Thanks to Subsidies

That's the case with Dave Shiels and his wife Kathleen Kiely. With his Harley and her Cadillac and their sprawling ranch house, they aren't central casting's version of environmentalists, but they are the kind of people who must embrace solar if it's going to take off in the U.S.

Rebates and credits are the main reason Mr. Shiels and Ms. Kiely have 72 solar panels on their red-tile roof and are considering installing another 20 later this year. For 11 months of the year, their meter spins backwards. Only in Arizona's August heat do they typically use more electricity than they generate, and even then credits they have banked during cooler months mean they won't have to pay to keep their house cool as desert temperatures outside hit 110 degrees.


There is debate, though, about whether it makes sense to subsidize solar power, as it is more expensive than power generated from coal or natural gas. The Energy Department estimates that solar panels, all in, cost about $210 for each megawatt hour, more than twice as much as a coal, which runs about $95, and nearly twice as much as natural gas, which costs about $125.

Those who support subsidies say they are necessary to drive demand to achieve market scale so that prices continue to drop. Opponents say the government supports only make power more expensive for all users.

Right now, the sun contributes only 0.2% of the power on the electric grid. Even if that doubles in the next five years, as expected, it will remain a teeny portion.

Solar has long held great promise. The sun is cranking exactly when power demand is typically highest and electricity is most expensive—during daylight hours. And residential installations can feed power directly into homes and power grids without needing to build giant new transmission lines. Installing panels is hailed as a green job that can't be outsourced.

In 2009, government support for residential solar systems was about $600 million, according to Larry Sherwood, a consultant who tracks solar programs for the Interstate Renewable Energy Council. That is split roughly evenly between federal tax credits and rebates paid for by electricity customers.