The reason is the alternative form of power, gas and oil.

Germany “The country largely imports its oil from Russia, Norway and the United Kingdom. Germany is also the world’s largest importer of natural gas. The largest gas imports come from the Netherlands, Norway, and Russia via the Nord Stream. In 2016, Germany imported 49.8 billion cubic metres (bcm) of gas from Gazprom.”

Germany doesn’t produce oil and gas like the US therefore Germany doesn’t need an incentive to get off of petroleum !

The government has several levers it can pull:

1. (a) Remove subsidies for fossil fuel / (b) leave them in place

2. (a) Force companies to capture the externalized costs of fossil fuels / (b) force the taxpayers to pay for the externalized costs of fossil fuels

3. (a) Incentivize a transition into green energy via subsidies so the US can be a leader in this market sector that’s going to explode in demand this century / (b) fall behind in the global market as China grabs the opportunity and runs with it.

Which levers make sense to you? I think subsidizing things like solar energy production is good for the economy (long-term especially), creates jobs domestically, limits our imports of oil which funds terrorism in the Middle East (and ultimately saves on Defense/State Department spending), helps de-centralize the grid which makes it more robust and less vulnerable to attack, expands energy production to help meet a rising demand that will follow the transition to EV vehicles, can limit the cost increases from natural disasters related to climate change.

I see those subsidies as investments with the potential for massive ROI in the long-term. If we think of the Government as a business (I know many conservatives do), this is an obvious choice.

Yes, we have been subsidizing the fossil fuel industries for decades. These subsidies need to end immediately.

We also need to stop production of new armaments, but that’s a different question.

Thanks all for your attempted answers. None of you answered the question as I intended it. The fault is mine. The question I ask at the top is different from the question I asked in the body! That was not intentional;, please accept my apologies.

I am not questioning the need for subsidies up front. My question is: “Should the subsidies have ended when the industry was established?” It seems clear if an expansion is contemplated without any subsidies that the industry is established.

Another way of looking at government subsidies. How does government know, before the market has picked a winner, which industry to subsidize?

I think it depends.

Take the solar tax credit. I went to a lecture where I live that gave you the math to figure out how much solar panels would cost to power your house and how long to pay them off with the saving on electricity including the tax credit. If I understood it correctly, people in higher tax brackets benefit more from the tax credit. At the time I was in a low tax bracket. The guy giving the lecture is a resident here, not selling anything. I’m in a retirement community remember. He has helped many of our residents, and places of worship with solar panels.

Ok, so only upper middle class people can really benefit from installing solar. Even with Tesla their first cars were for people with money who have more than one car. I would argue these types of roll outs are why electric cars and solar are not catching on as fast as they should.

Does solar have a large profit margin? That’s the real question. Would the price be lower without the subsidy? Let’s say the perception of the solar installer is they can sell 5 panels for $10,000, and the government offers $5,000 to the home owner, is the installer charging $15,000? I’d love to know if that’s happening. Government subsidies can drive prices up sometimes and slow sales. I don’t know if that was happening with solar.

Back to electric cars. They were higher end sports cars and tree hugging little cars. No normal sedans initially. Maybe that is part of why there was a slow start? Then my subsidy question comes back into play. Does the price come down once the subsidy is gone?

A lot of customers need the price to be comparable without factoring in tax rebates. People don’t understand tax rebates, and if you pay very little tax then the rebate is insignificant.

I think builders should be building solar houses, and then the volume should help bring the price down. Right now if a homeowner spends for solar and then has to move in two years they likely never see all of their money back. If the builder in a subdivision does it the house values are all comparable in the entire area. Builders can cut on something else like no crown molding and less expensive countertops in the laundry, etc. to balance the cost for comps in the local area outside of the community.

Were the tax credits given to builders?

@JLeslie First of all, a tax credit is different from a deduction. A tax credit reduces your tax dollar for dollar, while a deduction reduces your taxable income, dollar for dollar. A person’s tax bracket plays a big role with a deduction, none with a tax credit. In fact, people who pay less tax will be able to benefit more from a credit in terms of percentage of tax forgiven. I know that both solar panels and electric cars provide tax credits, not deductions. For instance, last year, I installed $22,000 worth of solar panels. I received a tax credit (not a deduction) of $6,750.

You can imagine a tax credit of over 30% will distort market pricing. We may never know what the solar panel system might have cost without the tax benefit. I hope solar systems don’t go the way of shale oil and coal gasification/liquefaction – these were “alternative” energy and were heavily subsidized by Jimmy Carter’s administration. All three technologies essentially disappeared with the phasing out of the subsidies.

My basic question is: does government know better than private companies about the technology to subsidize? If government backs the wrong horse, the right one may have to struggle far longer to make any headway.

On your last point, a builder will build solar houses if s/he sees enough potential to enhance her/his margins. I hope you are not recommending any government interference.

@crazyguy I wouldn’t mind the government giving builders incentive for solar in my state. I live in a sunny state.

Does government know better than private companies? I’d say it’s a toss up. The bad thing about government is it might not give up soon enough when the writing is on the wall. Private companies will give up when it’s not profitable. I guess that can be bad too.

When I was a buyer at Bloomingdale’s I was extremely successful. I was buyer for cosmetics and fragrances. Both are primarily very “basics” businesses. Like a supermarket there is a very high percentage of the stock that is not trendy or fashion, but just keeping enough stock for the demand. One reason my sales were so high was I fixed skus that were running out all of the time. You would think that’s obvious, but if a sku runs out you don’t know how many sales you missed. I knew, because I listened to my staff. I significantly increased the stock on some items that were previously thought to be slow sellers and significantly decreased stock on very big sellers and ran them tighter. Profitability went way up.

My point with the story is solar panel sales are unknown when they are at a lower price. No one is doing it lower, and I don’t know if that’s because there is no room to sell it cheaper or because they are being greedy and stupid all at once. That easily could be private business not trying a lower price, and so they don’t know what would happen. Business makes bad assumptions all the time as does government.

You’re right about the credit and deduction. Thanks for catching that. Some people pay no income tax according to Republicans lol, so that doesn’t help those people. I don’t think the credit would help with social security payments does it?

People who live check to check, or simply on moderate incomes, tend to not do things that help their taxes or pay later. They think in terms of monthly budget.
My husband saw this very plainly when his companies started going to offering PPO plans instead of just HMO’s. The people who made very low wages stayed with the HMO even though the HMO was more premium per pay period. My husband was VP of compensation and benefits. The executive team were all surprised.

One more thought. There could be more of a cooperative with local utilities and developers. Every roof can be an energy source for the grid. Especially in my state.

Tax incentives screw up the marketplace. Like I said, we may never know the real cost of anything that has a tax subsidy.

What happens with tax subsidies is that they eventually go away. When they do, one of two things happens: manufacturers drop the price in order to not lose sales; or they stop making the previously-subsidized product because it does not make sense without the tax subsidy. Both outcomes are bad. In the former, the subsidy was used to just increase the profit margin of the manufacturer. In the latter case, the government wasted money by barking up the wrong tree. Not only did it not gain traction for the subsidized product, but also, it probably hurt competing products.

@crazyguy So, what about food subsidies? I recently saw a show where farmers said they are making close to nothing on some crops now. I’ve been pretty sure I was against farm subsidies for a long time now. I say pretty sure, because that was a gut feeling based on minimal information.

@JLeslie The farmers’ lobby is strong.

@crazyguy “Should the subsidies have ended when the industry was established?”

IMO the subsidies should end when the long-term ROI for the total costs/benefits (including externalized costs) are factored in and the math doesn’t make it in the taxpayer’s interest.

@gorillapaws I agree with you, but Government moves much too slow for a dynamic analysis like the one you mention. In the meantime proponents and opponents become entrenched, and we get basically what we have with the farm subsidy.

@crazyguy “Government moves much too slow for a dynamic analysis like the one you mention.”

I think that’s one of those “truisms” that is not always as true as people think it is. There are budget analyses that are done every year. Once the initial models are established for calculating something like ROI on solar panel subsidies, it’s fairly trivial to update the values over time and look at the updated ROI projection.

@gorillapaws After the analysis is done, there is still a long process before any changes can be made.

Economist Thomas Sowell always said that if you want more of something just subsidize it.
College costs have gone up because we are pushing money into the educational system.

@LogicHead You are absolutely correct. Even in areas in which government subsidies were vital at one time, we find the subsidy keeps on going far longer than necessary. Or it is used to subsidize a new thing that has zero chance in the marketplace.