There is nothing as disconcerting as an outraged economist.
So when Paul Brewbaker, the former Bank of Hawaii economist and former chairman of the state Council on Revenues, starts asking that we rethink the state’s subsidized energy plan, I’m willing to pay attention.
In a column last week, I noted that the present Council on Revenues is warning that the state is now losing $70 million a year by giving tax credits to homeowners and businesses that install solar photovoltaic systems.
If the council’s argument was that it is costing the state too much money, Brewbaker fired back that it is not just expensive, it is also economically inefficient and bad social policy.
Brewbaker was also worried five years ago about the state’s tax credit plans for high-technology investments.
“It’s exactly the same waste of money, for exactly the same lame reason, with exactly zero public benefit. These tax credits are costly to the public, with zero public benefit,” Brewbaker said.
What is happening, Brewbaker argues, is that tax credits (money) are given to private citizens and businesses from the public treasury, only to help those rich folks who can afford to put solar on the roof.
“These are public expenditures for private benefits,” Brewbaker said.
When the state builds schools and pays for teachers and your kids go to school for free, that is a public expense for a public benefit.
“The public gains an educated population,” Brewbaker said.
“Using public money to pay for private households to install PV on their roofs, or to pay for private companies to erect windmills that don’t pay for themselves, is simply a transfer of wealth from a larger group of taxpayers to a smaller subset,” Brewbaker said.
This economic plan gets worse, Brewbaker said, because by taking some people out of the grid, the remaining people must pay more for their electricity because the power company has fewer customers to absorb the costs.
“First the poor people pay the rich for the PV panels, then the poor people pay the utility for the added costs of the rich people’s departure from the grid,” Brewbaker fumed.
This “Occupy” thinking is a direct challenge to the entire Hawaii Clean Energy Initiative, which is the state policy of both former Gov. Linda Lingle and Gov. Neil Abercrombie, calling for the state to be using 70 percent “clean energy” by 2030.
This initiative calls for “Hawaii to become more economically stable by keeping an estimated $6 billion in state that would otherwise go toward foreign oil investments.”
Brewbaker answered that “clean energy” is not so much a specific thing as it has become a marketing brand.
“It is a marketing gimmick, not an energy policy strategy,” Brewbaker said.
“Then there is the ‘money leaves the state’ fallacy,” he added.
“Global economic interdependency is not a bad thing. It is the main reason for our high material standards,” Brewbaker said, adding that if it is cheaper than an alternative, it make sense to import petroleum.
“Economic self-sufficiency is the development strategy adopted by North Korea; how is it working out for them?” Brewbaker asked.
This is not the end of the debate on how much taxpayers should subsidize the photovoltaic industry and its customers, but Brewbaker’s notes could form the beginning of bringing Economics 101 into the discussion.
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