Wall St. Cashes In on Solar Stimulus

by Gerri Willis

You've heard me say it before: The unintended consequences of sometimes even well-meaning government policies are, well, ridiculous.

Consider the federal solar energy subsidy. The idea was to give homeowners incentives to buy solar panels, reduce the load on the electricity grid, and become a greener nation - all the while encouraging domestic companies to build solar panels. Kumbayah! Everybody's a winner!

Sounds simple, but consumers were too smart for that. Here's their calculation: If I buy 60 solar panels to offset an annual electric bill of $6,000, say, for a home in California, my tab is $93,000.

Even after the tax deduction, I still have to shell out $63,000. In other words it takes the system a decade to pay for itself. The average American is only in their home about seven years. No dice. The government deal is stupid on its face.

But have no fear -- this free money from the federal government won't go wasted. Wall Street, naturally,has found a way to tap the tax break. Enter private companies backed by Wall Street. They purchase those home solar systems, install them in consumers homes and sell power back to homeowners in an arrangement like that between a cell-phone company and a consumer.

The consumers gets the solar panels but the Wall Street firms pockets the tax break and have even found a way to create a stream of income beyond that.

That's because the consumers agree to pay a monthly stream of revenue -- slightly below their current bill. They get free solar panels and a lower monthly bill. Albiet the solar panels are from China, often the cheapest they can find. And, then they turn the stream of income from consumers into an investment -- securitizing the debt -- like they did with mortgages.

So, instead of incenting consumers to use solar panels by domestic makers -- Washington has incentivized Wall Street to find another source of recurring revenue and gets a tax break too! So who's at fault here -- Wall Street for being creative or Washington for being naive?

I'd say Washington needs to get out of the business of business -- because whether you are talking about housing or industrial policy or solar panels -- the federal government has a habit of screwing it up!