of Teacherresource
By Robert Bradley Jr.
“Federal subsidies to support renewable energy constituted almost half of all federal energy support between fiscal years 2016 and 2022. Traditional fuels (coal, natural gas, oil and nuclear) received only 15 percent of all subsidies between FY 2016 and FY 2022, while renewables, conservation and end-use get 85 percent. (Mary Hutzler, bottom)
A fallacious argument in the energy/climate debate is that wind and solar are cheaper than fossil fuels in power generation. It must be wrong because government subsidies are central to liquid and intermittent energy on the grid. And that’s it is wrong if Federal accounting has been studied (below).
Actually, the relatively small subsidies for oil, natural gas, and coal turned negative, dramatically, when the Biden Administration’s anti-fossil fuel agenda was added, 225 actions.
Mary Hutzler of IER (and former acting head of DOE’s Energy Information Agency) prepared this analysis less than a year ago for the Energy Research Institute. “Renewable Energy Still Dominates Energy Subsidies in FY 2022” deserves a boost in the buildup to the Fiscal Year 2023 update. Hutzler’s August 9, 2023 post follows.
The Energy Information Administration (EIA), an independent agency of the US Department of Energy, evaluated the amount of subsidies the federal government provided to energy producers for the fiscal years 2016 to 2022, in its report. Federal Financial Intervention and Subsidies in Energyupdate the previous subsidy report.
Federal subsidies to support renewable energy form nearly half of all federal energy support between fiscal years 2016 and 2022. Traditional fuels (coal, natural gas, oil and nuclear) received only 15 percent of all subsidies between FY 2016 and FY 2022, while those renewables, conservation, and end-use receive 85 percent.
Renewable subsidies more than doubled between FY 2016 and FY 2022, rising to $15.6 billion in fiscal year 2022 from $7.4 billion in fiscal year 2016 (double in 2022 dollars). Federal subsidies and incentives to support renewable energy in fiscal year 2022 are nearly 5 times higher than fossil energy, totaling $3.2 billion.
Subsidies in the EIA report do not include state and local subsidies, mandates or incentives which in many cases are quite substantial, especially for renewable energy sources. The EIA also excludes large-scale subsidies that are legal under the Inflation Reduction Act (IRA) from the time it is approved in August 2022. Goldman Sachs estimates the cost of the bill at $1.2 trillion.
Source: Energy Information Administration
_____
Fast Facts
- The Energy Information Administration found that subsidies for renewable energy more than doubled between FY 2016 and FY 2022, happening before the Inflation Reduction Act (President Biden’s climate bill) became law in 2022 that increased renewable subsidies.
- Coal, oil, natural gas and nuclear receive 15 percent of all subsidies in FY 2022, despite providing a greater amount of energy than renewables — the largest subsidy recipients.
- End-use subsidies that provide low-income Americans with support to pay their utility bills are the second largest category of subsidies after renewable energy.
- Wind and solar combined represent 94 percent of federal renewable electricity subsidies in FY 2022, while generating 5.5 percent of combined primary energy.
_____
Energy end-use subsidies (Low-Income Heating Assistance and other programs) are the second highest category after renewable subsidies. Energy end-use subsidies increased from $7.9 billion in FY 2016 to $8.7 billion in FY 2022. The largest program of this category—the Low-Income Home Energy Assistance Program (LIHEAP), administered through the U.S. Department of Health and Human Services (HHS)—slightly decreased funding from $4.0 billion in FY 2016 to $3.9 billion in FY 2022, with a one-year increase to nearly $10.0 billion in FY 2021.
In 2021, funding for the Low-Income Home Energy Assistance Program, which helps with energy bills and energy-related costs, will double to nearly $10 billion, after Congress approved additional funding for the program in COVID-19 relief. a plan that resulted in end-use subsidies totaling $14.3 billion in FY 2021. The end-use subsidy program helps people at the bottom of the economic ladder pay rising utility bills, but does nothing to help most taxpayers.
Most renewable subsidies are tax incentives, with solar applications making up the largest portion of these subsidies. In FY 2022, solar subsidies totaling $7.5 billion exceed biofuel subsidies—the largest recipient of tax incentives in FY 2016, with total subsidies of $3.7 billion, amounting to close to $3.6 billion in total FY 2022 subsidies.
These sources typically receive additional support at the state and local levels, including credits in California for biofuels at $3.70 per gallon for production instead of petroleum refining. Other benefits in some states include “net metering” for solar energy that requires utilities to purchase solar at retail rather than wholesale prices.
Source: Energy Information Administration
Although renewable energy will receive more than half of federal subsidies in FY 2022, the EIA reports that fossil energy in the form of coal, oil, natural gas and natural gas plant liquids will make up 79.1 percent of primary energy production in FY 2022. Nuclear power will contribute 7.9 tip. , followed by biomass 5.1 percent, wind 3.7 percent, hydroelectric 2.3 percent, solar 1.8 percent, and geothermal 0.2 percent.
Source: Energy Information Administration
Federal Subsidies and Support for Renewable Energy
Renewable energy (including biofuels) comprises 53 percent of total energy subsidies in FY 2022–up from 41 percent in FY 2016. In FY 2022, tax costs account for 98 percent of total renewable energy subsidies. Biofuels represent 42 percent of total subsidies for renewable energy in FY 2022, while renewable energy for electricity production represents the other 58 percent.
The largest electricity-related federal energy subsidies are for renewable energy because subsidies for wind and solar each exceed subsidies for coal, natural gas and petroleum, and nuclear. Wind and solar combined represent 94 percent of federal renewable electricity subsidies in FY 2022, while generating 5.5 percent of the combined primary energy.
Source: Energy Information Administration
The Energy Research Institute calculated federal subsidies and support per unit of electricity production from information provided in the EIA report for renewable technologies and nuclear power for FY 2022. Because the EIA did not exclude electricity-related subsidies for coal, natural gas and petroleum from total subsidy, subsidy per unit of energy produced cannot be calculated for that electricity source. However, if one assumes that all the coal subsidies calculated by the EIA are for electricity production in FY 2022, the subsidy cost per unit of production for coal will be $1.06 per megawatt hour.
The figure below provides the subsidy cost per unit of production for these technologies for which the EIA provides relevant data. On a per-dollar basis, government policies result in solar generation being subsidized more than 76 times more than nuclear power generation, and wind being subsidized nearly 17 times more than nuclear power on a unit-of-production basis in FY 2022. Nuclear power is America’s largest carbon-free energy source Union.
Source: Energy Information Administration
Conclusion
From FY 2016 through FY 2022, most federal subsidies go to renewable energy producers (primarily biofuels, wind, and solar), low-income households, and energy efficiency improvements. From FY 2016 to FY 2022, nearly half (46 percent) of federal energy subsidies are tied to renewable energy, and 35 percent are tied to energy use. Federal support for renewable energy of all types more than doubled, from $7.4 billion in FY 2016 to $15.6 billion in FY 2022.
From FY 2016 through FY 2022, provisions in the tax code are the largest source of federal financial support. In FY 2016, the Internal Revenue Code (IRC) – with 31 energy-specific tax provisions – provides greater financial support for energy than for direct expenditures, including R&D expenditures. Total tax expenditures are 70 percent of total federal financial support. Since FY 2016, tax expenditures have continued to increase, accounting for more than 75 percent of total federal support in recent years.
On a total dollar basis and on a unit of production basis, solar energy has the highest federal electricity subsidies in FY 2022.
Related
