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How to Make Solar Power Cost-Effective

Two new solar energy proposals — one from the left side of the aisle, one from a Republican venture capitalist — could kickstart the solar economy.

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Last week, this column chastised environmentalists who haven't figured out that global warming is an exponentially worse threat than nuclear power, and act like we've got decades to figure out alternative energy. It goes without saying that free-market ideologues and coal-industry leaders are the real barriers to rational stewardship of the planet's climate. Take the Competitive Enterprise Institute, a DC think tank dedicated to limited government and unrestrained capitalism. The institute recently unveiled a new series of commercials aimed at defending that much-maligned compound, carbon dioxide, the active ingredient in climate change. Amid shots of girls blowing dandelions and happy families cavorting on the beach, a narrator softly proclaims: "Carbon dioxide. They call it pollution. We call it life."

If we're going to escape the environmental calamity that looms on the horizon in the coming decades, we have to explore every alternative to carbon-based electricity. Nuclear energy is one option, obviously, but so is solar power, which has become quite popular in the last few years. Unfortunately, solar panels are still too expensive for most Californians to install. But two Oakland men, who became pariahs among many environmentalist leaders for daring to utter some overdue critiques of their movement, may have come up with a way to finally put solar panels on every house.

In 2004, activists Ted Nordhaus and Michael Shellenberger dropped a bomb on the environmental movement by declaring, at a high-profile conference in Hawaii, that Greens had become too fixated on single-issue policy considerations, and marginalized themselves from an American mainstream that shares their core values. Sierra Club president Carl Pope suggested that the two were simply trying to poach grant money from older Green groups, and other leaders like Van Jones struck them from their Rolodexes. Since then, however, the two have been brainstorming dozens of new ideas, and their solar power notions could wean thousands off California's overtaxed energy grid.

Solar panels are terrific once you have them, but getting them is the tricky part. It costs roughly $20,000 to install a solar system on your rooftop, and while Californians and most other Americans can sell some of the excess power you generate back onto the grid, it typically takes up to 25 years to break even, even with rebate programs. Most Californians don't live in their homes long enough to realize the financial benefits, and Shellenberger says solar panels don't add much to the sales value of your home. As a result, most homeowners don't have the economic incentive to go solar.

Nordhaus and Shellenberger may have come up with a way around this problem. Under their plan, the state of California would issue bonds to create a fund that homeowners could borrow from to install solar panels. The loan would be repaid by selling excess power to the grid. Utilities are likely to oppose the idea, Nordhaus says, because it would create thousands of energy-producing competitors. But if something like this were to happen, homeowners would no longer need twenty grand up front to go solar, and the system would pay for itself. "At this point, it's just something we're talking to people about," Nordhaus says. "It's not like we have a plan to do this. But we think it's pretty clever."

That's the kind of thinking you can come up with when you're not content to merely denounce consumer capitalism. Environmental values are increasingly simpatico with free enterprise as more and more people realize the downside of depending on emirs and strongmen for oil. In fact, one of Bay Area capitalism's biggest personalities, Sun Microsystems cofounder and Kleiner Perkins Caufield & Byers partner Vinod Khosla, has just pushed one of the biggest environmental proposals in decades. This Republican venture capitalist wants to — are you ready for this? — tax Big Oil.

Khosla is the moneyman behind the California Clean Alternative Energy Initiative, a scheme to raise taxes and finance research and development into alternative fuels and technologies. Earlier this month, the campaign submitted almost 1.2 million signatures to the secretary of state, virtually guaranteeing that its plan will be on the ballot this November. If voters approve the initiative, the state will slap a 4.5 percent tax on oil extracted from California wells, using the proceeds to finance $4 billion in research and development over ten years.

According to Julie Buckner, the spokeswoman for Khosla's campaign, California is the only oil-producing state that doesn't impose an extraction tax, and petroleum companies will easily be able to afford it. "It's a modest assessment," she says. "Farmers pay for water, the timber industry pays for our trees, and Big Oil ought to pay for the oil resource that's in the ground here as well."

Under the initiative, a nine-member commission will review research grant proposals. The model follows the stem-cell research initiative that easily passed two years ago, but while just a few antitax crusaders and religious nuts opposed stem cells, this initiative will be going up against the likes of Chevron and all its record profits.

Al Lundeen is the spokesman for Californians Against Higher Taxes, an organization set up in large part by the California Independent Petroleum Association to oppose the initiative. According to Lundeen, the new tax will drive up the cost of gas; the initiative bans the practice of passing the cost along to consumers, but the legislative analyst's office has suggested that the tax could depress oil production and hence raise the price at the pump. In addition, gas station owners could be more likely to buy gas from foreign sources. A weakened Chevron would hire fewer workers and pay less in payroll and income tax, and our schools will be underfunded.

Finally, Lundeen argues that the tax will make the land containing the oil reserves less valuable, and local taxes will drop when the property is reassessed. "There's no question we should pursue alternative energy," he says. "This initiative simply just isn't the way to get there."

In any other year, a tax plan would flop over and die on Election Day. But this isn't just any year: Drivers are sick of watching oil companies post record profits while they pay three bucks a gallon. That's why Lundeen's arguments sound so hollow in the end. The price of marginally reduced income tax revenue, at a time when California is enjoying a multibillion-dollar surplus, is nothing compared to the windfall we could gain if such research pays off. In the end, Lundeen is reduced to suggesting that Khosla is really pushing this because he wants to profit from a new avenue of high-tech research to invest in. "It's legitimate to ask what kind of self-interest is at stake here," he says.

Hey, Al: Ever heard of Adam Smith? The marriage of Green values and capitalist initiative is the brightest possible future for the environmental movement, and if it were to pass, Khosla's plan would be among the greatest Green achievements in history. After years of energy crises, climate change, and oil wars in the Middle East, our collective, enlightened self-interest may finally be taking the future of the Earth seriously.

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