I wrote a letter to the editor for the Aug. 27 issue, “Solar Power a Good Deal?” In the Sept. 10 issue, Mark Buell said that my numbers didn’t add up. The point that he missed in my original letter was that my figures represent the present value of the energy savings, not the cumulative amount over the 25 years. This is the preferred methodology for evaluating such capital investments.
The widely used approach is called Discounted Cash Flow analysis. It is “discounted” because cash received in the future is worth less than cash received today. The further out in time the cash is received, the less the value today. For example, the $56,000 energy savings that Carlson’s receives in the 25th year is only worth about $16,000 today, with a discount rate of 5 percent. When you add up the present values of the $56,000 savings in each of the 25 years, it comes to the $790,000 mentioned in my letter. Comparing this total savings in current dollars to the investment today of $1.1 million results in the Net Present Value for the investment of minus $310,000. The investment, therefore, would not be considered to make economic sense.
Buell, and other letters commenting on my analysis, cited the amount of subsidies by the federal government for fossil fuels, implying we should level the playing field and subsidize renewables, such as solar, to the same extent or more.
Here are the facts. Stephen Mirarchi’s letter of September 3, says U.S. subsidies for fossil fuels average about $10 billion per year (Environmental Law Institute). The same report indicates renewables receive about $4 billion. That means that renewables receive 29 percent of the total energy subsidies ($14 billion). Yet, according to the U.S. Energy Administration, renewables account for only 8 percent of all energy production.
Mr. Mirarchi also neglected to mention the $67 billion that renewables received from the Obama stimulus plan. That amount alone is almost seven times the average annual fossil fuel subsidy.
Sounds more than level to me—in fact, a lot more.
Anthony J. Marolda
Jacob Gates Road
