Solar Energy: An Expensive Path to Job Creation

As a heat wave expands across the U.S. and the federal government debates whether to raise the debt ceiling, the U.S. Department of Energy’s Loan Programs Office (LPO) is offering to guarantee financing for three solar panel projects in California for $4.5 billion to First Solar Inc. After taking a closer look, these LPO projects do little to promote efficient energy production or create permanent jobs.

The LPO specifically targets projects that promote clean energy, and includes “job creation; reducing dependency on foreign oil; improving our environmental legacy; and enhancing American competitiveness in the global economy of the twenty-first century.” Moreover, the LPO supports borrowers in case they default on their financial obligations while the project is constructed. It is clear that these loans are to expand energy production that the government chooses, not those chosen by market forces.

The Energy Information Administration (EIA) notes that only 1% of energy consumption was from solar power in 2010; yet, 15 out of the 23 generation projects by the LPO have been for solar power plants. These projects cost $16 billion, and make up 40% of the total cost of projects with guaranteed financing. On the other hand, nuclear power makes up 9% of all energy consumption and has only received $10.3 billion.

The benefits of these guarantees are exaggerated. Job creation from these three solar panel projects is estimated to be 1,400, which amounts to $3.2 million per job. Additionally, many of these jobs are temporary.

A previous guarantee for a solar panel project was $1.6 billion for Bright Source Energy, which produced 1,000 temporary construction jobs and only 86 permanent jobs. The cost of these permanent jobs was $18.6 million per job created.

This is a huge cost for an energy source that is already subsidized and supported heavily by the federal government. In 2007, the average amount the federal government provided for solar was $24.34 per megawatt hour; in contrast, nuclear was only supported by $1.59 per megawatt hour.  

The lack of benefits and the substantial costs of these solar panel projects not only distort the energy market, but are also a waste of tax dollars. When it comes to increasing energy efficiency and creating jobs, these LPO guaranteed loans are not the answer.    

 Photo CreditWikimedia Commons

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Vance Ginn

Vance Ginn, Ph.D., is an Economist in the Center for Fiscal Policy at the Texas Public Policy Foundation, a non-profit, free-market research institute based in Austin, Texas. He can be reached at vginn@texaspolicy.com. Vance has been a PolicyMic contributor since 2011 and has university teaching and public policy experience. Fun fact: Vance is a drummer and once played in a top-rated rock band in Houston, TX.

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