By Nancy Pfund, Founder & Managing Partner, DBL Investors and Benjamin Healey, Research Affiliate, Yale Center for Business and the Environment
The collapse this past August of Solyndra, a California solar panel manufacturer backed with $500 million in federal loan guarantees, has sparked loud and ongoing complaints over renewable energy subsidies. "It is not the role of government to pick winners and losers," said House Energy and Commerce Committee Chairman, Fred Upton, in a September statement. "Let's learn the lessons of Solyndra before another dollar goes out the door."
But these complaints, and the related calls for free market ascendance, ignore the basic historical fact that energy subsidies have been both a constant in the American narrative and essential to our country's economic development.
After undertaking a first-of-its-kind analysis of U.S. energy incentives since our country's founding, we discovered two critical patterns: first, every great expansion of the American economy can be linked to the discovery of a new energy source. Second, each of these new energy industries received substantial government support at a pivotal time in its early growth.
What's more, on an inflation-adjusted basis, the subsidies for "traditional" energy sources in their early days -- coal, oil, gas and nuclear -- far surpassed what we are spending on renewable energies today.
During the key growth years of what would become our modern oil and gas industries, tax expenditures on behalf of producers averaged the equivalent of five percent of the federal budget. By contrast, the current support for renewables is barely a fifth that size, comprising less than one percent of federal spending.
Quantified another way, factoring in inflation, $1.8 billion per year was spent on subsidies during the early years of the modern oil and gas industries, compared to just $400 million annually for renewables.
Over the full lifetime of subsidies, the oil and gas industry has benefitted from tax expenditures of, on average, $4.86 billion per year between 1918 and 2009. The renewables industry has received an average of only $0.37 billion per year between 1994 and 2009.
It is a simple and straightforward falsehood when established energy industries or special interests describe renewables as sops for federal money. Rather, the renewables industry is getting relatively less government help, not more, than traditional competitors.
Additionally, disappointments like Solyndra must be kept in perspective. For every successful 19th-century coal operation, dozens, perhaps even hundreds of projects collapsed in bankruptcy. Looking at the solar industry, several companies have received the same loan guarantees as Solyndra, but they are not making news: rather, they are well-managed companies that are growing and quietly creating jobs across the country.
Finally, it is important to note that early energy subsidies for coal, oil and gas were never phased out, even as those energy sources matured. The existence of these subsidies (for in some cases over a century) makes the competitive landscape look less like a level playing field and more like a black diamond ski slope for renewables. It also means that those who call for an end to ALL subsidies may end up with a surprising outcome: in many regards, the profitability of these industries has risen and remains elevated upon the backs of taxpayers.
The coal industry, for example, has received help from subsidies - often hidden - for centuries, beginning with an import tariff levied in 1789 and continuing through to preferential capital gains tax treatment enacted during the Korean War -- a subsidy that remains in place today.
Our aim here is not to criticize support for coal or oil or gas, but, instead, to raise awareness around the critical and historically consistent need for federal investments in the energy sector. Time and again, this kind of investment has benefitted society with large returns down the road.
Calls for an end to renewable subsidies ignore the lessons of American history. It has long been, and should continue to be, the case that government investment supports the growth of emerging energy sources. History teaches that such support helps drive U.S. technology innovation, job creation and economic expansion.
A webinar on this topic featuring the two authors will take place December 22, from 12:00 -1:00 p.m. (EST). Click here for more information and to register. Follow the Yale Center for Business and the Environment RSS Feed for future updates and news.
Follow Benjamin Healey on Twitter: www.twitter.com/mageben
Logic says solar, wave and hydro-electric technologies that should be the ONLY relatively cost-effective renewable energy to currently roll out, which will cut emissions, develop employment prospects, and produce the kind of energy we all need until more advanced technology such as Fusion becomes commercially viable.
Countries spending 100bn's on wind energy as a primary example I think will be left in the lurch, as wave, solar are cheaper to roll out and far more reliable then thousands of wind turbines.
Subsidising should only be done on what is reliable and can become an almost permanent feature, rather than a temporary measure.
The Aesop Institute website explains why: Multiple meltdowns at nuclear plants - a forthcoming article will be entitled: 400 CHERNOBYLS.
Rooftop solar is the obvious place to begin. See CHEAP GREEN and MOVING BEYOND OIL on the same Aesop website for a few other examples.
A strong action program that might save millions of lives could sharply boost the economy and generate jobs.
How about some "meat" instead of the same old pitch?
"Joule’s renewable fuel platform will best the scale, productivities and costs of any known alternative to fossil fuel today, with no reliance on biomass feedstocks or precious natural resources. Our inputs are sunlight, waste CO2 and non-potable water. Our output? Millions of gallons of clean, renewable fuel that drops into existing infrastructure. Next step: change the world.
Joule Wins Prestigious Wall Street Journal Innovation Award
Joule Named 2012 Technology Pioneer by World Economic Forum
Energy in America: Awarded Patents for High-Volume Ethanol Production
See Joule in Action"
They can produce diesel from sunlight, water, CO2 and bacteria for $50/barrel
Green Tech will make those that pursuit it much money!
Fanned and Fav'd!
BTW Charges for maintenance and energy transmission is yet another separate charge!
http://www.grist.org/solar-power/2011-08-08-clever-accounting-lets-utilities-cash-in-when-you-go-solar
http://www.time.com/time/magazine/article/0,9171,955183,00.html
http://edition.cnn.com/2005/WORLD/meast/01/30/iraq.audit/
So your argument is a straw man.
Nobody from the Obama administrating got fired for losing half a billion dollars because of politics and because Obama has no guts
http://usliberals.about.com/od/homelandsecurit1/a/IraqNumbers.htm
I for BOTH Parties cutting Gov't waste and going Solar ASAP, N☢T Nuclear of any flavor!
Hmmm. So, actually, we are just perpetuating the Big Energy/Big Bank rape of our economy and wilderness but switching industrial technologies and greenwashing it. That is a massively losing proposition for our democracy, our economy, our ecosystems and our climate.
What is needed are PACE loans so that WE can install efficiency upgrades and local distributed generation where the power is needed, and WE can own the generation, and German style feed in tariffs, so WE can be paid fairly for producing the clean energy instead of Chevron slaughtering tortoises for money.
This is not a war of fossils vs. "cleans." This is a war of Big Energy of all types vs. Democracy, Taxpayers, Ratepayers, The Economy and the Environment. Which side are you on?
Right On!
Scandalous! Too bad that most advocates for green energy don't know this.
Thousands of (threatened) desert tortoises are being slaughtered on just one project alone - Bright Source at Ivanpah - which is permanently destroying thousands of acres of healthy wilderness to produce solar power at more than twice the installed cost of comparable power from rooftop panels of the very ratepayers who will be forced to buy the power.
Chevron, BP, StatOil, Morgan Stanley - these are the names behind it (although all the money is, of course, supplied by taxpayers, as is the land). These guys have one business model - kill wilderness, socialize the costs onto society and the environment, hoard all the money. it's the exact same with their Big Solar and Big Wind!
We need to site the renewable revolution where we live, not in our last remaining functioning ecosystems, and WE need to own it and profit from it. It's the first time in the past century we have had a shot at participating in the energy economy as more than piggy banks for Big Energy, and these creeps are crushing us underfoot, with a big assist from the government and the Corporate Enviros, just like those
Thank you for this excellent article!!
More importantly in today's world, natural gas (methane) is NOT a fossil fuel. It continues to be created in the earth's interior through natural causes. There is already enough to last us for hundreds of years. That amount of time will allow us to develop viable alternate energy sources that will be both sustainable and affordable. I wonder how quickly fusion power would be developed if we poured as much money into that research as we have wind, solar, biofuels, etc.?