Rentseekers and The Free Market: Part II

I watched a piece on CNN the other day that really tied the room together, in terms of the battle over America’s energy future. Recently in this space, I’ve ranted about “rentseekers”—established industries backed by favorable regulations that stifle innovation and thrive by maintaining the status quo. This story rides a thru-line from social innovators, like Uber and Airbnb, to the heart of the solar energy revolution, and it exposes a dilemma at the core of our economy: The free market doesn’t really exist.

Uber is a mobile app that lets users hail taxis or private cars from their phones. Airbnb is a web-based application that allows people to rent out their homes or apartments on a nightly basis. It’s easy to see why the yellow cab industry in some cities is fighting back against the former, and it’s not surprising that the traditional hotel industry is up in arms about the latter. It’s called profit. And if you’ve been making it for long enough, you can afford to have friends in high places passing laws that protect your desire to eliminate competition.

The same rule applies to the energy industry, where investor-owned utilities have owned the playing field for the better part of a century. Now that people are slowly awakening to the very real threat of climate change, a gap has opened in the market, and innovators have stepped in to fill it. Once viewed as a luxury for the rich, rooftop solar is steadily expanding to low- and moderate-income communities. And policies like net energy metering, which give rooftop solar customers full retail credit for the excess energy they give back to the grid, have made this more than an alternative to fossil fuels.

Distributed solar energy has the potential to save our energy future. But instead of embracing this shift in our technology and culture, the utility industry has attempted to kneecap the nascent solar industry at every turn. Two prominent weapons in the news these days are Feed-in-Tariffs (FITs) and Value of Solar Tariffs (VOSTs), alternatives to net energy metering that may sound reasonable at first, but actually have hidden, negative tax implications for consumers.

A memo released last week by The Alliance for Solar Choice— authored by top national law firm Skadden, Arps, Slate, Meagher & Flom—finds that consumers are ineligible for a 30-percent federal investment tax credit under FITs and VOSTs. These people will also owe income taxes on the payments they receive for the solar power they feed back to the grid.

Exchanging tax credits for taxes? Sounds like a raw deal to me. But it makes perfect sense for big utilities to push legislation that allows them to maintain their monopoly status.

These “rentseekers” want to live in a world where cool ideas go to die. Where maintaining the status quo trumps public health. Where expediency is more important than efficiency.

Our only saving grace is that human innovation almost always prevails in the long run, and technology advances faster than those who try to contain it. Just like Yelp and OpenTable have revolutionized the restaurant industry, and Reddit has turned the news market on its head, so will Uber and Airbnb and the scrappy solar industry find a way to upset the status quo and move us one step closer to a truly free market. All it takes is a little Silicon Valley creativity and the will to persevere.

Peter Allen is an independent communications consultant and a proud native of San Jose.


  1. Well, you’re certainly correct when you point out how the taxi industry is out of line to use laws to stifle innovators such as Uber. But of course you have to spread propaganda that global change or climate warming is a “very real threat.”

    This, of course, is anything but settled despite what the Goracle would have you believe. There are just too many problems with the warmist party line, some of which are listed here:

    In Galileo’s time, the consensus was that the sun revolved around the Earth. Just because that was the consensus didn’t make it right. Same is true with the global warming hoax.

    “Historically, the claim of consensus has been the first refuge of scoundrels; it is a way to avoid debate by claiming that the matter is already settled. Whenever you hear the consensus of scientists agrees on something or other, reach for your wallet, because you’re being had. Let’s be clear: the work of science has nothing whatever to do with consensus. Consensus is the business of politics.” Michael Crichton 17 January 2003 speech at the California Institute of Technology

  2. “rooftop solar is steadily expanding to low- and moderate-income communities.”

    Really…..please give some specific examples.

    Chris Mizera

  3. It’s only natural that those involved with and committed to an industry or organization will take measures available to them to promote the interests of that group. So what is it that Mr. Allen finds so nefarious about the taxi industry or PG&E doing their best to promote the interests of their respective industries? You’ll note though that he has nothing to say about the blatant “rentseeking” of entrenched, institutionalized public employee unions, or the wind energy or solar energy coalitions.
    A pattern is emerging and it is becoming increasingly clear that Mr. Allen is not opposed in principle to “rentseeking”. As long as the interests of his own political ideology are being advanced, “rentseeking” is just fine and dandy.
    And this is just another way of saying that he has no problem with corrupt politicians. All the lobbying in the world will not deter an honorable politician from making decisions that are in the Peoples’ best interests. So Mr. Allen is in favor of legislative, judicial, and executive corruption- just as long as it is corrupt in the right direction-I mean the Left direction.
    Well Mr. Allen is on the wrong track. It’s crooked government period that’s the problem. It’s deliberately misinterpreting the Constitution. It’s cronyism. It’s special interest legislation and the politicians who are prone to doing it. And mostly it’s an ignorant, bought off public that is oblivious to it. And despite Mr. Allen’s glib charlatanism, he is NOT a champion of government of the People, by the People, and for the People.

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