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August 3, 2011

EIA Releases New Subsidy Report: Subsidies for Renewables Increase 186 Percent

August 3, 2011
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At the request of congress, the Energy Information Administration (EIA), an independent agency of the U.S. Department of Energy, evaluated the amount of subsidies that the federal government provides energy producers for fiscal year 2010.[i] Over a 3-year period, from fiscal year 2007 through fiscal year 2010, total federal energy subsidies increased from $17.9 billion to $37.2 billion, an increase of 108 percent over the 3-year period. Of the increase, 77 percent was due to the Obama administration’s economic stimulus law. The largest increases in federal energy subsidies were in renewable and end-use subsidies. Over the 3-year period:

  • Renewable energy subsidies increased by 186 percent from $5.1 billion to $14.7 billion. Renewables saw by far the largest jump in federal benefits. Of the $14.7 billion in fiscal year 2010, $6.2 billion (65 percent of the increase) was related to the Obama administration’s economic stimulus law.
  • Wind led the various renewables with a more than 10-fold increase in subsidy from $476 million to $4,986 million.
  • Solar subsidies increased by more than a factor of 6 from $179 million to $1,134 million and led the electricity sector subsidies on a unit of production basis.
  • Subsidies for biofuels increased by 66 percent, from $4 billion to $6.6 billion.
  • Conservation and end-use subsidies more than tripled from $4 billion to $14.8 billion. Conservation subsidies increased from $369 million to $6,597 million, a factor of almost 18. End-use subsidies increased from $3,618 million to $8,241 million, more than a doubling.

In contrast,

  • Federal subsidies for coal increased 44 percent from $943 million to $1,358 million.
  • Federal subsidies for oil and natural gas increased 40 percent from $2,010 million to $2,820 million.
  • Federal subsidies for nuclear energy increased 46 percent from $1,714 million to $2,499 million.

Federal Subsidies and Support for Electricity Production

The focus of the congressional request was on subsidies for electricity generation, both on a total dollar amount and on the amount per unit of electricity production. From 2007 to 2010, federal subsidies for electricity production increased from $6,582 million to $10,902 million, an increase of 66 percent. The largest dollar amounts went to wind and nuclear. But, on a unit of production basis, the winners were clearly wind and solar.

Source: Energy Information Administration, Direct Federal Financial Interventions and Subsidies in Energy in Fiscal Year 2010, July 2011, http://www.eia.gov/analysis/requests/subsidy/pdf/subsidy.pdf

Federal Subsidies and Support per Unit of Electricity Production

Absent from this report is an accounting of subsidies by unit of production, which the previous report released by EIA in 2008 contained.[ii] In the 2011 report, EIA states “while the overall amount of federal subsidies and support provided per unit of overall energy consumption or production has clearly grown, simply dividing the current value of subsidies by current consumption or production does not reflect either the long-term impact of the imbedded subsidies and or the future impacts of current subsidies and support that may only be starting to impact energy markets.”  While whatever this statement is meant to imply may be true, these measures are another indicator of how federal dollars are being used and the value the nation is getting from them. It is interesting that the same upper management in EIA that thought that the amount expended divided by the amount produced was an appropriate indicator three years ago, no longer believes it should be reported now even though that information was requested by congress.

EIA does state that “Relative to their share of total electricity generation, renewables received a large share of direct federal subsidies and support in FY 2010. For example, renewable fuels accounted for 10.3 percent of total generation, while they received 55.3 percent of federal subsidies and support.” While this statement is true, the difference is skewed much more than presented by these statistics because hydroelectric power provides the largest share of renewable generation (about 60 percent), but got only 0.6 percent of all subsidies and 1.5 percent of all renewable subsidies.

The Institute for Energy Research decided to calculate the federal subsidies and support per unit of electricity production from the information provided in EIA’s report and the generation data in its Monthly Energy Review.[iii]  The ratio of dollars to production is given in the following figure. As can be seen by the figure, solar is being subsidized by over 1200 times more than coal and oil and natural gas electricity production, and wind is being subsidized over 80 times more than the more conventional fossil fuels on a unit of production basis.

*Natural Gas and Petroleum Liquids

Source: Energy Information Administration, Direct Federal Financial Interventions and Subsidies in Energy in Fiscal Year 2010, July 2011, http://www.eia.gov/analysis/requests/subsidy/pdf/subsidy.pdf

Non-electricity Sector Subsidies

Biofuels, including ethanol, received $7,646 million in federal subsidies and support in fiscal year 2010, more than double its $3,249 million received in FY 2007, and the largest component of non-electricity production subsidies (73.2 percent). This translates into a unit of production subsidy of $7.09 per million Btu, over 15 percent higher than in FY 2007. Biofuels received 3.5 times more federal support than natural gas and petroleum liquids did in fiscal year 2010.

Federal subsidies and support for natural gas and liquids in the non-electricity production sector totaled $2,165 million in fiscal year 2010, about 20 percent of the non-electricity sector subsidies and support.  On a consumption basis, natural gas and petroleum liquids subsidies in fiscal year 2010 were $0.04 per million Btu based on non-electricity consumption. This was the metric used in EIA’s 2008 report. On a production basis, natural gas and petroleum liquids subsidies in fiscal year 2010 were $0.07 per million Btu, excluding the domestic share of natural gas and oil consumed by electric generating plants. In either case, subsidies for biofuels in fiscal year 2010 were over 100 times more on a Btu basis than those for petroleum and natural gas.

Conclusion

EIA’s report shows that on a total dollar basis, wind energy has the highest federal subsidy. However, on a unit of production basis, solar energy is by far the costliest form of electricity production. Both of these technologies are being promoted by the Obama Administration and many environmentalists in lieu of the more cost effective fossil fuels. Also, one thing that bears investigation is why EIA did not include the amount of federal subsidies and support provided per unit of overall energy consumption as it had in its previous report.



[i][i] Energy Information Administration, Direct Federal Financial Interventions and Subsidies in Energy in Fiscal Year 2010, July 2011, http://www.eia.gov/analysis/requests/subsidy/pdf/subsidy.pdf

[ii] Energy Information Administration, Federal Financial Interventions and Subsidies in Energy Markets 2007, April 2008, http://www.eia.gov/oiaf/servicerpt/subsidy2/pdf/execsum.pdf

[iii] Energy Information Administration, Monthly Energy Review, http://www.eia.gov/totalenergy/data/monthly/pdf/sec7_5.pdf


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38 Responses to “EIA Releases New Subsidy Report: Subsidies for Renewables Increase 186 Percent”

  1. Anonymous on

    Only a bunch of inbred nitwits or politicians, but I repeat myself, could cook up such a system.  The more you lose, the more we’ll pay you, and we’ll subsidize you each time you increase your capacity to lose more.  No wonder we owe our souls to the Red China Store.

    Reply
  2. Anonymous on

    These numbers don’t show the pollution and water use of COAL, Nuclear and NG. Or the facts that COAL and Nuclear can’t be ramped down at night so they dump energy.

    They also don’t show how the cost of Solar and Wind has decreased so many subsidies are being phased out while fossil fuels increase in cost and have for over 30 years.

    Also Nuclear imports 95% of the uranium used and have to be shut down to refuel every 18 months. It on a path to no where.

    Reply
  3. Len Johnson on

    jstack6- re. “ramped down at nigh”:
    Not how it works. ‘The grid’ has multiple sources of power, and those that can be ‘ramped down’ are often used for ‘peaking power’. If power needs are reduced at night, which is not always the case, peakers may be shut down. There is still the need for steady, reliable, and cheaper sources of power which is provided by base load plants. Yet, even nuclear and coal plants have to shut down from time to time, so there has to be a generation reserve available. Thus, the larger and better managed the grid, the more base load plants are on line, and the less likely it becomes that customers will experience brown or blackouts. There must always be more power generated than is actually consumed, but the goal is to match requirements as closely as possible using cheaper (generation, not capital costs) and more reliable base load plants. When government causes artificial constraints on base generation construction as in California, it is not unusual to have inefficient plants operating at something very near capacity, massive importation of power from other regions, and energy generation costs that are higher, more volatile, and less predictable.

    Reply
  4. R Howe on

    I believe that the graph showing “Federal Electric Subsidies per unit of production” is not a valid representation. The referenced report states that this type of comparison is not accurate. (Energy Information Administration, Direct Federal Financial Interventions and Subsidies in Energy in Fiscal Year 2010, July 2011, http://www.eia.gov/analysis/requests/subsidy/pdf/subsidy.pdf)
    See the two quoted excerpts from the report below.

    1. “Though the two options have roughly similar value to investors and cost to the
    government over the life of the projects, the grant program front loads the
    government’s support for covered projects in the year that the grant is awarded.
    If the wind and solar plants that took advantage of the grant program during the
    financial crisis had instead utilized the production tax credit program, the
    subsidy value reported in FY 2010 would have been much smaller, reflecting only
    the credit for up to one year of generation”

    2.”While the overall amount of federal subsidies and support provided per unit of
    overall energy consumption or production has clearly grown, simply dividing the
    current value of subsidies by current consumption or production does not reflect
    either the long-run impact of imbedded subsidies and or the future impacts of
    current subsidies and support that may only be starting to impact energy
    markets.”

    Reply
  5. R Howe on

    REQUEST FOR CLARIFICATION AND/OR CORRECTION: There are some people referencing your data and charts for Federal Subsidies and Support per Unit of Electricity Production.

    Your decision to do the $/megawatt subsidy calculation based on only one year’s of production appears to be very inaccurate. For example, much of the solar subsidy is
    related to the investment tax credit. That tax credit is applied to a system
    that will last for 30+ years. Therefore you probably need to divide the $775 by
    30 to get a comparison to be made to the other subsidies. If you do this, then
    it is $25.80 for solar.
    This is one example why the EIA report that you are quoting states that “simply dividing the current value of subsidies by current consumption or
    production does not reflect either the long-term impact of the imbedded
    subsidies and or the future impacts of current subsidies and support
    that may only be starting to impact energy markets.”
    As another example, see page xii of the report, in the second paragraph – …”If the wind and solar plants that took advantage of the grant program during the financial crisis had instead utilized the production tax credit program, the subsidy value reported in FY 2010 would have been much smaller, reflecting only the credit for up to one year of generation.”……

    Reply

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