Energy Subsidies Generate Financial ‘Green Bubble’

Taxpayers propping up fiscally dubious solar power installations

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Private solar leasing companies are renting solar panels to homeowners at high costs while also receiving millions of dollars in taxpayer subsidies, a combination that could create a financial bubble similar to the 2007 housing market crash, according to a new report.

According to the report released by the TaxPayers Protection Alliance on Friday, the government subsidy of solar panels is too high for their low popularity. Less than one percent of America’s energy supply is based on solar, and the subsidies increased more than 38 percent from 2010 to 2013.

"Much like the housing bubble and subsequent financial crisis, handouts at the federal and state level are creating a solar bubble that taxpayers are propping up, and it will be the taxpayers and investors who take the hit when the industry comes crashing down," the report says.

The average cost for a homeowner to install solar energy panels can fall between $10,000-$50,000, opening up a market of solar leasing companies to help cover costs and take advantage of the state and federal subsidies that the homeowners pay for.

"Most homeowners do not have enough tax liability to utilize the Investment Tax Credit and some state incentives, the leasing company can take advantage of subsidies the average homeowner cannot, helping to lease the system more cheaply at the expense of the taxpayer," the report says. "Solar leasing companies then take hundreds or thousands of leases and PPAs [power purchase agreements] and bundle them together to offer them to investors (banks, insurance corporations and corporate investors) as asset backed securities, using the homeowner’s lease or PPA payment to service the debt."

The subsidies could leave taxpayers as well as homeowners vulnerable, TaxPayers Protection Alliance president David Williams said in an interview with the Washington Free Beacon.

"There could be a huge bubble and liability for taxpayers if the industry busts," Williams said. "There are multiple risks here though. In addition to these solar leasing companies being dependent on subsidies, homeowners who are leasing these panels are having an issue selling their homes with these leases attached. The solar leasing company needs to approve the new buyer of the panel contract, and the issue of maintenance is huge."

SolarCity, a prominent solar lender, cashed in on more than $800 million in federal and state subsidies last year. These private solar lenders rely on these subsidies, which are set to be reduced from the current level of 30 percent of the entire cost of the solar system, to 10 percent in 2017.

SolarCity did not respond to a request for comment

"When economically uncompetitive technologies and companies cannot survive without the taxpayer’s crutch, there is a good reason these companies could not fully attract private financing," the report says. "The distortions of market risk, the misallocation of financial capital, the market weaknesses and the dependence on subsidies could very well result in a much bigger green energy collapse, wasting billions of taxpayer dollars and private investment."

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