Governments are important and often they are important because of the direction they wish to lead the public. In reality, most of the public has limited access to credit and if the government gives an incentive, the public will eventually adopt it. There will be early adopters who see the value in the incentive and believe in the outcome. There will be others who will do the incentive because they see it as the right thing to do and late adopters because the price has dropped or they see others doing the incentive and join in because it seems a normal thing to do. The above happens in new product launches it is generally the way the public functions.

In an article by Kathleen Ronayne of the Associated Press, if you think about California, particularly southern California you will see many parts near Los Angeles are a desert or semi-desert conditions. For the past 26 years, California has a program to put solar panels on their homes. It is widely successful with over 1.3 million homes having solar panels and new subdivisions must be built with solar panels on the homes. The current incentives are if you have solar panels on your home in California, whatever power you do not use you sell back to the power companies which can result in a discount on your bill. The term is net energy metering and the incentives lower the amount of time to pay for the panels. At present the time is between 3 and 4 years. The power companies want to increase the time to between 10 and 15 years.

The issue for the power companies is the current program allows for customers to sell back into the power grid for more than it is worth. Utility power companies need to maintain power distribution across the state and while the incentives have been necessary for the public to adopt solar panels, the cost of the rest of the system is not being paid evenly. The utility companies are proposing the incentive to either be lower or a fixed rate for every customer, then everyone pays their fair share.

Linking to dividend paying stocks, there are government incentives for all types of businesses, most of them rarely are changed, when times are in downside the incentives become larger, but rarely do they go down. Ideally making a long term decision based on incentives is the not the correct process but everyone and companies do it. Cutting incentives by the government is very difficult because decisions have been made using the incentives. When it comes to your investments ask the company which incentives they are using and how much do they depend on them?

There are more questions than answers, till the next time – to raising questions.