Energy sources, from coal to oil and gas to nuclear, have all been subsidized over the last 400 years in the U.S. and elsewhere. By most metrics, renewable energy sources have received far less in subsidies in their early years than any of these other energy sources.
These findings come from a report by Nancy Pfund, Managing Partner, DBL Investors, and Ben Healey, a graduate student at Yale University School of Management and School of Forestry and Environmental Studies (here's a link to the PDF).
Pfund said, “All new energy industries -- timber, coal, oil and gas, nuclear -- have received substantial government support at a pivotal time in their early growth, creating millions of jobs and significant economic growth," adding, “Subsidies for these ‘traditional’ energy sources were many, many times what we are spending today on renewables."
Here's a table showing the historical average of annual energy subsidies for O&G, nuclear, biofuels, and renewables.
According to the report, as a percentage of inflation-adjusted federal spending, nuclear subsidies accounted for more than one percent of the federal budget over the first 15 years of each subsidies’ life; oil and gas subsidies made up half a percent of the total budget, but renewables have amounted to only about a tenth of a percent.
Other key findings in the report include:
- Energy industries have enjoyed a century of federal support. From 1918 to 2009, the oil and gas industry received $446.96 billion (adjusted for inflation) in cumulative energy subsidies. Renewable energy sources received $5.93 billion (adjusted for inflation) for a much shorter period from 1994-2009.
- Average annual support for the oil and gas industry has been $4.86 billion (1918-2009), compared to $3.50 billion for nuclear (1947-1999) and $0.37 billion (1994-2009) for renewable energy.
“The takeaway from this history lesson is that government support has been and should continue to be an essential component in the growth of emerging energy sources, enabling U.S. technology innovation, job creation and economic expansion,” said Pfund.
Pfund and Healey make their argument for keeping renewables subsidized -- but there are other sides to this discussion.
If solar or wind power can compete on their own without subsidies, the renewables industry can, with a clear conscience, insist on the removal of all subsidies for all energy sources.
Jigar Shah, the CEO of the Carbon War Room, said in a recent blog entry, "The federal government should get rid of permanent energy subsidies for all energy sources, including fossil fuels, nuclear, solar, wind, biofuels. This would force everyone to innovate, compete and win -- or lose -- on their own merits.
Shah continues, "The truth is that permanent energy subsidies do more harm than good. They don’t encourage established energy providers to innovate ('Why bother when we get free money from the government?') and they don’t force new providers to rapidly scale their innovations. Permanent subsidies are just plain bad for business -- and history has shown us time and time again, solutions to big problems that are bad for business have no hope of success."
Shah said in an email, "If subsidies are not removed from mature energy source that have realized sunk costs, how do you establish a true benchmark for energy costs?"
Pfund communicated in an email saying that she and her co-author "[a]gree that permanent subsidies should be re-examined given their cost and the advantage they give to incumbents." Pfund argues, however, that their research shows that "subsidies early in the life of an energy transition have historically been very helpful to disseminating new energy technologies and bringing them down the cost curve." She adds, "Subsidies play a large part in our country's energy history; the trick is knowing when to stop."
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