206 Denis A. Hayes bodied in those techniques-have come to dominate the public policy arena. Although "energy economists" were few and far between in 1973 (most earned their livings by giving elaborate explanations of why OPEC would never amount to anything), today Washington is filled with the breed. The fraction of authors in this book who build their cases solely upon economic analysis is indicative of the paramount role now enjoyed by this rather narrow (and notoriously imprecise) discipline. It is, perhaps, enough to remark that if any energy facility enjoyed a 25 percent price advantage over a competitor, there would be no question. in the minds of most policy analysts which one to choose; no other criteria would be relevant where there was such a great price gap. Yet there is abroad in the land a popular sentiment that believes that a 25 percent premium might not be an outrageous price to pay for an energy source that produces neither radioactive wastes nor bomb-grade materials, that neither destroys the landscape nor threatens to trigger a planetary greenhouse effect. Renewable energy resources, used wisely, will have fewer and less serious environmental impacts than conventional energy resources. Renewable resources tend to foster decentralization, pluralism, self-reliance, and a favorable balance-of-payments. They tend to be labor intensive, stable, and resilient. Moreover, used internationally, they should tend to discourage nuclear proliferation. Such elements should be of great value to society. Viewed from the vantage of our great-grandchildren a hundred years hence, such characteristics will almost certainly be of far greater significance than even a 25 percent price difference. Although almost totally ignored in the process of policy analysis, these noneconomic features provide a compelling rationale for establishing public incentives to encourage solar investments. Public Policies A substantial body of research has documented the barriers to rapid solar development, and a number of policy initiatives have been designed to overcome these obstacles. While there docs not exist much hard data on how effective various policies and programs would be, it might be instructive to quickly review some of the major alternatives. At the top of most lists are substantial tax credits for investments in renewable resources. Although after a delay of eighteen months, Congress passed a tax credit modeled upon the Carter administration's proposal. The credit is too modest (20 to 30 percent, compared with a 55 percent state credit in California); it applies to too narrow a range of equipment (mostly active solar heating systems); it expires too quickly (1985); it is not “refundable" (hence is of little or no value to people who pay little or no federal tax); and the industrial tredit is too small to compensate Short-term Solar Prospects 207 for the fact that companies can write off expenditures on conventional fuels directly against their taxes as operating expenses. An interesting case can be made that tax credits should be available not just to final consumers but also to lessors and other middlemen. These parties would then lease or rent solar equipment to apartment dwellers or to businesses seeking to "expense" their solar bills. Prospective solar purchasers should have access to long-term financing at low rates of interest. At present, homeowners who seek financing are mostly confined to five-year loans at rates of interest in the 15 to 18 percent range. Businesses have also experienced difficulty financing solar investments. One option would be a federal solar development bank to provide a secondary market for loans to solar purchasers and to guarantee loans to solar manufacturers. An alternative, and in some ways more attractive, way to guarantee very attractive financing in the residential solar market is to employ latent leverage in the existing secondary market. The Government National Mortgage Association, the Federal National Mortgage Association, and the Federal Home Loan Mortgage Corporation could require most national lending institutions to adopt the program currently being used by San Diego Federal Savings and Loan-the nation's fifth most profitable multibillion dollar savings and loan. San Diego Federal will provide thirty-year financing to any existing mortgage holder who wishes to purchase solar equipment. The existing mortgage remains at its original interest rate; the increment (covering 100 percent of the cost of the solar equipment) is financed at the currently prevailing mortgage rate. The heart of the program is the fact that the homeowners' monthly payments do not change when the solar loan is obtained. Rather, the mortgage is rewritten over a longer period of time, so that instead of being paid off in, say, twenty-two years, it is paid off in twenty-six years. When the solar equipment is installed, the homeowner pays lower average conventional energy bills, pays the same mortgage bills, and obtains a substantial tax credit from the state government. Few homeowners retain ownership for the entire duration of the mortgage; the full mortgage is paid off when the home is sold. Several renewable energy technologies suffer high costs because they are produced in low volumes by cottage industries. While safeguarding against the capture of the solar industry by corporate giants, an intelligent federal procurement effort could drive up volume and drive down prices. This approach is particularly promising in the fields of photovoltaics and wind power. A major barrier is the problem of establishing a high degree of public confidence in solar equipment. In several highly publicized instances, solar heating devices performed poorly. Usually the problem lay with 203 Denis A. Hayes faulty installation procedures, but occasionally the equipment itself has been the culprit. It is dangerous to demand too specific a set of standards and criteria for equipment in a young, dynamic industry, as this would tend to stifle cost-cutting innovations. But thorough training programs for solar technicians should be established, strict standards for installation should be enforced, and follow-up inspections should assure that the equipment is performing at full capacity. Suggestions for promoting this end include a federal warrantee program, the establishment of an industry liability pool, or a system in which the purchaser withholds the final installment of his payments pending one year of satisfactory operation. In addition to such programs, it is essential that public solar consumer advocates be available to warn people of possible problems and to advise them regarding promising remedies. The farm is in a unique position to lead the United States into the solar era. It tends to be rich in sunlight, wind, and organic matter. Farmers tend to be skilled at maintaining equipment and willing to make capital investments that will save them money in the long run. The Agricultural Extension Service could be geared up to disseminate information on renewable energy resources. And the type of work done on the farm-heating buildings, drying grain, pumping water, making fertilizer-lends itself to renewable energy technologies. Ore of the most exciting solar prospects might be a comprehensive effort-modeled upon. the rural electrification program-to bring solar power to the farm. : In ɔme instances, existing energy enterprises-notably gas and electric utilities-have discriminated against solar consumers. For example, solar owners and business have been charged higher rates than they would have paid if they had no solar equipment-despite the fact that their heat storage capacity allows them to limit their consumption to relatively. plentiful, inexpensive off-peak power. Such rate discrimination should be outlawed. Moreover, where dispersed solar equipment produces surplus electricity, the utility should in most cases be required to purchase this power at the full marginal cost of new power. Over time it is plausible that electric utilities will phase out of the generation business and become mostly vehicles for storage, transmission, and distribution. Sunlight travels 93 million uninterrupted miles to reach the earth, but in the final couple of hundred feet it sometimes encounters trees or buildings. U.S. homeowners have a right to any sunlight that shines down vertically onto their property, but none does. The sun is always to the south of the U.S., and sunlight thus always slants over the property to the south. Since equipment to harness sunlight performs poorly in the shade, prospective solar purchasers should assure themselves of full access to the sun. Several innovative approaches to resolving this problem at the state and local level have been suggested. Short-term Solar Prospects Conclusion 209 The best energy investiments available to the United States are in improved energy efficiency. Dollar for dollar, $250 billion dollars will save more energy if invested in conservation than it will produce if invested in any new sources of supply. However, no matter how much we conserve, we must develop new sources. Our entire society rests upon a diminishing fuel supply, and a transition must be made to more bountiful sources. The choice of future sources will be largely determined by politics. Energy policy has tended to be established by making a choice and then arranging the necessary public subsidies and incentives to make the choice appear rational. About $150 billion in direct federal subsidies has been awarded to conventional energy sources over the last few decades. Far less would suffice to bring about the solar contributions outlined in this chapter. We have the option today of making a genuine choice of what energy future we will bequeath our children. We can choose an assortment of fuels that are dangerous, vulnerable to disruption, and environmentally unsupportable. Or we can instead choose to turn increasingly toward the sun. |