Solar Subsidies

We are installing over 30 solar panels on our roof. The City of Austin currently offers a rebate up to $15,000 for 60 per cent of the cost, and the federal government gives a 30 per cent credit on the remainder. With those subsidies, the rate of return on our own investment is 17 percent — making this is a superb deal for us.

A neighbor in the Netherlands has 4 solar panels on his roof, a strangely small number.  I asked why.  His answer:  The Dutch government pays up to €1500 if you install a solar installation.  Each solar panel costs him €450, with a fixed cost of about €200 for the installation. Thus his average rate of return on his 4 panels is about 25 percent, a great investment.  He would get no subsidy for a 5th panel, so the marginal rate of return on it would only be 4 percent for him. Small wonder that my neighbor has his unusual solar installation.

Both my Dutch neighbor and I benefit from the subsidies–but should our governments be using taxpayers’ money for this, especially since I bet that most of the beneficiaries are well into the upper part of the income distribution?