A Tale of Three Cities: Solar Power and the Irresistible Lure of “Free Money”
Introduction
In recent years, a number of local governments across Minnesota have been installing solar panels to generate a portion of their electricity. Cities and schools embrace these solar installations despite the fact that they can take 40, 50 and even 100 years to pay for themselves. Local governments are able to make these poor “investments” thanks to cash grants from the federal government and electric utilities. Though just a tiny corner of the federal spending juggernaut, federal grants still add to the nation’s $17 trillion dollar debt. Subsidies from electric utilities—mandated by the state—represent a larger, slightly more visible burden on Minnesotans in the form of higher energy rates.
In this report we look at three solar power projects undertaken by local governments in Minnesota. By exploring how each city made the decision to accept cash grants, we can begin to get a picture of how uneconomic projects get funded, with each party involved making apparently rational decisions in their own best but narrow interests. In light of how these decisions were made, we offer some alternatives for city officials to consider even when they feel compelled to move forward with uneconomic projects.
We were graciously welcomed by these cities and found the staff, elected officials and volunteers we interviewed to be well informed and well intentioned. We do not want this report to be viewed as a personal criticism. As we told the people we interviewed, we bring a different perspective on the project dollars they viewed as “free.” Federal dollars come from only two sources: current federal taxpayers contributing to the national treasury and future taxpayers who will pay back the borrowing used to fund current spending. State mandated subsidies push up energy costs which raise prices. This may not be noticed by most people but it is a burden for low-income Minnesotans and can impact, for example, job growth in energy intensive industries.
As noted above, we hope this report will encourage citizens, city councils and their staff to think about these opportunities differently in the future.