Deconstructing Solar's Green Halo

How California solar subsidies created a rent-seeking monster

AI slop courtesy of ImageFX

Kennedy Maize has this eye-opening post on the way solar and wind subsidies have become an albatross hung around California ratepayers’ necks. As solar (and wind) subsidies lead to ever more supply at times when fewer and fewer Californians need power, the state is having to pay more and more just to get the excess off its hands. As a result, California has ended up with the most expensive power in the continental U.S., a reality that bites into consumers’ pockets and sends energy-intensive industries out of the state.

Sometimes, being South American gives your intuition an edge: subsidies are a case in point. Growing up, I could see the perverse effects of subsidies all around every single day: the terrible Hecho en Venezuela appliances that cost three times what the same model would cost in the states, the useless cars, the messed up phone service that would work when it felt like, and no more.

Latin Americans caught on to what was going on: these industries were all protected by a mass of subsidies, tariff barriers and rules that made their owners a ton of money, no matter how shitty the goods and services they made were. The ownership class knew full well on which side their bread was buttered: they understood better than anyone else that they were rolling in it not because anybody liked the terrible washing machines and cars and phone services they were selling, but because politicians had agreed rules that made it impossible for them to lose money.

Logically, they spent all their time and energy courting those politicians: corrupting them with bribes and gifts, socializing with them, getting their daughters married off to their sons, sucking them into a web of mutual obligations that made it extremely awkward for politicians to withdraw their support. That this system ended up impoverishing Venezuelans little by little over a generation few cared about. That it ended up paving the way for Hugo Chávez to take power is something none of them foresaw.

Economists have a word for this kind of behaviour: rent-seeking. It’s the behaviour of rational actors when faced with incentives that allow them to increase their wealth by doing things that produce no value for the rest of society.

The thing Latin Americans intuit, and Californians apparently don’t, is that rent-seeking perpetuates bad policy.

Where there are rents, there are rent-seekers: groups of powerful, politically connected people who owe their wealth and status to a set of rules. Rent-seekers always use their wealth and status to sustain the rules that give rise to their rents. Which is why nothing is harder to kill than a bad policy that makes a few people very rich.

This dynamic is very clear in California’s clean power sector. Solar power long since reached the point of diminishing returns in California: the state doesn’t need more power in the middle of the day: it doesn’t have any uses for power at that time. The marginal megawatt at 1 p.m. costs the grid operator money. Yet California’s subsidy regime ensures that adding solar capacity remains profitable anyway, and that subsidy regime is politically bullet proof, because rent-seekers gonna seek rents.

Of course, green rent-seekers aren’t the only ones lobbying California’s policy-makers. Groups like the California Solar & Storage Association, the American Clean Power Association and California’s Sierra Club spend millions lobbying politicos in Sacramento, but dollar for dollar, they get outspent 5-to-1 by the fossil fuel industry. How do groups getting this badly outspent manage to keep control of policy anyway? How do they keep riding high on the subsidy hog?

Through ideology, that’s how.

Green power rent-seekers have an extra ace up their sleeve that the makers of shitty Venezuelan washing machines could only have dreamed of: the Green Halo effect.

What is the Green Halo effect? It’s the vague but powerful sense of environmental virtue that attaches to renewable energy technologies. That warm, satisfied, virtuous feeling people get when they hear their power is plucked directly from sunlight, producing no pollution at all.

Solar rent-seekers can’t match the fossil fuel industry’s spending power, but they can do something the fossil fuel industry can’t: they can mobilize volunteers to march for their cause. They can embarrass politicians that cross them, pegging them as tools of the big bad polluting oil and gas polluting industry. They can credibly threaten to mobilize progressive voters against them. That’s power! Enough power to neutralize a strategic competitor’s five-to-one spending advantage.

Not, of course, that solar and wind really compete with fossil fuels: they’re more stuck in a symbiotic relationship with them. Renewables are intermittent — if you’re going to add more and more renewable generating capacity to the grid, you’re going to need more and more back-up capacity to step in and pick up the slack when the wind doesn’t blow or the sun doesn’t shine. Perhaps the least understood —and most assiduously obscured— point about this industry is that renewables and fossil fuels aren’t really competitors, they’re more like frenemies: deeply hostile to one another, but joined at the hip nonetheless.

For the solar crowd, though, what matters most is that the subsidies keep coming. The Green Halo effect —that subtle sense that only solar power is guilt-free— has become the industry’s most important asset. Sustaining that illusion is the rent-seeker’s most pressing task.

When you start to intuit these rent-seeking dynamics, all those gleaming images of eco-friendly solar farms that dot clean power company websites start to take on a different hue. Maintaining the green halo around solar farms and wind turbines is a fundamental part of a rent-seeking strategy: the way the renewables industry ensures that even politicians who see through this scam will think twice about crossing it, for fear of offending voters.

The Green Halo isn’t just a cultural phenomenon. It isn’t mostly a cultural phenomenon. It is, at heart, a business strategy: one of the most powerful tools in the rent-seeker’s arsenal. It is how you keep California politicians fearful of challenging policies that make their voters less well off.

One of the tragedies of our time is that the people who get it about our climate problem absolutely do not get it when it comes to energy. Commitment to green halo technologies has become a cultural stand-in for a whole value system: cultural signifiers of environmental virtue. But those technologies are inherently limited in their ability to power a complex modern society. So stylistic allegiance to environmental goals ends up wedding a whole swathe of the population to a sure-to-fail approach to energy, while a tiny cohort of rent-seekers pal around in their high-spec Teslas and pat themselves on the back for saving the earth as well.

It’s very messed up.