The Truth About Energy Subsidies

In the debate over energy subsidies, you will hear all kinds of claims.  One side complains about massive subsidies for fossil fuels and the other side complains about huge subsidies for renewable power, like wind and solar.

Where does the truth lie?  Last summer (July 2011), the U.S. Department of Energy's Energy Information Administration (EIA) issued a study examining this issue for electricity generation.  The study looked at all sources of Federal subsidies, including direct subsidy, tax credits, R&D, loan guarantees, etc.

The EIA found that for fiscal year 2010, subsidies to all electricity sources totaled $11.9 billion dollars.  Of that total, renewables received 55.3 percent.  Nuclear received 21 percent and coal received 10 percent.

When looking at subsidy shares relative to production levels, the differentials are even more startling.  Wind alone receives 42.0 percent of the total 2010 subsidies, while accounting for only 2.3 percent of total electricity production that year.

Nuclear received 21 percent of the total 2010 dollars, while producing 19.6 percent of the total electricity generated.  Coal received 10 percent of the subsidy dollars, while producing 44.9 percent of America's electricity.

On a per unit basis, the outcome is even more lopsided.  Think of 5 cents/kWh as a benchmark price for "grid" power.  Wind power's per unit federal subsidy totaled 5.25 cents per kWh in 2010, arguably an amount greater than the actual value of the power.  Nuclear received a federal subsidy equal to 0.31 cents per kWh.  Coal's subsidy accounted for a mere 0.06 cents per kWh.  On a relative, per unit basis, wind receives a subsidy 82 times as large as coal power's subsidy.  Comparing wind to nuclear on a relative, per unit basis, the federal subsidy of wind is 17 times bigger.

Solar power received 8.2 percent of the total federal subsidy dollars.  Its share of total 2010 electricity production rounds to zero percent.  On a per unit basis, solar received a subsidy of 96.8 cents per kWh.  That is a subsidy 1,507 times bigger than coal.

Renewable energy received most of the federal energy subsidy dollars.  On a per unit basis, renewables subsidies dwarf those available to conventional power.