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August 14, 2011

A Good Use of Our Tax Dollars for Renewables

The solar hot water equipment being installed at the Highgate "affordable-housing" (subsidized housing) complex in Barre is a good use of our tax dollars whether looked at from an economic, environmental, or plain old good-governance point of view. According to an article (subscription required) by Peter Hirschfeld of the Vermont Press Bureau, this project will more than pay for itself over its twenty year life, directly eliminates the need to import and burn 5000 gallons of oil per year, and reduces the cost of running the housing complex so presumably decreases the subsidies needed to keep the housing affordable in the future. In other words, the benefits from spending taxpayer money go to the taxpayers.

Unlike solar photovoltaic (generating electricity from sun light), solar hot water heating actually makes economic sense at the current costs of other water-heating fuels – even in Vermont's sun-challenged climate. You do, however, have to have a backup system if you want to shower on cloudy days and in the middle of the winter. But the economics work, even with the backup system and its need for fuel. According to the Press Bureau story, the full cost of the Barre project is $300,000 of which $133,000 is from a federal grant; payback is thirteen years – actually atypically long for solar hot water but still a positive payback - on the full project cost. Amortizing the capital cost over 20 years (but without adding in interest), the hot water produced will cost about as much as if it were produced with $3.00/gallon heating oil. Currently heating oil is close to $4.00/gallon although it could fall this winter.

Unlike solar photovoltaic in Vermont – which is much more heavily subsidized than solar hot water – every bit of energy produced by this project directly reduces the need to import and burn oil. We use almost no oil to generate electricity in Vermont and we have the lowest carbon footprint in the country for our electricity generation since two thirds of it comes from nuclear and hydro and the remaining third from relatively clean natural gas. However, we green Vermonters have a very high carbon footprint overall because of our dependence on oil for heating and because we drive a lot. The Barre project is a small step towards solving a problem we actually have. Since it pays for itself, it's a "sustainable" step.

Even though this is a time when we especially need to scrutinize all government expenditures, this capital expense is justified because it reduces the need for future government spending. The benefit from the federal grant which helped fund this project goes to the federal taxpayers who funded the grant. Grants for solar photovoltaic, on the other hand, actually drive up the cost of electricity because utilities must buy it at five or six times normal wholesale and the benefit goes to those who developers lucky enough to get the grants rather than to the taxpayers who fund the subsidies.

A good government energy policy would consist of using taxpayer dollars only for increasing the energy efficiency of assets which belong to or are funded by taxpayers. There is an enormous potential for saving both energy and public dollars by making government a more efficient user of energy. And, because government is such a huge purchaser, a rational government energy program will help develop healthy energy-related businesses all over the country. On the other hand, subsidies to producers of over-priced products like corny ethanol and solar photovoltaic farms just use our money to create "businesses" which will fold the minute the subsidies are removed.

Related post:

How to Increase Your Electric Bill to $630 per Month

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