Governments always subsidize energy -- because energy is vital to governments.
To accuse a government of picking winners or succumbing to special interests because it supports the energy that will make the country go is as sensible as accusing a car driver of picking a winner or succumbing to a special interest for buying gas.
The coal industry had no problem with this principle when it was the darling of the British government in the 19th century. The oil industry had no problem with it when it was the United States' golden child in the first half of the 20th century. The nuclear industry was pleased to be the chosen one from the 1960s to the 1980s.
But when the nations of the world responded to the threat of greenhouse gas emissions or nuclear waste by supporting renewables, the vested interests began throwing fits about energy subsidies.
Do renewables get an inequitable slice of the federal pie? It depends on how you count.
Direct Federal Financial Interventions and Subsidies in Energy in Fiscal Year 2010, from the U.S. Energy Information Administration (EIA), is the result of some Congressional conservatives’ request that the EIA update its 2008 take on subsidies. Ostensibly, the request came because federal subsidies have grown from $17.9 billion in 2007 to $37.2 billion in 2010 and subsidies and support for electricity went from 2007’s $7.7 billion to $11.9 billion in 2010.
According to the EIA study, renewables got over half (55.3 percent) of all federal subsidy money for electricity production. Nuclear got 21 percent, coal got 10 percent, transmission got 8.2 percent and oil and gas got 5.5 percent.
Federal subsidies came in the form of direct government expenditures (39 percent), tax expenditures (28 percent), R&D (22 percent), DOE loan guarantees and government electricity use. Most of the increase from 2007 to 2010 came from Recovery Act spending. This was especially true for renewables because of the 1603 cash grant provision.
U.S. energy consumption fell from 101.4 quadrillion BTUs in 2007 to 98 quadrillion BTUs in 2010 and U.S. energy production went from 71.4 quadrillion BTUs in 2007 to 75 quadrillion BTUs in 2010.
The EIA study calculated subsidies per year for each generation source. This approach made it possible for the renewables’ subsidies to be characterized by opponents as radically disproportionate to the BTUs for which they account. However, this is not necessarily the most accurate way to assess subsidy dollars.
As the EIA study itself pointed out, electricity generation technologies that have been supported for decades and that are now mature and self-supporting do not need or get as much support as renewables, which are less mature and have only recently become more highly valued and subsidized.
But the mature industries that emerged in the past would not be so successful today if they had not been given support when it was needed.
An example: A coal plant built in 1965 has been the beneficiary of subsidies for 45 years. A wind farm built in 2008 is collecting the bulk of its support now but will get no more federal money after 2017. Yet, by the EIA calculation, the wind farm is at present getting the bulk of the federal dollars.
With the benefit of historical perspective, it becomes clear that the subsidies now flowing to renewables means federal lawmakers intend to prioritize renewables in the same way other electricity sources were prioritized in past decades. Similar support for renewables is now emerging even more strongly at state and local levels in the U.S. and in other governments all over the world.
More importantly, subsidies to renewables imply that governments all over the world believe them to be a more important and/or better value proposition going forward and they realize they must put a higher emphasis on developing the energy of the 21st century.
This is how governments always use energy subsidies.
The coal industry would not be what it is without the railroad system it was given a century and a half ago.
The U.S. oil industry would have strangled by its own terminal greediness had Congress not provided it with the Oil Depletion Allowance and Golden Gimmick tax breaks in the middle of the last century.
Nobody would have built nuclear plants in the 1970s if the Price-Anderson Act hadn’t indemnified the industry against its occasional catastrophes.
And renewables, in partnership with efficiency and storage technologies, will not reach scale or replace fossil fuels if not provided with reasonable subsidies.
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