One of America’s biggest solar companies, SolarCity announced last week that it would slash at least 550 jobs within Nevada, following its December decision to suspend solar-panel sales and installations within the state.
The company blames recent policy changes approved by the state’s public-utility commission. But the facts validate Nevada’s controversial decision, also calling into question the fundamental business model of solar companies across the country.
“Telling employees they can no longer work for SolarCity is the hardest thing we’ve ever done,” said CEO Lyndon Rive in a Jan. 6 news release. “These are hard-working Nevadans and a single government action has put them out of work. This is not how government is supposed to work.”
Until recently, SolarCity and businesses like it offered Nevada residents a deal where they could install rooftop solar panels at no upfront cost; instead, they paid a monthly lease that increased slightly every year. The perk for consumers: Nevada’s utility company would buy any excess solar energy they managed to generate at retail cost.
Solar companies marketed this as a way for households to go green while also saving money on their monthly utility bill.
Just one problem: The retail rate Nevada utilities paid back to solar-panel owners was really high– especially compared to the wholesale price of buying electricity from alternate sources, including not only natural gas and coal but also bigger solar farms. Small-time solar-panel owners enjoyed from these inflated pay-backs, even as they failed to cover the cost of transmission, grid maintenance and other expenses factored into the final retail price.
No surprise, such a skewed pricing system had to be made up in the form of higher utility bills. Nevada compelled ordinary households to spend hundreds of dollars extra each year on utilities to subsidize their affluent neighbors with rooftop solar panels.
Low-income and minority families found this added cost especially difficult to bear. As the National Black Chamber of Commerce recently noted, compared to white households, black families devote 50 percent more of their take-home pay to their utility bills.
Concerned about such a regressive economic policy, Nevada eventually decided to change its compensation plan. Going forward, homes with rooftop solar panels will sell back their excess energy at the wholesale rate instead of the retail rate, and they’ll also have to chip in to help maintain the state’s energy grid.
While such a structure is certainly fairer, it tipped the balance against solar-panel ownership. Highlighting how inflated the previous payment structure was, solar-panel owners’ compensation for excess electricity will plummet by about 75 percent. As a result, households that installed solar panels on their rooftop may soon see monthly utility bills far higher than what they anticipated.
That’s a major problem for SolarCity and businesses like it—even though such “net metering” policies are far from the only subsidy Big Solar enjoys.
Over the past 15 years, the federal government gave SolarCity $326 million in grants and tax incentives—and that’s not even factoring in state and local subsidies, nor legislation or regulation creating artificial demand for solar energy.
To get a sense of how unprecedented taxpayer-backed green largesse has been, look at Elon Musk’s empire alone. A recent L.A. Times investigation found Musk’s SolarCity, electric-car company Tesla Motors Inc. and rocket inventor SpaceX had together received a staggering $4.9 billion dollars grants, bargain loans, tax incentives and other subsidies.
SolarCity has long enjoyed every government-provided advantage conceivable—and still, without the forced support of low-income or middle-class ratepayers, it can’t compete in Nevada. The 550 jobs lost to Nevada’s policy change foreshadow the fate of the solar industry in a true, undistorted energy marketplace.
Jillian Melchior writes for National Review as a fellow for the Franklin Center, Independent Women's Forum and Steamboat Institute.