Fossil Fuels and Green Energy Feed Mightily at the Public Trough

The fossil fuel industry is pouring lighter fluid all over the renewable energy sector both in the United States and Europe, saying that the subsidies given to those power sources are landing in the laps of consumers. What oil, gas and coal don’t mention, though, is that they, too, have a steady diet of government fat.

One person’s lard is another’s meat. But the public must still sift through PR campaigns to try and understand where the truth lies. What all positions can agree, in theory, is that a diversified energy portfolio serves to protect the national interests. However, the level of public allocation to such endeavors is not unlimited and that leaves each fuel source fighting to get its fair share. 

“Despite being propped up by government mandates and billion dollar subsidies for decades, wind power continues to be an expensive and boutique energy source that the American people cannot rely on for power when they need it,” says Tom Pyle, president of the fossil fuel group, Institute for Energy Research. 

Pyle is referencing Texas Tech study, funded by oil and gas interests. He, specifically, makes note that wind energy costs taxpayers $12 billion per year and that it actually comes in at $109 per megawatt hour, which is greater than the government projections of $72 for the same unit. The added costs are the result of including such things as transmission and construction. 

The Texas Tech evaluation points to the Government Accountability Office that says 82 different federal programs are offering support to wind power producers, which include the high-profile production tax credit. Other benefits involve loan guarantees and tax breaks, which the analysis fails to mention are also provided in huge numbers of oil, gas and coal developers. 

Meantime, the wind and solar industries in Europe are also getting scrutinized. TheWall Street Journal ran a story that says that the chief executives of 10 European utilities have called for an end to subsidies there, saying that those costs are falling on consumers during difficult economic times. 

“Even if many countries are becoming less bullish on renewable subsidies, the increased share of these energies in the energy mix is triggering higher and higher subsidies amounts,” adds Colette Lewiner with CapGemini Consulting. “This is becoming a burden for heavily indebted countries, and the higher electricity prices paid by consumers are damaging their standard of living already threatened by economic crisis.”??

Flip Side

In a review of the literature released by the U.S. Energy Information Administration, the more traditional forms of energy -- coal, natural gas and nuclear -- have received their respective cuts of federal ‘pork.’ According to the White House Office of Management and Budget, oil and gas companies are to get $46 billion in subsidies during the next 10 years. 

In 2007, the renewable sector got more than any other energy classification at nearly $5 billion. But when added together, those others topped that amount by well over $1 billion. By contrast, 10 years earlier, coal, natural gas and nuclear got about $3 billion in federal subsidies. Renewables received half that amount. For the record, total payouts for all energy forms equalled about $16.5 billion in 2007 and about $8.2 billion in 1997.

The renewable sector says that, generally, production costs have dropped 80 percent in 20 years. To do better would require a more proactive government and more certain policies, it adds. The energy information unit, in fact, said that development would jump if tax credits are extended and expanded.

The production tax credit, which gives a 2.1 cent credit for each kilowatt-hour of power generated by some green facilities for the first 10 years of operation, has been allowed to expire three times in the last decade. The stimulus program extended these benefits for wind projects that begin construction before 2014. It goes further, though, than previous efforts by allowing investment tax credits or cash grants in lieu of such tax benefits.

In fact, much of the growth so far in the renewable energy sector is because of government-sponsored tax breaks and state renewable mandates. But that's exactly how to foster technologies that are in their infancy. The goal is to bring down those costs so that they can compete with more traditional fuels without the public’s help. Moreover, until banks and other lenders get it together, many economic analysts say that the federal government must step up.??

“Oil and gas subsidies are costly to the American taxpayer and do little to incentivize production or reduce energy prices,” says President Obama’s corporate tax reform plan. “Repealing fossil fuel tax preferences helps eliminate market distortions, strengthening incentives for investments in clean, renewable, and more energy efficient technologies.”

It’s no secret that renewable energy requires a helping hand, the merits of which should be debated in the public realm. But the groups pounding the drums should be underscoring the amount of assistance that they are also receiving. The public trough is only so big and each side should be better rationed.

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