Some cheer the government subsidies, mandates, and tax credits that currently support the solar power industry, especially in countries like Germany, where subsidies are high and electricity prices are higher. On the back of the economies of scale made possible by such involuntary taxpayer investments, the cost of solar power has indeed come down. But as the appetite for continued taxpayer support wanes, this business model is looking shaky.
More importantly, as Matthew Stepp of the Information Technology and Innovation Foundation points out in the debate, “solar policy advocates are too focused on prioritizing the deployment of today’s technologies rather than supporting the development of cheaper, better solar and storage technologies.” As he explains, deployment can lead to gradual improvements in technology and cost reductions, but only R&D can produce the breakthrough innovations that will really make solar power competitive. All the money taken from taxpayers to subsidize uneconomical deployment is money that is not invested in the innovations needed to make it economical.
So should governments just redirect those tax dollars from deployment to innovation? Far better to just give that money back to the people who earned it. Not only is it their money, but when it comes to picking winners and losers in the race for R&D funding, venture capitalists with skin in the game will outshine government bureaucrats playing with other people’s money any day of the week.