Editor’s Notes: Taxing the Sun

California Becomes Latest to Propose a Tax on Solar Panels









A number of years ago, we published an article about how Arizona was going to start imposing a monthly tax on solar panels. They started at 70¢ per kwh and are now currently charging 93¢ per kwh. Since then, a few more states have followed suit. Most recently, California has put a much higher cost proposal on the table and, dude, they’re getting a lot of negative vibes.

The argument from the utility companies is that they have to maintain their power grids for the good of everyone. Further, solar panels not only diminish the amount of power supplied to homes, but the utility companies have to pay the homeowner when the unused power from the solar panels is reverse-supplied and bought back, at a set rate, to the utilities through their own equipment. Both of these are a loss of income for the utility companies. Their argument makes sense, since equipment has to be maintained and the utility company is entitled to a fair profit. However, as with everything when the government gets involved, the implementation can be anything but fair.

For instance, California is proposing an $8 per kwh tax on solar panels. At this rate, a 200-kwh system would cost the homeowner $160 per month. This is set cost, whether or not the system is in use, and not accounting for the fact that solar panel output diminishes over time. This flies against the pay-for-what-you-use utility system now in place. As a side note, it’s still unclear if this tax will go directly to the utility company or to the state and directly into their general fund to do with as they please.

Of course, this $8 rate is just the first volley. It will probably be reduced by the time the tax is implemented and the furor had died down. This dance is designed to get the homeowner to say, “This is great, I could have been stuck with more.” Just give it time, because you will. Once in place, taxes always go up.

When the personal income tax was implemented, it was never to exceed 3%. The Social Security tax was never supposed to exceed 1%. The monthly federal excise tax that you see on your phone bill every month was put in place during World War II to pay for the war effort. If you haven’t figured it out by now, I’ll be blunt: taxes don’t ever go down, and they don’t ever go away.

Hawaii is dealing with the situation in a different manner, and to me, this approach makes sense. Rather than tax the solar panels directly, it has reduced the rate the utility companies are required to pay the homeowner under the electricity net-metering or buy-back program. So, you pay for what you use from the utility company, and get paid back for what you supply them from your solar panel array, albeit at a now lower rate. You’ll note that with this system, no tax money goes to the state.

Tesla’s Elon Musk was quick to criticize the California plan, calling it insane. He noted that the idea essentially penalizes people for switching to sustainable energy. California has spent decades promoting and subsidizing solar panels, so the proposal was a shock to many. In a separate note, Musk stated that, “California used to be the land of opportunity and now it is becoming more so the land of over-litigation, over-regulation, over-taxation.” He added that it is, “increasingly difficult to get things done in California.”

SunPower®, a large supplier and installer of solar panels based in San Jose, California, was also critical. They stated that this proposal will cost jobs and significantly slow the solar panel industry in California. Apparently they are not alone. According to some reports, more that 128,000 people across California have sent letters to Governor Newsom, voicing their opposition. Many have pointed out that with the state’s history of rolling-blackouts and utility-caused wildfires, now was not the time to discourage solar panel installation.

It’s been said that if a government wants to encourage an activity, they subsidize it, and if they want to discourage that activity, they tax it. Nobody can deny that the solar industry has received more than its fair share of tax incentives. For the past several decades, solar panels have enjoyed tax incentives from federal, state, and/or city sources. The goal, of course, was to encourage photovoltaic (PV) use and help reduce our dependence on foreign oil, and it worked. With PV costs dropping and utility costs increasing, there has been dramatic growth in rooftop solar over the past year. I guess it was just inevitable that at some point, the bureaucrats in charge would want some of that money back, and probably then some.