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Free Market Hypocrisy: Why Do We Hold Renewables to Different Standards than Fossil Fuels and Nuclear?

Stephen Lacey, Climate Progress
August 31, 2012  |  21 Comments

Now that renewables are receiving some of the same incentives that fossil fuels have enjoyed for nearly one hundred years, we're suddenly being inundated with calls for a purely "free-market" approach to energy development from politicians on the right and companies concerned about the growth of clean energy.

Their arguments make for good sound bites. But if we take a look at the history of energy development in the U.S., it’s very clear that we’ve never had a truly “free” market. In fact, all of the technologies that dominate our energy system today were given special incentives by the government in order to get them to commercial scale.

According to a recent report from the venture capital firm DBL Investors, the U.S. coal, oil, gas, and nuclear industries have cumulatively taken in more than $630 billion in tax credits, land grants, R&D programs, and direct investments from the government. That far surpasses the roughly $50 billion in government renewable energy investments (wind, solar PV, solar thermal, geothermal, biofuels) through these same mechanisms over the decades, according to the report.

But when renewable energy is given similar incentives — helping double the penetration of non-hydro renewable electricity since 2008 — the energy free-marketeers come out of hiding and lament how we’re supposedly “picking winners and losers.”

The Republican party’s platform released this week is a perfect example:

Unlike the current Administration, we will not pick winners and losers in the energy market-place. Instead, we will let the free market and the public’s preferences determine the industry out-comes. In assessing the various sources of potential energy, Republicans advocate an all-of-the-above diversified approach, taking advantage of all our American God-given resources. That is the best way to advance North American energy independence.

Sounds pretty straightforward. However, the RNC’s platform is very bullish on maintaining use of coal, a resource that is declining in the U.S. because of … current market forces.

According to the Energy Information Administration, we’ve seen a 20 percent drop in coal generation over the last year. That decline has been “primarily driven by the increasing relative cost advantages of natural gas over coal for power generation in some regions,” wrote EIA.

But when market forces move in the wrong direction for coal supporters, that is apparently when it’s okay for government to intervene. According to the RNC’s platform, the party wants to use the strength of government to “encourage the increased safe development in all regions of the nation’s coal resources.”

So there you have it. When the government encourages renewable energy, that’s called picking winners and losers. But when the government encourages coal — an increasingly-expensive resource that has become an environmental nightmare — that’s “the best way to advance North American energy independence.”

And the picture becomes even more complicated when looking at the forces behind the boom in gas production. In fact, the fracking technologies people love to hold up as a miracle of the free market were made possible through years of government investment.

A 2011 investigation from the Breakthrough Institute showed that the natural gas industry was able to commercialize fracking technologies only after decades of tax credits, government R&D programs, government assistance with mapping, and partnership with companies entering commercial scale.

A geologist from Mitchell Energy, a leading company that pioneered fracking put it this way: “I’m conservative as hell. But the “[Department of Energy] did a hell of a lot of work, and I can’t give them enough credit for that.”

The examples of government assistance to help commercialize energy technologies goes on and on.

And most people only know about the ones that are easy to track. There are other imbedded subsidies — things like land give-aways to coal companies or tax exemptions — that are hidden below the surface. Here are a few examples, as illustrated by this subsidies iceberg infographic from Earth Track:

This long history of assistance to energy technologies is completely lost in the current debate.

The latest political dust-up is over support for wind through the production tax credit, a performance-based incentive crafted by Iowa Republican Senator Chuck Grassley that provides wind farm owners with a credit of 2.2 cents for every kilowatt-hour of electricity produced.

The credit is set to expire at the end of the year. Since it was introduced, the U.S. wind industry has been able to drop costs by 90 percent. However, because of suppressed natural gas prices (again, helped by decades of tax credits, commercialization partnerships, and R&D programs) the wind industry says it needs the tax credit for a couple more years in order to give investors certainty. If the credit expires at the end of the year, the industry could shed up to 37,000 jobs, according to a report from Navigant Consulting.

Extending the credit has very strong bipartisan support. After all, 81 percent of wind is installed in Republican districts nationwide. But there has been growing resistance from a band of free-marketeers who claim that the tax credit distorts the market, thus preventing Congress from extending the incentive for a year or two more. (Ironically, many of these same critics consistentlyvote to preserve permanent tax credits worth billions of dollars for the most profitable oil companies in the world).

At the same time, companies like the nuclear-heavy utility Exelon are pushing Congress to abandon the tax credit. Here’s what the company’s CEO said in a recent statement:

“These groups agree that it is now time for federal government to stop picking energy technology winners and losers through subsidies like the PTC and to allow market forces and state and local renewable portfolio standards to work.”

Exelon has a pretty substantial wind portfolio worth 900 megawatts of capacity. However, most of its portfolio — 93 percent — is made up of nuclear power plants. But if it were not for theimmense support for nuclear through loan guarantees, government-backed insurance, waste containment programs, and cost-recovery allowances for cost overruns over the last five decades, we wouldn’t have much of a nuclear industry in this country.

But here’s something more remarkable: even while warning about “picking winners and losers,” Exelon executives have gone to the government to request loan guarantees and tax credits for its other operations.

In 2007, Exelon President Christopher Crane testified to Congress in favor of new loan guarantees for the nuclear industry. Of course, without these loan guarantees and government-backed insurance programs, no private investor would finance a nuclear plant in this country.

And just this year — two days after saying the production tax credit for wind should be ended — it was reported that Exelon would receive tax credits for two hydropower projects it had under development.

We desperately need an honest conversation about energy incentives.

In order to smooth out this complicated picture, there are some analysts and political leaders who say we should get rid of all subsidies to all technologies and let the free market hash it out. That’s an appealing argument to many. But it completely ignores the embedded impact of a century of support to fossil fuels and 50 years of support to nuclear.

It also ignores a more fundamental problem: Our climate is reaching a tipping point and we don’t have time to waste in transitioning away from carbon-based fuels. Period.

Most supporters of clean energy agree there will be a time to phase out incentives that are currently helping boost the industry. There are a lot of disagreements about exactly how and when it should be done, but that conversation is well underway as the cost of renewables continues to fall.

As we drudge through this political season and listen to the calls from selective free-marketeers on “picking winners and losers,” let’s remember how we got to where we are in the first place.

And more importantly, let’s remember where we’re trying to go.

This article was originally published on Climate Progress and was republished with permission.

21 Comments

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James Desmond
James Desmond
October 3, 2012
I have collected research on both sides of this debate here:

https://sites.google.com/site/freemarketsolarpower/
Lawrence Carroll
Lawrence Carroll
September 6, 2012
thomas-mayrand, here is what doesn't make sense to me in your sentence. You say, "If we stop giving them our money . . . .renewables will never win." I cut out the middle part for clarity.

It would seem more logical to me that we if we DID stop giving them our money, then because they couldn't subsidize fossil fuels, and nuclear anymore and thus, renewables WOULD win . . .
Thomas M
Thomas M
September 5, 2012
jajagabor. The phrase you said,"don't (do not) stop giving them our money", means we will keep giving them our money.....if i do not stop at a red light..i will keep going.....
Lawrence Carroll
Lawrence Carroll
September 5, 2012
Hey RTagain - thanks! As we say in Suuthern Lingo, "You iz rite, boy!" We do need to get those fossil fuels off us as you point out so eloquently, to "scrape them off like some dread disease"! :D

I do love Ron Paul! - in fact I met him back in 1992 at the Libertarian National Convention in Salt Lake City and shook hands with him (this wasn't a formal meeting - rather I saw him walking across the room and went up to him and asked if I could shake his hand). He came across in person as he does on the "tele" - totally unassuming, down to earth and honest - a veritable Howard Roark in the flesh - someone who really would rather "work as a day laborer" than sell out (unlike another Rand devotee, such as Paul Ryan, whom I "can't stand").

Since then I've left the Libertarian Party (but haven't joined any other party), but still have a lot of respect for it and its philosophy/approach.

I started reading the left-wing libertarian, Noam Chomsky, in the mid-late nineties and had my mind "blown" by him too - Chomsky "awoke me from some of my dogmatic slumbers." The left-wing libs and right-wing libs both, however, actually have a lot in common, such as anti-imperialism - and a distrust of any power structure. I love 'em both!

I believe Ron Paul endorsed a pro-nuclear PSC candidate here in my home state, Alabama, a few years ago (fortunately the person lost the republican nomination), but Paul's overall philosophy is certainly consistent with self-sufficency and thus, renewable energy. Like ya'll, I agree that if the gov't wasn't sucking our money away for endless crap (like wars, the IMF, the World Bank, the drug war etc. etc. etc.), we'd all have plenty left over to be more than self sufficent! Right on! Go Rtagain!
Robert Tilden
Robert Tilden
September 5, 2012
Good point "jajagabor" - we need to get the government out - actually OUT of everything! If the fossils were not so subsidized, the REs would be much more developed and we would have a much better environment, economy, etc. Ron Paul was / is the man.
Lawrence Carroll
Lawrence Carroll
September 5, 2012
thomas-mayrand-14505, I like your comment above, but didn't you mean to say "If we don't stop giving them our money" rather than "If we stop giving them our money"?

I would just like to clarify that.
BRYAN BROWN
BRYAN BROWN
September 5, 2012
The DBL report requires a deeper reading. The report primarily addresses subsidies by industry and compares them as equals. There is little comparison based on energy or capacity. You have to get to p32 before that comparison is made. And renewables don't do well compared to O&G. The paper goes on to say that you really can't compare emerging technologies with fully-depreciated technologies. I'd appreciate someone who can parse the data on per-unit energy basis and then see what can be expected from subsidizing renewables. The DBL paper explicitly won't predict what subsidizing renewables will do for us after 30 years.
Thomas M
Thomas M
September 5, 2012
The key word here is 'free'. Why would the gov. promote an energy source which once installed gives you free energy? And where does all the subsidy money come from? We the people. If we stop giving them our money, and the ability to spend it as they see fit, renewables will never win. All the money spent to subsidize oil and the like could give every person the means to install or develop free energy systems. Fluctuating energy cost yo-yo's the fossil fuel dependence. When fossil fuel prices go up, renewables look better and people invest in them. Then the gov. jumps on the band wagon subsidizing their buddies to build RE plants to flood the market and make billions, then they go bust and collect billions more. Then fossil fuel prices drop and the people revert to using the now cheaper alternative again and the subsidies once again go back to their fossil fuel buddies. So in a sense, there is no free market decisions, the market is manipulated by the large conglomerets to continually line their own pockets knowing the sheep will follow.
lawrence elliott
lawrence elliott
September 4, 2012
@Tagain

I think I made it pretty clear that I am in favor of some subsidizing of select technologies.

I was also pretty clear on the fact that there's a very long history of well placed CEO's and those who purchase politicians, through what is called political contributions but are in reality clearly bribes, who manage to rape the treasury as subsidies but never are held to pay for their crimes.

Actually governments in all forms have subsidized many people and projects for many many years.

I'm certain that the ancient Egyptians managed to store their wheat harvested along the Nile in granaries built using funds drawn from the Kings treasury or subsidized with labor provided by slaves forced to work by the same King.

Christopher Columbus could never have come across the ocean and stumbled upon the north American continent without funds provided by Queen Isabella of Spain.

I'm not for or against any subsidy.

What I resent is a government of the corporations and well placed and for the corporations robbing all of us of a prosperous future while a minority of people with severely limited intellect continue to pose as leaders as the common man votes to support more of the same.

Perhaps it's truer than we would like to admit that "we get the government we deserve" or put another way "we get a lousy government only when we fail to demand better"

So far all I see is one party demanding ever more stupidity and criminality with another party collectively curling up in a fetal position hoping that the stupid party doesn't destroy them at best or that the sheeple who voted them in don't finally gather pitch forks and and clubs and drive them from the temples of government.
Lawrence Carroll
Lawrence Carroll
September 4, 2012
What is obvious is that we need fundamental, radical change in the polticial/social world, and on the level of "consciousness."

For myself, the "Republicrats" and/or "DemoPublicans" will probably never (at least as a whole) live up to that need. I would prefer a mixture of Nader/Green types with Libertarians. A non imperialist philosophy is essential for any decent society to exist or flourish.

Haha, but I won't be holding my breath for that to manifest itself. . . :(
Robert Tilden
Robert Tilden
September 4, 2012
larryofgalaxy - thanks, I agree, but it is not clear if you think there should be subsidies (for clean energy) or not.

If we could get this gov't back to what it should be by eliminating ALL subsidies, that would be great - as we have the clean Renewable Energy techs now to beat out coal and oil and nuclear (http://powertaxcredit.com). But we could do it faster with subsidies / tax credits, and it is justified to charge the fossil fuels for the pollution. Although there we run the risk of having a corrupt government, like ours, to extend the practice, like now, to controlling everything.
lawrence elliott
lawrence elliott
September 3, 2012
@Rtagain

I agree with you on most points but......

In regard to subsidies I have to disagree to some extent

I think most rational folks will agree that our governments' current structure for subsidizing anything is corrupt beyond all hope and of course reflects the decline of ethics and the resultant criminality that has plagued and will continue to plague any society that so willingly and happily rejects our founding fathers feeble attempts to give us a gift of a representative republic. Instead we have those in favor of a very vocal and in many ways quite silly and obnoxious support(think Tea Bagger's) of rule by Economic Royalists. These modern day KINGS now own the government as well as any media who could have a positive influence on change. Oh to dream of 'freedom of the press' being more than a slogan.

1000 Am radio stations pouring out a steady diet of mindless adoration of the Economic Royalists and mass killing (US military action in recent times) known as ''right wing talking heads" while half a dozen stations try,like Paul Revere,to warn us all of the coming total subjugation of the citizens to a few 'hedge fund parasites and inheritance babies).

Now to subsidies

Study the financing of the trans continental railroad. In our history there has never been a more dramatic example of government subsidizing development. We can argue whether or not it was positive development but we all know the results of such government participation in economics.

Also a nascent,under capitalized technology such as say solar PV can in no way ever compete on a level field with coal,oil or natural gas.

Not permitting subsidize to potentially 'game changing' technologies such as solar is the height of foolishness.

Now ask yourself.

How many CEO's who participate in the fraudulent rape of our treasury ever spend their lives peeling potatoes in a federal lockup.

Answer

None

It's hard for common rabble to imprison their KINGS.
Robert Tilden
Robert Tilden
September 3, 2012
Many good comments: Bottom Line - The fossil fuels pollute which damages everyone - so anyone producing or using them should pay something, somehow to compensate - for clean up, or for support of clean energies to get away from the polluters. Outside of this, there should be NO SUBSIDIES (WINNERS PICKING) WHAT SO EVER. Also, we clearly have the technologies available, or in development now, to produce more than we could use of DOMESTIC, CLEAN, RENEWABLE ENERGY - LOWER COST THAN THE FILTHY FOSSIL FUELS - AND - CERTAINLY, ABSOLUTELY NO SUBSIDIES SHOULD HAVE EVER GONE, OR NOW BE GOING TO THE FILTHY FOSSIL FUELS AT ALL! But, due to the immense corruption in this government, and barring someone like the noble Ron Paul getting in to get things straight, this all will have to end in a collapse. Meanwhile, if you are now paying income taxes, here is a no-brainer - while no cost and totally beneficial to you, will do the greatest amount of good all around: http://powertaxcredit.com
lawrence elliott
lawrence elliott
September 3, 2012
It is quite obvious that anonymous, in his own way and perhaps the equal of Mr Lacey, also shows a bias towards his sports team or religion or sacred group (In other words Republicans. The only way I can think to describe a person choosing to ignore the obvious and live in an intellectual bubble)

Personally when you research past support for or against fossil fuel subsidies and reluctance to support renewables the record for Republicans is quite obvious. Both parties regularly gorge at the bribery trough of oil and gas companies but at least Democrats make a somewhat feeble effort to show RE support.

As to subsidies to natural gas?

How about a Dick Cheney led exemption and obvious gift to drillers to EPA standards in fracking fluids?
Want to poison underground water supplies for profit?
Sure. Here is your exemption
Want a big tax cut on those capital gains while we are at it?

How about Nuclear

There is no bigger pig at the public trough than this short sighted industry.

Just dig up the facts
They are out there for all to see.
Look at who promotes these 'currently controlled meltdowns' posing as energy sources.

Anyway we can go on and on about 'my team is better than your team", "my politician will solve problems where yours will just make them worse" but.....

There are two very obvious things in all of this discussion.

No politician on either side of the isle will give positive leadership till we lead them and demand it.

The second thing that is quite clear is the Republican party has devolved from a group of privileged old rich white men fighting to concede anything to "those people" to essentially a group of race baiting,flat earth, science hating,homophobic near suicidal old rich white men.

If somehow a person feels that's appealing and deserves a vote then that's your choice.
But don't come crying when that same group reduces your country to an international joke at best or a dystopian third world oligarchy at worst.
ANONYMOUS
September 2, 2012
I fully appreciate that Mr. Lacey's article is his opinion. Regardless, I would have hoped that RWE editors set their bar a bit higher when deciding what to publish on their website. I like to think I have an open mind, and I even enjoy reading opposing viewpoints as long as they are well presented and thoughtful. Unfortunately much of what Mr. Lacey writes is neither.

Firstly, no informed person would suggest that we have anything close to a free market in the US for energy. All forms of energy are heavily regulated/taxed/subsidized by federal, state and municipal governments. But to suggest that overall, oil/gas and nuclear energy production currently benefits more financially from government regulations than RE is wholly untrue. Oil and gas production contributes massive net revenues to federal and state governments, while most RE (except for hydro) currently does not.

It is also unfortunate that Mr. Lacey feels the need to inject political bias into his article. On one hand, he seems greatly troubled by some potential future event, which may or may not occur, and is based solely on an ambiguous comment in the GOP political platform. And he seems to feel that the only thing standing between success of RE in the US market are a few Luddite Republicans in the House. Unfortunately, Mr. Lacey conveniently ignores the fact that from Jan. 2009 until Jan. 2011, Democrats had total control of the US federal government.

I'm a firm supporter of RE technology, and that's why I read REW. The reason I post comments like this is because I feel the editors can do a much better job of being discerning in what articles they post. Ideally all articles, even opinion and commentary, would strive for thoughtfulness and balance.
Mike Holly
Mike Holly
September 2, 2012
Come on Lacey, I know the Republicans are ridiculous about supporting fossil and nuclear fuels, but the Democrats are equally ridiculous about wind and solar.

Our company can't even attract investors to commercialize our new lower-cost biomass technology. Nor can we utilize the tax shelters and special help for transmission and backup given to wind power.

The real Free Market Hypocrisy is that both Republicans and Democrats have failed to promote free markets in the U.S. electricity industry. Markets are dominated by electric utility monopolies in the 35 regulated states and their monopolistic spin-offs in the deregulated states. The US doesn't even offer feed-in tariffs like in Europe.

In our Midwest region, the states of ND, SD, NE, KS, MO, IA, and MN allow utility monopolies to meet renewable energy mandates by building their own generation or holding rigged competitive bidding. Because these monopolies could block or take any technology they want (like Warren Buffet's Mid American Energy is doing with wind in Iowa), there is little incentive to develop new low-cost technologies. Monopolies bid for conventional wind and wood projects.

In addition, the bids are rigged for wind power. The US pays 30% of the costs of windmills with the Production Tax Credit and another 20-25% with federal accelerated depreciation (through tax shelters for big business and the wealthy). States also offer accelerated depreciation and ratepayers must cover the higher costs of transmission and backup of the low capacity factor generation.

It is time to create real free markets without utility monopolies AND stop picking winners and losers with preferential mandates and subsidies. After over 20 years of disappointment, it is time this disgrace of a nation levels the playing field and lets our company in the market !
Peter Lynch
Peter Lynch
September 2, 2012
Stephen - great article....

Drop me an e-mail I have some great charts for you.....Peter

Solarjpl@aol.com
Ethan Lipman
Ethan Lipman
September 2, 2012
Well Done - this is well written. Now if only it was as simple as lobbing this in an email to those free marketeers suggesting that the switch should be flipped to let the energy market choose it's own losers and winners.

Is the new DBL report ~ the best pieces of research putting numbers to the historical impact of subsidizing other forms of energy? Does it mesh with previous reports by other groups?

How can somebody who doesn't like these facts play devil's advocate and attack the results? author bias? Is there an argument to be made about statute of limitations for historical subsidies? Land give aways? public private partnership on building pipelines? I don't think there should be, just trying to understand how anybody can rationally argue these reports - and what is clearly (to me) not a free market (and never has been).
Lawrence Carroll
Lawrence Carroll
September 2, 2012
It is good to see REW - and Mr. Lacey in particular - tackling this issue that I and others and been posting on for years here (not that this is a new issue on REW, but it does need articles like this more often, and the mass media needs it thousands of times more).

Mr. Lacey states: "A 2011 investigation from the Breakthrough Institute showed that the natural gas industry was able to commercialize fracking technologies only after decades of tax credits, government R&D programs, government assistance with mapping, and partnership with companies entering commercial scale.'

But don't forget that 'fracked' natural gas received perhaps its biggest subsidy in the previous administration when Bush/Cheney exempted it from the Clean Water Act.
lawrence elliott
lawrence elliott
September 1, 2012
When in the process of evaluating the pros and cons of any statement from the Republican party on any position,especially when it comes to their sacred and SECRETIVE pledge to support any and all fossil fuels no matter their virtues or downsides, it really helps to remember that except for when a candidate or republican operative tells you his or her name,odds are they are lying.(best to check the name also)

Empirical evidence over many years proves this FACT over and over.

"Unlike the current Administration, we will not pick winners and losers in the energy market-place. Instead, we will let the free market and the public's preferences determine the industry out-comes. In assessing the various sources of potential energy, Republicans advocate an all-of-the-above diversified approach,"

Republicans speak in code if you haven't noticed. You must have a secret decoder ring to understand them. (the ring generally green and having a picture of a former president imprinted).

I managed to steal one of those rings from Carl Rove as he was distracted sinking his teeth into the neck of his latest victim.

Using this ring here is what they actually said in the statement above.

When stating they will not pick winners and losers in the energy market - place. True only if you simply replace the 'we' (republicans) with 'them' (the economic royalists who purchased them.

"Republicans advocate an all-of-the-above diversified approach,"

Translation:

In the race for success or failure of renewable energies vs fossil fuels all are welcome to compete...............except

Translation:

All renewable racers competing must first obediently submit to attachment of leg irons, mill stones and flip flops while Republican 'fossil fuelers' use roller blades and jet packs paid for by the upper .001%.

Now I need to give this ring back to Carl

Have to wait till dark though

Seems he has a problem with the light.
ANONYMOUS
September 1, 2012
WOW - AWESOME article on the most critical issue in the whole energy industry - and way overdue!!! This should be screamed about in every venue! Subsidies responsible for the dominance of the FILTHY FOSSIL FUELS FOR A CENTURY, and now that the RENEWABLES ARE APPROACHING COST COMPETITIVENESS, the bastards with a voice say it is time to end all subsidies! Another example of the extreme corruption controlling this government. There never should have been (nor should be) ANY SUBSIDIES! But to compensate for the pollution, it would be justified to subsidize CLEAN ENERGIES. And certainly now, subsidies should definitely be stopped for the filthy fossils and continued for the clean energies at least until they have received what the filthy fossils have already gotten. For now, here is one way to make your time & money count and do some REAL, ACTUAL GOOD - while it lasts: A program here will SAVE ALL YOUR INCOME TAX - with about 65% of liabilities going directly into SOLAR & BIO-MASS DEVELOPMENT, and about 35% cash staying in your pocket - you receive a gain in cash right at the start. Jump on it while it lasts - explained here: http://powertaxcredit.com

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Stephen Lacey

Stephen Lacey

I am a reporter with ClimateProgress.org, a blog published by the Center for American Progress. I am former editor and producer for RenewableEnergyWorld.com, where I contributed stories and hosted the Inside Renewable Energy Podcast. Keep...
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