LESS DOLLARS FOR DINOSAURS? Historically the vast majority of energy subsidies have gone to developing fossil-fuel resources. But that is beginning to change as part of the Obama administration's goal of cutting back on subsidies to the hugely profitable oil industry. In 2011 $2.5 billion of tax dollars subsidized the fossil-fuel industry in the form of tax breaks, whereas some $16 billion went into subsidies for renewables and energy efficiency.
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Dear EarthTalk: Renewable-energy production in the solar and wind markets currently receives about $7 billion in government subsidies annually, but is still not competitive against fossil fuels on a large scale. To what extent should the U.S. continue to prop up these industries as they compete against dirty energy?—Jack Morgan, Richmond, Va.
Given the importance of abundant amounts of energy for Americans, the federal government tends to subsidize all forms of energy development, including fossil fuels and renewables. A recently released report by the Congressional Budget Office (CBO) found that in 2011 the federal government spent $16 billion of our tax dollars in subsidies for the development of renewable energy and increased energy efficiency, and only $2.5 billion in subsidies to the fossil fuel industry in the form of tax breaks. But this breakdown in favor of larger subsidies to alternative renewables is a recent product of President Obama’s stated goal of cutting back on subsidies to the hugely profitable oil industry.
Historically the vast majority of energy subsidies have gone to developing fossil fuel resources and reserves. The CBO notes that until 2008 most energy subsidies went to the fossil fuel industry as a way to encourage more domestic energy production. A report by the non-profit Environmental Law Institute (ELI) confirms that, between 2002 and 2008, the federal government provided substantially larger subsidies to fossil fuels than to renewables. “Subsidies to fossil fuels—a mature, developed industry that has enjoyed government support for many years—totaled approximately $72 billion over the study period, representing a direct cost to taxpayers,” reported ELI. “Subsidies for renewable fuels, a relatively young and developing industry, totaled $29 billion over the same period.”
Even though subsidies to the oil industry may be down substantially from what they once were, the Obama administration and many others would like to see any such subsidies to the oil industry stripped completely. This past March the U.S. Senate rejected the so-called “Repeal Big Oil Tax Subsidies” bill that would have eliminated several of the tax breaks still enjoyed by the five largest oil companies—and use some of the proceeds to extend expiring energy tax provisions including tax breaks for renewable energy, electric cars and energy-efficient homes.
A September 2011 report from DBL Investors, a San Francisco-based venture capital fund specializing in renewable energy, backs up environmentalist calls for increased subsidies for renewables by showing how early subsidization of other energy keystone sources helped secure their respective dominant places in the energy marketplace. The report calculates that, in the U.S., nuclear subsidies accounted for more than one percent of the federal budget in their first 15 years, and that oil and gas subsidies made up one-half of one percent of the total federal budget in their first 15 years. Subsidies for renewables, in contrast, have constituted only about one-tenth of a percent, the report concludes.
While the pendulum of energy subsidies may be swinging in favor of renewables in the last year or two, such momentum can be lost easily if lawmakers don’t extend various incentives and credits that have helped drive it.
CONTACTS: CBO, www.cbo.gov; ELI’s “Estimating U.S. Government Subsidies to Energy Sources: 2002-2008,” www.elistore.org/Data/products/d19_07.pdf; DBL Investors, www.dblinvestors.com.
EarthTalk® is written and edited by Roddy Scheer and Doug Moss and is a registered trademark of E - The Environmental Magazine ( www.emagazine.com). Send questions to: earthtalk@emagazine.com. Subscribe: www.emagazine.com/subscribe. Free Trial Issue: www.emagazine.com/trial.
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19 Comments
Add CommentIt is a common sense imperative that we develop alternative energy sources. This means that there will be fits and starts in this progression. It is fitting that the public supports this effort while the various industries are in its infancy. The fossil fuel industry is vibrant and mature enough to fund its own R&D and needs no help from public sources.
Reply | Report Abuse | Link to thisHow about ending all subsidies for all energy companies. It is the subsidies that are interfering with the adoption of solar or other alternatives. One some of this money is being funneled into bad ideas or bad companies. Without the subsidies, a company has to perform and have good ideas or it goes bankrupt and this fact will focus private money into the good ideas and companies.
Reply | Report Abuse | Link to thisThe second and more important problem with government subsidies is it artificially sets high prices, stifles any kind of competition and prevents any sort of price correction. This is why after 4 decades, solar is still way to expensive and has not gone down in cost at all.
How this works is simple, after having to deal with it myself recently. The solar company simply raises the prices by the amount of the subsidies they expect to get from the state and federal governments. They also keep the prices high to begin with to keep up the illusion that the subsidies are needed.
Get the subsidies out and solar companies will have to start pricing their products competitively, which will reduce the price possibly low enough to actually be the same as or less than coal and natural gas.
With all mass production savings in place there are no further cost reductions down the line on solar or wind tech so subsidy has no further effect on cost. That is the point of subsidy.
Reply | Report Abuse | Link to thisSince 2004 the US has spent over $200B on wind/solar all of it subsidized most of it backed up with low efficiency gas plant. Far less money, less gas less ghg's if high efficiency gas plant or nukes had been built instead.
The only reasonable subsidy remaining in the renewable field would be in the effort to develop some sort of dreamland way in the future economic grid storage technology. The current cheapest - pumped Hydro - would add a buck a kwh to a 80% renewable US wind renewable electricity regime.
If that subsidy money had been spent on nuclear the US would now be coal free saving thirty thousand lives every year. The wind/solar subsidy is paid in the blood of innocents as well as the coin of the realm.
If even a small fraction - a few paltry billions - of that solar/wind subsidy had been used to build Gen IV IFR technology embodied in the design ready to build GE Prism or Molten Salt Reactors the world the US would now have a massive export industry and the world would be well on its way to ending global warming within ten years. That investment pays back at a rate of return to the nation overall of over 40% per annum.
There are no nuclear subsidies. Greenpeace boilerplate claiming them always refer to past military weapons and power plant operations as well as the liability canard. In fact, nuke power is close to $80B in the black subsidizing the US government with used fuel storage, decom, and insurance funds which will never be used since the fuel will be reused in Gen IV reactors, nuke sites will always be nuke sites so no decomm, and the insurance will never be used as there will be no accidents.
Wasting more critical time and treasure on wind/solar and associated subsidy is a dangerous distraction in the war against the fast approaching global warming precipice.
Eliminate the subsidies AND tax carbon, then you have a level playing field.
Reply | Report Abuse | Link to this15.7 trillion in debt and this is a question?
Reply | Report Abuse | Link to thisWake up folks, the cookie jar is stuffed with IOUs and all government spending is going to be slashed within 5 years.
USA Federal Subsidies for non-carbon emitting electricity, 1950-2006, (renewable subsidies have increased exponentially since 2006):
Reply | Report Abuse | Link to thisnewpapyrusmagazine.blogspot.com/2008/09/federal-support-for-non-carbon-dioxide.html
Solar & Wind subsidies: $45B for 0.7% of USA Electricity production
Geothermal: $7B for 0.3%
Hydro: $81B for 7%
Nuclear: $65B for 19%
Thus Hydro received 3.5X the Nuclear Subsidies per TWh of Electricity produced.
Geothermal 6.9X the subsidies of Nuclear.
Wind & Solar 19X.
Add to that there are nothing short of INCREDIBLE State subsidies for Wind & Solar energy. The Sleaziest of which is Renewable Portfolio Standards, a COWARDLY, DEVIOUS way to try and hide, GARGANTUAN Wind & Solar subsidies. And notice big Renewable promotion state utterly refuses to release the cost of contracts they sign with Solar & Wind farms, they claim we just want the public's cash - we refuse to give the public access to information on just what they are getting for those $billions in costly subsidies. Utterly DESPICABLE behavior of the California Utilities Commission.
@sethdiyal:
Reply | Report Abuse | Link to this"and the insurance will never be used as there will be no accidents". Were that only true your argument might have a stump of a leg to stand on. However, it's a dangerous assumption that can lead to no good for man kind. The precipice is approaching, as you note, but Nuclear won't save us (IMHO)...
Ed
End oil subsidies: problem solved!
Reply | Report Abuse | Link to thisThe true landed cost of oil has yet to be seen and it most likely will not be paid by the oil companies but rather by the consumer. Most spending should be for research and development not helping a business hop along. Solar and wind have become economically viable to the degree that we can now move some of that money towards more research instead of direct subsidy. I think in some ways subsidizing can actually hurt a businesses growth. We need to innovate to the market price point to begin with.
- And yes it can be done.
Google the following for an interesting article in Forbes about Solar power costs: Cut The Price Of Solar In Half By Cutting Red Tape
Reply | Report Abuse | Link to thisA myth persists that solar power is too pricey. The reality is that in many states, solar is already cheaper than utility power. "The paperwork it takes to officially install a standard rooftop system in the U.S. That’s right, government red tape - local, state and federal."
Shocking! Government is in the way of Solar Power.
No bankruptcy is so bad that it can't be made worse, by accelerating the process of subsidies, which helped to create it in the first place. If money is unlimited... then it is also worthless.
Reply | Report Abuse | Link to thisAll electrical generation technologies have their practical niches. The problems arise, when we force (subsidize) a particular generation, into a niche, that is NOT practical. GK
G Karst..exactly. I'm not negative on the role of governmnet in many things but when it comes to alternative energy the motivation is usually political correctness and not reality.
Reply | Report Abuse | Link to thisMost alternative energy is like motherhood...the concepts are fine but they are often pollyanish where the rubber meets the road.
krohleder: "A myth persists that solar power is too pricey. The reality is that in many states, solar is already cheaper than utility power. "The paperwork it takes to officially install a standard rooftop system in the U.S. That’s right, government red tape - local, state and federal."
Reply | Report Abuse | Link to thisNot really. My brother is on his third system on his property in Kentucky. He couldn't give a crap about regulations where he is. It's labor of love over the last 23 year. He's figured solar has cost him about triple and that's doing all his own installation and maintenance...but it's a hobby for him. If he had to call in a plumber or electrician every time there was an issue...he'd have gone bankrupt.
Yes. Renewables such as Wind potential is high in US more-so offshore wind farms with large wind turbines. Hence Subsidies go a long way in the expansion of this clean energy to supplement conventional power.
Reply | Report Abuse | Link to thisDr.A.Jagadeesh Nellore(AP),India
Wind Energy Expert
E-mail: anumakonda.jagadeesh@gmail.com
Real cost of solar:
Reply | Report Abuse | Link to thisOntario's tariff of roughly 60 cents a kwh is the actual cost of providing it with another 20 cents a kwh for 8 times sized tranmission builds and 100% name plate gas backup providing close to 100% of the power from the solar/gas backup scam. Add green storage add another buck a kwh.
Real solar install in service Jan 2011 by expert engineers at Duke Energy using real solar panels not the Walmart quality Chinese junk that Big Oil's not so greed media pushes with the same service life as everything else you buy at Walmart.
http://www.pv-tech.org/project_focus/davidson_county_solar_farm_north_carolina
$43 a watt average, 65 cents a kwh at Dukes discount rate.
The cost of the assembled mass produced cost of the glass and aluminum is actually greater than the cost the solar cells. Currently with the collapse of the world solar market and Chinese dumping fire sale solar panel prices are now less per sq foot than a similarly constructed mass produced skylite at Home Depot. As solar cell manufacturing costs go down it has little effect on the installed cost as installation and structure are 6 times cell cost and as the excess in the market solar cell capacity disappears.
While economies of scale have reduced cost greatly, production is now so great that it is no longer a factor. Looking forward here's the outlook for this technology Toyota Prius MSRP: $19,995 in 2000 when 19K were produced and $23520 for 2011 when production of 404K estimated.
Reply | Report Abuse | Link to thisI'm against subsidies but I see no mention of the huge socialized cost of oil and coal that increase our taxes by $700B/yr at least.
Oil military costs in the Persian Gulf to protect international oil companies and dictators and support terrorism against us comes to around $400B/yr or 50% of US military expenses. Now add the cost of $400B trade deficit/yr for importing oil, money never to make another job in the US. Plus pollution costs especially from diesel and low grade oil fuels is another $100B.
Now coal for pollution damage has no peer. It causes in the US 30k deaths, 200k hospitalizations/yr we pay for in taxes, healthcare costs. Other land, air, water, buildings, bridges, forests, crop, etc damage runs $300-500B/yr. Luckily coal use has dropped from 60% of electric to 32% last month so damage is dropping thankfully but still about the same/unit of energy.
So put these massive subsidies into oil, coal's cost instead of in our taxes, healthcare, etc costs and RE needs no subsidies and a true free market, level playing field could do it's job instead of the mostly republican, oil/coal state politicians and special interests rig it like now.
And let's not forget give away royalities. Many countries get 50-75% royalities vs the tiny 2-5% ones we get.
Sadly it's true solar costs depend far more on regulations, installation costs that panel costs.
The good thing is if you are anywhere near handy, bolting them together is far easier than much furniture or toys now days. Then just hire someone to wire it up and save 50% of the cost if you shop right. sunelec.com is one source of $1/wt panels, etc.
Takes these
How about no subsitys for energy at all? Get the Government and the enviromentlists out of the way and let the market decide. Wind-mills kill birds and bats and sholud not be consired enviromentaly "friendly".
Reply | Report Abuse | Link to thisThere are major disruptive new clean energy technologies entering the commercial market this year based on plasma physics and low energy nuclear reactions.
Reply | Report Abuse | Link to thisEven with subsidies fossil fuels and nuclear will not be economically competitive for very much longer.
The first LENR commercial 1 megawatt reactor has already been sold and delivered. A powdered nickel fuel load to run this heat reactor for at least six months costs about $40. It replaces more than 650,000 gallons of fuel oil. No radioactive elements, emmissions, or waste, enviromentally friendly, abundant enough that replacing all nuclear and fossil fueled boilers in use would not even consume 1% of the market resource and the fuel is recyclable.
Small scale plasma transition motors suitable for individual farm and homestead baseload power generation will be commerically introduced at PowerGen this December in Orlando and available for sale in quantity from multiple manufacturers worldwide. Cost will be on par or less with similar capacity gas or diesel backup generators to start and will be much less within a couple of years as production ramps up. Retail for a 250hp 2-cylinder will start out at $2k this year but is expected to decline to less than $500 in just two years. They are sealed motors, no intake no exhaust, running on a cylinder mixture of common noble gases that are not consumed in the process though there is gradual loss of charge pressure over time. A 1lb can of the gas mixture will run one 24/7 for more than two years. Fuel cost is negligible.
Neither of these technologies is subsidized in any way nor will they need to be. Both are so inherently clean, safe, and environmentally benign that UL and similar commercial safety certifications are not a major problem.
Next year is going to be very interesting to watch.
It's nice to hear a little optimism over the din of doom.
Reply | Report Abuse | Link to thisLENR can be the answer to much of our energy needs, WHEN VERIFIED. Secrecy supposedly for proprietary purposes will hinder rapid deployment and improvement, and keep suspicions of fraud and hoax aflame. Not exactly ideal marketing conditions.
A few delivered sales with verified continuous service records will soon change things. Until then, I will remain properly skeptic. Exciting... you betcha. GK
When you factor in the cost of carbon capture and storage, none of the fossil fuels are economical. CO2 will cost thousands of billions of dollars to future generations in terms of damage to ressources, so not implementing CCS is suicidal.
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