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Monday, November 7, 2011
Which Energy Source Receives the Largest Subsidy?
By NCPA @ 1:22 PM :: 6146 Views :: Energy, Environment, National News, Ethics


One of the common refrains from those advocating “green” energy is that we need to stop subsidizing coal, oil and natural gas. And while they admit, even advocate for, the existence of subsidies for wind, solar and the like, they imply that if only we got rid of subsidies for oil, those other forms of energy would be more popular.

To see if this argument makes sense, we can turn to the Energy Information Administration’s “Direct Federal Financial Interventions and Subsidies in Energy in Fiscal Year 2010” released in August of this year. The study looks at how much the federal government spends on subsidies in a number of areas, and relates it to the amount of energy produced.

For electricity, when we compare the amount of energy produced and the size of the subsidy, we see that solar receives significantly more per kilowatt hour (kWh) of energy produced. The breakdown looks like this:

Energy Source Subsidy per kwh
Coal $0.0006
Natural Gas and Petroleum Liquids $0.0006
Nuclear $0.0031
Renewables $0.0154
Biomass Power $0.0020
Geothermal $0.0125
Hydroelectric $0.0008
Solar $0.9680
Wind $0.0525

Coal receives about 6/100ths of a cent per kWh while solar receives an enormous 96.8 cents per kWh. Wind receives 5.25 cents per kWh and nuclear receives just under 1/3 of a cent per kWh.

Green advocates generally have two responses to this list.

First, they note there are external costs (i.e. carbon emissions) that are not captured here. With a $20/per ton carbon tax, however, the price of coal would go up about 2 cents per kWh and natural gas would increase in price by about 1 cent, far less than even the 5.25 cents subsidy received by wind power and far below the solar subsidy.

Second, they argue that oil requires us to spend money overseas in places like Iraq to protect our supply of oil. Oil, however, is a very small part of electric generation, so it doesn’t factor much in these numbers. This also assumes the United States would largely disengage from the world if we didn’t need oil. That certainly isn’t the case in Afghanistan, Bosnia, Uganda, Europe, Japan, Taiwan and other places where we see humanitarian and strategic interests without oil being involved.

It should be noted that the solar subsidies here, since they are for 2010, do not count the $528 million lost in the Solyndra bankruptcy alone. If that had occurred in 2010, it would have added another 50 percent to the cost of solar subsidies.

Put simply, the failure of solar and other renewables to be price competitive certainly isn’t because the federal government isn’t doing everything it can to prop them up.


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