Fossil Fuel Subsidies More Than Double Those for Renewables

1. Would it be possible to calculate the stimulus in dollars per energy unit for each of the energy categories (fossil, reneweable)?

2. How will the recently announced 'Recovery Through Retrofit' program announced by DOE affect these calculations?

Chris,

I thought about trying to calculate the stimulus in dollars per kilowatt hour for solar electricity. But the study can only give numbers for "renewables" based on stimuli that are often available to multiple renewables, without breaking down how much of the stimulus went to each type of renewable energy. And these include renewables that generate energy in the form of heat as well as electricity. I suppose one could try adding up the total energy consumed in the USA (heat and electricity), convert both to the same unit (joules, BTUs, kWh, or whatever) and then calculate the dollar per energy unit on both sides (renewables and fossil fuels), but I'm not sure how useful those figures would be.

To be really useful, one would need to include the subsidies for nuclear energy (which is explicitly NOT covered in this study), as well as the "external costs" of fossil-fueled and renewable energy sources, e.g. medical costs and lost productivity resulting from pollution. These too, are costs resulting from fossil fuels (and to a vastly smaller extent from renewables), just as your car insurance costs result from owning and insuring your car. If you really want to know what you pay per mile driven, you can't just look at the price per gallon paid at the pump.

Subsidies

Subsidies for fossil fuels, right now are very high,
We need more for renewables if we don't want our Earth to fry,
Carbon burning is getting out of hand, warming our atmosphere,
Less combustion is what we need, our studies have made it clear.

adrianakau2aol.com

This is an odd study that is twisting the definition of a subsidy to reach a desired conclusion that subsidies favor fossil fuels. The extent to which they need to engage in such distortions is astounding. Consider:

1) They list the low income home energy assistance program (LIHEAP) as a subsidy for fossil fuels. This is a program that, in large part, gives money to poor people so that they don't freeze to death in the winter. There is no requirement that these poor people use fossil fuels for heat, and if the program didn't exist many people would have to cut back on things such as food rather than fuel. I doubt that when many environmentalists say that fossil fuel subsidies should be cut, that they are thinking of turning the heat off on the very poor. (This is ~9% of the 72 Billion total)

2) They list the foreign tax credit (21% of the 72 Billion total) as a "subsidy" even though this is a tax rule that prevents DOUBLE taxation for ANY business conducting affairs abroad.

3) This list buying oil for the strategic petroleum reserve as a subsidy (8.6% of the 72 Billion total). If buying a product at a fair market price is considered a subsidy then I can say I spend nearly all my income subsidizing others.

4) They count certain payments to the highway trust fund as a subsidy for fossil fuels but NOT a subsidy for biofuels. This is extreme bias as we need roads no matter what source of energy is used from to run the cars on them.

These are examples rather than a comprehensive list of things that few would consider as shifting the playing field in favor of fossil fuels....

CONTINUED

Continuation of comment #4:

On the flip side, they neglect many rather important subsidies gives to renewables:

1) Every month when I open my electricity bill I see a charge collected from me by the utility to fund government MANDATED increases to renewable energy production. None of these charges are considered a subsidy under this study, but mandated set asides are about as extreme as one can get in terms of tilting the playing field toward renewables

2) There is no estimate of the benefit for things such as legally required net metering that forces electricity companies to buy solar power and to provide essentially for free the benefits of transmission infrastructure and backup to small scale renewable producers.

3) Federal funding of research into renewables is larger than research for fossil fuels but this effect isn't counted at all.

4) the amounts spent for the production tax credit for wind, etc., has increased dramatically in the the last few years but by basing this study on a 7 year period it dilutes this rapidly expanding benefit. Additionally, this benefit is guaranteed many years into the future at the time of project completion--the value of these guaranteed future revenues to the wind industry is surely NOT zero.

Again, I could list quite a few other biases in terms of things omitted from the renewables side of the ledger....

It is also worth emphasizing that on a per-unit-of-energy basis the subsidies for fossil fuels are nearly negligible whereas they amount to very significant competitive advantages for the very small renewables industry

One could argue that these benefits for renewables are good policy, but it is extremely hard to argue--as this article deceptively implies--that the fossil fuel industry in unfairly advantaged by current policies. If all subsidies were eliminated the renewables business would be greatly impacted and the fossil fuel business would hardly bat an eye.
Steven

Steven,

While I don't have the information on tax breaks in the US (I'm in the UK) for Fossil/renewable energy, there is one simple fact that you are overlooking. The cost of implementing fossil fuels has largely been borne by investment (including tax breaks/subsidies/government incentives/government funding projects) over the last 150 years. Fossil fuels have been receiving tax breaks etc for a huge amount of time (even if you just take into account the loopholes that have been written into tax laws to enable large corporations/wealthy individuals to avoid taxes to some extent) whereas there has been little to no investment in any renewables until the last 30 years at most. And no serious investment until the last 15 years. What really bugs me about this whole subsidy/incentive debate is the way that people who defend fossil fuels seem to completely disregard the historical investment in fossils without which they would never have become economically viable.

"If all subsidies were eliminated the renewables business would be greatly impacted and the fossil fuel business would hardly bat an eye." Is only true because of the grandfathered costs.

Equally, as fossil energy owners have NEVER paid for the environmental damage their products cause - government sponsored environmental programmes are paid for out of taxes - you could argue that they receive this as a subsidy as well. Whereas the renewables industry is looking to reduce it's impact from the start, fossil owners are still trying to influence legislation so they never have to take responsibility for their actions.

U.S. Wind Subsidies

"The Energy Information Administration estimates that total Federal subsidies for electric production for fiscal year 2007 from wind power are $23.37 per megawatt hour, compared to 44 cents for traditional coal, 25 cents for natural gas and petroleum liquids, 67 cents for hydroelectric power, and $1.59 for nuclear.[11] For wind power, these subsidies include a production tax credit of 2.0 cents per kilowatt-hour.[12] However, they do not include accelerated depreciation, (a five-year write-off), a favorable accounting treatment that wind developers receive. (Figures are in 2007 dollars.)

According to the General Accounting Office, in fiscal year 2007, wind received 2.8 percent of all federal research subsidies to power generation but produced only 0.4 percent of U.S. electricity. Per kilowatt-hour, this was 14.7 times higher than the amount allocated to coal, most of which was spent to develop cleaner technologies. Coal produced 51.4 percent of all U.S. electricity in fiscal year 2007.[13]

Approximately nine percent of electricity generated is lost in its transmission and distribution from power plants to end-use consumers (also called "line losses").[14] Given that the production tax credit for wind is based on electricity generated, not sold, the PTC is actually costing taxpayers and consumers more than its current value of 2 cents per kilowatt-hour since one-tenth of that electricity is not reaching consumers. Also, wind is an inefficient user of transmission because capacity must be available to handle the full rated output of turbines but wind turbines run at full capacity only a small portion of time."

http://www.instituteforenergyresearch.org/facts-on-energy-wind/

Excellent point, Chris Johnson, stimulus grants, hundreds of millions of U.S. dollars to foreign countries, should also be calculated.

http://blogs.wsj.com/environmentalcapital/2009/09/01/clean-energy-grants-iberdrola-cleans-up/

To all fossil fuel defenders,

I find it extremely unfair to compare subsidies for fossil fuel and to renewables on a per kWh basis as intensive burning of fossil fuels (and support of it) goes for two hundred years while renewables are very new.

Subsidies to oil should also include the lion share of military budget as production and delivery of oil from overseas would not ever be possible without heavy US military presence in these regions.

As well subsidy to corn ethanol go directly to oil and bio-tech companies anyway through mineral fertilisers and GM seeds. That's how the oil patch has managed to set up agriculture.

Natasha,
Regarding your comment #6, I certainly agree that the advantages the fossil fuel industry currently enjoy are a product of long term investment and efficiencies resulting from economies of scale, established market position, etc. Until relatively recently, basically the only viable competitors to fossil fuels were nuclear and hydro power plants and the use of wood for heating. Under such conditions, even if the fossil fuel industry had never received a penny of "subsidies"--using virtually any definition of that term--they would have received the majority of investment and established the strongest market position. Furthermore, the ~$10 Billion per year that this study claims for subsidies to the fossil fuel industry (using an accounting that I find to be rife with distortion and mendacity) provides only a trivial perturbation on the prevailing market forces that allow the fossil fuel industry to continue as the dominant player in the energy sector. If every penny of these so-called subsidies to the fossil fuel industries went away the energy market place would be very little changed.

Nevertheless, there is a large faction that rants that the dominance of the fossil fuel industry is the result of corruption and unfair subsidies. The authors of this "study" seem to be among those seeking to feed this irrational paranoia--and they don't seem disturbed in the slightest to embrace very obvious distortions. I think this site does a great disservice to the cause of renewable energy when it aids in the distribution of such biased work because it damages the credibility of the entire field. Discussions about how new technologies displace inferior ones, the best ways to accelerate such displacement, the proper role (if any) of subsidies for new technologies, what the most promising new technologies are, and other technological and economic realities would all be useful and interesting discussions. Canards from conspiracy theorists aren't.
Steven

Steven-------perhaps we should include the costs for Operation Desert Storm, Operation Desert Shield, and Iraqi Freedom in those costs, none of which had anything to do with storms or freedom. The bulk of the oil contacts went to US companies last year under the Bush administration, by direct award. The unbid contracts making the news this week by the Iraqi oil ministry were damaged, or only marginally productive wells deemed too economically risky or unproductive to bother with. Most were not even bid on. Perhaps we should include the cost of naval operations to protect the Red Sea, the Gulf of Hormuz and the Horn of Africa from pirates and terrorist attacks. If it were not for oil shipping there would be no reason for any US ships to even be there.
Get rid of oil, and you get rid of the whole reason we have to maintain such a large military. Get rid of oil, and there is no reason for the US to even be in the Middle East. Nobody can shoot at us or try to bomb us if we aren't there.

The bulk of the ethanol subsidies go to blenders--------petroleum companies. If petroleum companies had their way---they'd still be putting tetraethel lead in gasoline-----belching lead into the atmosphere.

What about leasing government lands for oil drilling at bargain basement prices? The Bush administration even gave away thousands of leases for free. Public lands should not mean a private, for profit playground for oil companies.

Fred,
Regarding your comment #10:
I don't accept the strange notion that US military policies are primarily a struggle to secure oil. How much oil is in Afghanistan? in Vietnam? in Korea? Three wars without an energy interest in sight....

Virtually all of our coal and methane comes from US sources and most of our oil is imported from places such as Canada and Nigeria that are far from points of US military conflict. Military funding has very little to do with the competition between fossil fuels and renewables for market share. The primary factor limiting the spread of renewables is the lack of cost effective technology. If tomorrow we discovered that within a year every oil well in the world would run dry the big market shift would be towards refineries to transform coal to liquid fuels, ways to extract more oil from tar sands, shales, and the like, and the exploitation of methane as a transportation fuel. Biofuels would get a piece of the market, but even it this extreme case would not be sufficiently scalable and cost effective to take over.

But here are two questions for you Fred: Do you believe that funding for the low income home energy assistance program is really a subsidy for the fossil fuel industry?? Wouldn't you be embarrassed trying to defend some of the definitions the ELI uses for what is and isn't a subsidy?

Steven

--------" How much oil is in Afghanistan? in Vietnam? in Korea? Three wars without an energy interest in sight...."------------

Korea was 55 years ago.

Vietnam ended 34 years ago.

Look at a map. The land route from the Middle East to India and China must pass through Afgahnistan. There are other reasons to be in Afgahnistan as well involving corporate wealth transfer and preservation. This is well known and common knowledge to the troops stationed there.

-------" Military funding has very little to do with the competition between fossil fuels and renewables for market share."---------

US military strategic planners do not think so. They have come right out and said that competition for resources is and will be the overriding factor in future conflicts. They are planning on it. Look at back articles just on this forum alone. The Air Force is testing synthetic fuels, the Navy is testing algae produced diesel oil, the Army is developing EVs. DOD has a number of programs to make use of renewable energy.

-----------"But here are two questions for you Fred: Do you believe that funding for the low income home energy assistance program is really a subsidy for the fossil fuel industry?? Wouldn't you be embarrassed trying to defend some of the definitions the ELI uses for what is and isn't a subsidy?"-----------

The way I see things------I don't care what the label is, I support what works. Coal is dirty, toxic, and comes from strip mines. No matter how you try to clean up smokestacks(and we have spent over $50 billion on that alone)-----it still comes from strip mines that destroy the land and water.

Natural gas is clean, efficient and causes minimal damage to the environment to extract and handle. Natural gas produces the same energy with less than 1/2 carbon emissions that coal does.

We should stop coal subsidies and put them on natural gas.

The article states that fossil fuels benefited from approximately US $72 billion over a seven-year period, thus approximately $10 billion per year. This may create the misleading impression that fossil fuels are in fact uncompetitive and require subsidization. This is, of course, untrue. ExxonMobil alone paid $116.2 bn in taxes last year. Using Exxon as an example, this suggests that the ratio of subsidies received to taxes paid runs about 2% for the oil and gas business. In other words, the oil and gas industry is, by a large margin, a net contributor to the government budget.

We may hope the renewables industry may achieve a ratio subsides/taxes below 100% someday, but we are not there yet.

-----------"This is, of course, untrue. ExxonMobil alone paid $116.2 bn in taxes last year."-----------

To whom? They had after tax profits of over $40 billion. Why should they need subsidies at all?

The best governance is when a government sets the scene so that it is worthwhile for the citizens of a country to make the right decisions. It then gets out of the way and lets it happen. It seems so obvious that simply scrapping incentives for fossil fuel would tip the balance in the necessary direction to save our miserable hides from the likely apocolyps (sp?) that scientists say is heading our way. I never could understand why oil or coal needs subsidies. Both are a lisence to print money.

Hi:

Well, this topic landed on a powder keg....
The defense of conventionals by xyz parties is always good for a laugh.
Natasha's point about the long accumulation of subsidies for conventionals is easily underestimated. Whether "they" would have still garnered a dominance, rests not on looking back on history as it exists now, but rather what time line would exist if those subs had not been present. Those recurring and constant subs allowed prices to be offered at such a low level, that it killed alternatives before they could even be born or perhaps more accurately negating the desire to look in the first place. The killing of the electric cars in the early 20th century, the once strong solar thermal hot water usage in places like AZ, CA etc... are just small examples that you can see. The bulk of the destruction is not even visible because it was never allowed to happen in the first place.
In short, this is the sinister beauty of the 150 year history of the conventionals industry that have controlled our existence by killing the parents of any potentially promising offspring. If you add Nuclear into the mix, then the full sweeping picture comes together weaving in the MIC and its trillions of dollars over time.
At the end of the day though, the joke is on us for there is no where else to go.....
It is a scientific possibility that the human species is just not wired for the long haul, that our "mix" lacked the right or included the wrong ingredients, no matter how big or wonderful we think we are....
Have a nice day....

.....Bill

Bill & Bill (Hughes and Fitch)--------RIGHT ON! I agree with both of you.

With a green meet-up group, I toured an exemplary sewage treatment plant last week in Durham, Oregon. It was spotless, ship-shape, it produces high-value struvite fertilizer (5-28-0, 10% Mg) in a time-released, non-plastic form much desired by golf courses. Its N fertilizer is sold separately.

The final state before water is used in irrigation or put back in the river runs the water by test fish in a tank in the basement of one of the buildings. The guy said they were 50-cent goldfish, turned into hefty koi.

This plant produces CO2 that doesn't get used. You can watch it bubble, and they still flare methane.

I remain puzzled as to why they flare methane. He said they can't afford the expense of a motor to do something with it. Some of it they do use.

Robert Kennedy came to the opening of the struvite-production process and was pretty pleased, according to the tour guide.

He said, "I usually have to sue sewage-treatment plants for what they do to rivers."

The use of much energy in general is saved by the new processes at this plant. If innovations like this are going on across the country, we will have change in spite of government policies that have subsidized pollution and allowed recovery from harm only after the hard work of people like Erin Brockavich.

Last week Obama was at MIT. My son watched him there on closed circuit. They were asked to help the U.S. get an edge back. My son looked around him and thought, well, some of these guys won't go home.

We need to get kids on board with conservation (blowing machines and finding leaks), smart-metering, playing with clean-up techniques, and other methods of getting involved in improvement.

We need hands-on stuff for kids to do, for their health and for the health of water-, food-, and air-sheds.

Doing this would be fun for teachers also. Waiting for the feds to help seems like a non-starter. Their plans impoverish Main Street.

In comment #15 William writes: "It seems so obvious that simply scrapping incentives for fossil fuel would tip the balance in the necessary direction to save our miserable hides..."

Suppose we let William have his way by turning the heat off on a bunch of elderly poor by canceling the low income home energy assistance program, we scuttle the strategic petroleum reserve, we add a bias to tax energy companies doing business abroad more than any other business, and all the other changes that would be needed to eliminate what this study calls a "subsidy". At most the fossil fuel industry is out $10 billion a year (in practice it will be much less, but let's accept for the moment this upper bound). They can make this much back again by raising prices on fossil fuel generated electricity by 0.3 cents/kWh OR by raising oil prices by 3 cents/gallon. Does anything seriously think these price differentials will cause their market share to plummet? My electricity co. already changes me an extra 0.3 cents/kWh to fund new renewable generation (primarily wind). Thus, a single renewable subsidy--not included in this survey--already has more impact on me than an upper bound for all the fossil fuel subsidies this survey considers. It is a myth that fossil fuel subsidies play a significant role in the energy market and it is a myth that subsidies for renewables are small.
Steven

Hi All:

Thought this thread was over...
Steven writes in comment #9...

..."Natasha,
Regarding your comment #6, I certainly agree that the advantages the fossil fuel industry currently enjoy are a product of long term investment and efficiencies resulting from economies of scale, established market position, etc."...

There is agreement here... so now the question is simply now how do we (Gov. etc..) do for RE what has been done for the conventionals over the past 150 years, so we can rapidly grow RE to be bigger than what it displaces, allowing us to survive in the long run....

Lets move forward and get the job done....

.....Bill

In response to the query for subsidy per kWh generated -

In the US, Refined coal leads the subsidy list at $ 29.81/kWh; although solar and wind are less but comparable ($24.3 and $23.7/kWh resp.), the overall generation from 'refined coal' is much higher, resulting in overall higher subsidies - in fact, much higher than ALL renewables combined (coal, NG, oil recd. $5billion; nuclear $1.1 billion; RE $1.25 billion - figures rounded-off)

All information from a EIA report published regarding USA 2007 subsidies.

Please see page 106, Ch. 5 for per kWh subsidies. See pg. 100 in the same chapter for total subsidies from all federal programs.

Report available at http://www.eia.doe.gov/oiaf/servicerpt/subsidy2/index.html

Regarding Nalin's remarks in comment 21:
His per kWh values are all off by a factor of 1000--note carefully that the EIA quotes data per MWh not kWh. Nalin quotes a value for refined coal ($29.81/MWh) but fails to quote the value for ordinary coal of $0.44/MWh (or 0.04 cents/kWh, which is negligible). Refined coal production is a small percentage of coal production and quoting the high value for this without quoting the value for ordinary coal is very misleading.
Also note that these are EIA estimates of 2007 federal subsidies for electricity production only and do not include any estimates for the future value of the guaranteed production tax credit, or any value to mandated set asides or state subsidies. In particular, it does not include any subsides for renewables that are funded as fees collected by the utility companies--and this is a very large contributor to true renewable subsidies. The $24.3/MWh value for solar neglects entirely the tax credits given for the installation of residential solar cells; including just this addition would raise the per MWh value by 70%.

The EIA also has a rather arcane scheme for defining the portion of a subsidy that goes to the "electricity production share". For example, it assigns 100% of the 58 million dollars of wind R&D to the electricity production share, but only $13 million of the $187 million dollars of solar R&D to the production share. Thus, if one counts all R&D expenditures for solar in their per kWh subsidy calculation you would get a value that is more than a factor of 10 larger than the EIA computed value.
Steven

How about we end all subsidy games? I am for subsidizing new technological research on the basis that new technologies may have future potential. But let's have our electricity rates reflect the real price of service; not some imaginary politically distorted price.

Hi 23:

Sounds like a good idea, but since conventionals have had the benefit of 150 years of "help", don't you think that may leave things just a bit askew, off center, cockeyed, out of line, tipped, out of kilter and half _ss backwards..??..
How about we balance the scales first then eliminate the "help"...

.....Bill

Wow, excellent discussion! I'm new to the renewable energy field, but I do have a background in economics and the one thing that I can tell you for sure is that, "figures lie and liars figure!".

To try and get a handle on just what the actual subsidies to fossil fuels amount to or conversely, what the actual subsidies to renewables are seems very difficult...if not impossible!

One reason is that the tax code is so large that very few people (if any) really have a firm grasp on it. My suspicion is that it contains quite a few benefits to the oil and coal companies that are hidden to most of us, but that the industry knows all to well about.

That said, reality is what it is. I doubt seriously that we are going to be able to stop big oil and big coal from gaming the system. Also, it doesn't help our cause when people and organizations skew data to make political points.

The facts of the matter are that fossil fuels are on the way out and that renewables are on the way in. Political clout and money (aren't they really the same???) won't be able to change this.

Carbon based fuels are killing the planet and unless we drastically cut back on our use of them, we're going to pay the price. Even if you don't believe in global warming (which can be debated) there's still "ocean acidification" to deal with and that is a problem that could potentially endanger our very survival as a species! Eventually, even most die hard Luddite is going to have to come to the same conclusion....no matter who signs their paycheck!

The one thing that I would love to see included in this debate though is the cost of the various "externalities" such as what we spend on the military to protect our oil production interests or in pollution or worker safety or anyone of a hundred other costs that aren't generally included in the cost of fossil based fuels.

Thanks for allowing me to comment!

Bob "FreeAsTheWind" Mitchell