Why is nearly all solar power built where subsidies are the highest?

If solar net energy return is as high as some solar advocates claim, why does solar need any subsidies? And not just U.S. subsidies, it’s subsidies on top of subsidies when you add in that we’re buying Chinese government subsidized solar panels and equipment.

States with only federal incentives produce the least solar power. Those that offer state and local incentives have the most. California is the King Kong of solar power due to its 49 incentives at the state, city, county, and utility levels ( http://www.dsireusa.org/). Subsidies are why California produces 60% of all U.S. solar power. High levels of subsidies are perhaps why Arizona has 14% of solar power, Nevada 7%, North Carolina 5.5%, New Jersey and New Mexico 2.5%, Massachusetts 1.8%, and Texas 1.6%. Together, these 8 states provide 94% of all solar power.

Of course, the southwestern states are by far the best places to put solar, since it is so damn seasonal as you can see in my post about Concentrated Solar Power (which applies to plain old solar power as well) here.

Federal, state, and local financial incentives can be rebates, corporate depreciation, tax credits, and tax exemptions, feed-in tariffs, grants, green building incentives, loans, net metering, PACE financing, personal tax credits and exemptions, and more.  City level subsidies can be substantial. San Francisco has incentives of up to $10,500.

On top of that, solar (and wind) don’t pay anything at all for transmission or the natural gas plants essential to balancing their intermittent power. Sure, hydropower is dispatchable too, but it is seasonally limited and spoken for by cities, agriculture, and river ecosystems most of the year. Pumped hydro storage, compressed air energy storage, and utility-scale batteries are only able to store 1-2% of power generation.

When there is another financial crash, it is highly unlikely that these subsidies will be maintained.

In the 11 states with the most potential solar power (21 to 35 degrees latitude), Georgia, Louisiana, Mississippi, Alabama, South Carolina, and Arkansas, produce only half a percent of U.S. solar power.  These states have few state level incentives and five of them have no Renewable Portfolio Standard (RPS).

But States at these latitudes that have more financial incentives produce 20% of solar power (Hawaii, Florida, Texas, Arizona, and New Mexico), and four of them have Renewable Portfolio Standards.

The entire United States is north of optimal solar power, but even so, on the whole the states with the most southerly latitudes (36 or less), where solar is most profitable, produced 68% of solar power.  The 15 states with 13 incentives or more produced 88% of the power, and the 11 states with an RPS that began before 2003 produce 75% of the power.  Of course, California skews everything with the lion’s share of production.

Conversely, the 14 states above 42 degrees latitude produced just three-tenths  of one percent of all solar power.  And the 36 states with few fewest incentives, those with 12 or less, produced just 12% of solar power.

Although the number of state subsidies is a rough indicator of how profitable it is to install solar, just one large incentive can be enough.  For example, until 2016 North Carolina had one of the highest state renewable tax credits, 35%, a big reason why North Carolina now generates 5.5% of U.S. solar power.

Texas ought to have more solar power than it does, since it has 20% of the potential solar power in the U.S., but developers prefer wind power because it has lower front-end costs and is therefore less risky.  According to Warren Buffett “we get a tax credit if we build a lot of wind farms. That’s the only reason to build them. They don’t make sense without the tax credit” (Pfotenhauer 2014).

Texas also doesn’t have net metering, which allows solar power to be sold back to the grid, which 43 other states have.  And electricity is already dirt-cheap, making it hard for any kind of power plant to make profits, especially solar with its high up-front costs.

But it is questionable how much more solar power California will build.  California appears to have hit the solar wall at just 7.7% in-state solar generation, yet after fossil fuels are gone, solar and wind will need to provide 80 to 90% of electricity generation.  Which can’t be done without massive energy storage. Which is 99% provided by natural gas, a finite fossil fuel like oil and coal.

The California Enegy Commission is also concerned about being able to reach the RPS goal of 33%, and doesn’t see how it a 50% goal can be reached with today’s technology.  Already an enormous power ramp rate that wasn’t expected until 2020 has occurred because solar power is mainly generated at noon, but electricity is most needed in the late afternoon, requiring vast amounts of natural gas power to ramp up to meet demand (Meier 2010, CEC 2016).

In 2016, Stanford scientists worried that California could hit the solar wall (Benson 2016).

In 2017, California did hit the solar wall, and this is rendering natural gas plants  unprofitable, plants that cost $2.5 to 5 billion and were able to borrow money because the banks believed they would be generating power much of the time.

Nothing but natural gas can balance solar and wind.  Energy storage batteries can’t be scaled up (only enough material exists on earth to build sodium sulfur batteries), there are few places to put dams for pumped hydro, even fewer places for compressed air underground storage, and hydrogen is the most ridiculous of all the possible ideas for providing energy.


APPENDIX A – Some details

The 8 states below produced 94% of all solar power, and tended to have one or more of these traits: latitude 36 or less (5), having an RPS (all), having an RPS that began before 2005 (5), and more financial incentives  than average (6).

  • # state      % of                            Average     Year RPS
  • Subsidies  power   State                 Latitude     Began
  • 64           60         California             36          2002
  • 16           14         Arizona               34          2006
  •   8             7         Nevada               38          1997
  • 13             6         North Carolina     36          2007
  •   9             3         New Jersey          40          1999
  • 30             2         Texas                 31         1999
  • 16             2         New Mexico         35         2002
  • 21             2         Massachusetts    42          1997

ALASKA Despite Alaska’s high latitude, solar energy is playing a role in off-grid applications, especially in remote locations. Solar thermal technologies, primarily for hot water and building heat, and solar photovoltaic panels are all being used to tap solar energy when it is available, reducing the need for other fuels

In 2014, California became the first state in the nation to get more than 5% of its utility-scale electricity generation from its solar resource. In 2015, utility-scale solar photovoltaic (PV) and solar thermal resources supplied 7.5% of the state’s net generation. California has considerable solar potential, especially in the state’s southeastern deserts. Several of the world’s largest solar thermal plants are located in California’s Mojave Desert. On a smaller scale, the California Solar Initiative encourages Californians to install solar power systems on the rooftops of their homes and businesses. When distributed (customer-sited, small-scale) generation is included, about one-tenth of California’s total net generation is provided by solar power.89 Currently, California has about 14,000 megawatts of installed solar power generating capacity.90

MONTANA had 4.5 megawatts of installed solar generating capacity by the end of 2015, but none of it was at electric utility-scale solar facilities.

WYOMING Although the state has good solar resources no utility-scale solar generation has been installed, in part because of Wyoming’s relatively low electricity rates. A small amount of distributed (customer-sited, small-scale) solar photovoltaic capacity has been installed around the state.123,124 The state does not have a renewable portfolio standard or other requirement for renewable energy


Benson, S., Majumdar, A. July 12, 2016. On the path to deep decarbonization: Avoiding the solar wall. also see  http://energyskeptic.com/2016/california-has-hit-the-solar-wall/

CEC. December 2016. Tracking resource flexibility. California Energy Commission.

DTF. June 2003. Diesel-Powered Machines and Equipment: Essential Uses, Economic Importance and Environmental Performance. Diesel Technology Forum.

Friedemann, Alice. 2015. When trucks stop running: energy and the future of transportation. Springer.

Heinberg, Richard and Fridley, David. 2016. Our Renewable Future: Laying the Path for One Hundred Percent Clean Energy. Island Press.

Meier, Alexandra von. (California Institute for Energy and Environment). 2010. Challenges to the Integration of Renewable Resources at High System Penetration. California Energy Commission. Publication number: CEC-500-2014-042.

NC. 2017. NC clean energy technology center database of incentives for renewables and efficiency http://www.dsireusa.org/. Also see https://solarpowerrocks.com/2017-state-solar-power-rankings/and https://energy.gov/savings

Pfotenhauer, N. May 12, 2014. Big wind’s bogus subsidies. Giving tax credits to the wind energy industry is a waste of time and money. U.S. News and world report.

Smil, Vaclav. 2013. Prime Movers of Globalization. The History and Impact of Diesel Engines and Gas Turbines. MIT press.

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6 Responses to Why is nearly all solar power built where subsidies are the highest?

  1. Prof. Laurel Phoenix says:

    Interesting comparison of state subsidies. Two thoughts I had was that latitude alone doesn’t give you the amount of solar power producible, since the SW also benefits (re: solar) from far less cloudy days relative to the SE states, but it no doubt still worth doing. However, the recent hurricanes remind me that the SW states would need to consider only panels flat against the roof so no winds could go under them and loft them skyward, and also to protect the panel investment, possibly a type of “hurricane shutter” system that could go over the panels right before a hurricane to protect the panel faces from destruction from other flying debris. No doubt someone out there has thought about these things…

    • Laurel Phoenix says:

      Good point…I had been thinking more of the more historically common hurricanes (Cat 1-3). For stronger ones, you would also have to design different roofs and build MUCH stronger houses which would be unaffordable for most.
      And yes, in my classes people are disappointed when I let them know that solar and wind can’t magically replace all our current fossil fuel power. NO MAGIC!

  2. mike says:

    I just don’t get why our national leaders are keeping the population in the dark about our predicament of insufficient energy; I know a lot of people who are pinning their hopes on clean solar its like a mass delusional belief.

  3. JT Roberts says:

    Right on Sheila.

    You have the picture framed.

  4. Deborah says:

    Thank you, another excellent post and thanks to the commentators too you always add more food for thought. Sheila I agree, the only option that I can think of is small hydro, easy for me to say living in a wet climate NW UK. It will not provide for industrial living, although it did provide for small industry in the UK BUT our population was a fraction of what it is now and was regularly reduced by various diseases, soon I fear to make a big come back. I can see nothing but utter chaos for some time until numbers balance resources or do we destroy the lot in the fight to claim what is left? As Joseph Tainter said in ‘Collapse of Complex Societies’ humans are problem solvers and solving problems creates complexity. I wonder how well problem solving will work simplifying? Very few civilisations have managed it in the past.
    I have read various reports thanks to educators like Alice and can agree our leaders know well what our situation is but to make that known to the masses would crash the system pretty rapidly, which is after all built on nothing more than fragile belief.
    Humans have many emotions perhaps we can describe fear as an emotion although there is much argument about this. Fear is a survival mechanism given to us by nature, and as we know nature can be brutal. Fear transcends all classes, rich and poor, the strong and the weak for various reasons, we are all in this together whether we like it or not.
    Subsidies are a vailed attempt to keep the system going as long as possible as are debts, QE, resource theft, ZIRP, inflation, helicopter money etc etc but ultimately energy, EROEI will have the final say, money being just a token of future energy, deriving its claim or value from that resource, that is left……….
    My biggest fear is how do we deal with nuclear plants and waste in a collapsing complex society?