We live in what is often referred to as a pluralistic economy where governments engage in manipulation of the free enterprise system through the introduction of “sticks and carrots’” designed to sway action in a direction it might not ordinarily go. Noting the public’s resistance to heavy-handed methods often ascribed to scurrilous tyrants, our planners tend to emulate the success that automobile salesmen have found in a variety of softer inducements to get us moving in the desired direction.
In the case of residential solar, this has proved to be at least a two-edged and possibly (if you can imagine it) a three-edged sword, the former reflecting the current glut of solar panels resulting from increased production in anticipation of a last-minute flurry of activity in anticipation of the planned demise of the ITC.
With the subsidy’s extension, however, the anticipated residential flurry cooled, presenting the industry with substantially lowered expectations for the near term and a situation in which the oversupply of panels could lead to lower prices and even tighter margins for producers. Lower prices, however, may in fact give way to a rebound in residential activity, driving both solar and storage installations to even greater heights than anticipated before the today’s cooling off period.
So what can we say about subsidies? Not much since they are so deeply imbedded in nearly every activity in which governments and their planners are involved. Ultimately, however, it’s pretty hard to fool the marketplace for very long, but while the subsidy signals can add unforeseen risks to already risky games, so too can they provide rewards. It sort of depends where one sits when the inducement swords do their slicing.