential for solar is enormous in the U.S. But it’s not theoretical anymore. Solar PV is rapidly gaining market traction today — creating jobs, providing local economic value, and doing so with government support consistent with every other energy technology throughout history.

Adam James is a special assistant for energy policy at the Center for American Progress.

8 Responses to Federal Support For Solar Is Relatively Small, But Provides ‘More Jobs Per Megawatt-Hour Than Any Other Energy Industry’

  1. I would be very careful about using Figure 2 from the Baker center report until someone determines how these costs were cumulated. In principle they should be discounted using a societal discount rate (typically a few percent after inflation) but the report does not specify whether the savings are discounted and if so, what discount rate was used. There may be a technical appendix for the report, but I haven’t seen it. Is there a way to ask the author of the report and have his response posted here?

  2. SecularAnimist says:

    People like me read this article and cheer. The growth of the solar industry and its potential for even more rapid growth is one of the few sources of optimism in the whole climate/energy scenario. There may be no such thing as a panacea, but solar energy comes pretty darn close.

    On the other hand, the Koch Brothers read this article and mutter “the solar industry must be destroyed by any means necessary”.

    Unfortunately they are the ones with millions of dollars to deceive the public and bribe politicians.

  3. CW says:

    A good point on discounting I’m sure. One I can’t speak to.

    However, the MISI study apparently used for that figure only includes a number of types of direct federal support (subsidies, R&D, etc.) for the oil industry between 1950 and 2006. No inclusion of earlier support or support since, and no mention of indirect support (roads, military protection, health care costs, spills and clean ups, etc.)

    So if anything it’s an underestimation of cumulative federal support for oil, discounted or not, right? (That’s an honest, straight-forward question seeking your obvious experienced/expert opinion).

  4. Mark Shapiro says:

    PV panels now cost less than $1/Watt.

    That simple, astonishing fact has not sunk in yet. As PV becomes familiar to engineers, architects, entrepreneurs, builders, designers, homeowners, and business leaders it will become ubiquitous.

    The remaining job is eliminating the installation cost. At $1/Wattp installed, the ROI is 10% to 20% (based on electricity at $0.10/KWh, and 1 or 2 KWh/Wattp/year).

  5. Michael Mazengarb says:

    The combination of the level of subsidy for each fuel source with its place on the diffusion/adoption curve is freaking genius (I really wish I had though of doing it…)!

    I nicely highlights how rediculous the government subsidies in the energy sector as been (I suppose it would look much the same in Australia as well).

    No support for emerging technologies but massive support for muture tech. Its such a backward approach and defies the whole concept of why we subsidise technologies.

  6. Yes, the omission of those other indirect costs would tend to underestimate the costs, but that’s true for all energy sources, not just oil, and I don’t know which direction it would push the results.

    I looked at the MISI study and there’s no mention of discounting there either. They do at least correct all costs to 2006 dollars, but it’s really not correct to sum the numbers up as they have done without discounting using a real discount rate (that’s the discount rate that remains after you subtract inflation from the more commonly used nominal discount rates, like the ones that apply to a home mortgage). The intuitive idea is that you could have invested the money spent in 1950 (for example) and earned a return on it, so discounting accounts for the opportunity cost associated with spending that money on this subsidy and not something else.

    The omission of discounting will tend to make costs incurred far in the past less important than they actually are, thus favoring technologies that have been subsidized for a long time (like oil, gas, coal, and to a lesser extent, nuclear power). So it’s fair to conclude from this that the MISI study numbers are biased against technologies for which subsidies are a more recent development.

  7. Steve says:

    You can make more jobs for ditch diggers if you give them spoons instead of shovels. The trick is to find jobs while not decreasing productivity – getting more mWh per job, not fewer. Every industry can deliver more jobs if you make labor less efficient – as long as it doesn’t have to compete with other sources. Touting the labor cost of an energy source betrays an ignorance of economics.

  8. CW says: