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Solar and Wind Subsidies Are a Clear Success. The Coal and Nuclear Industries Just Aren’t Ready to Admit It.

Friday, May 25, 2018

The coal and nuclear industries criticize subsidies for solar and wind power based on their belief that the subsidies distort the market

However, a closer look shows the coal, natural gas, oil and nuclear sectors enjoy substantial subsidies, and federal outlays for solar investments are decreasing as the price of solar declines. Wind costs have also dropped significantly over the last decade. 

All sources of energy receive subsidies. The question is why continue to throw money at the dying coal and nuclear power industries, whose costs continue to rise despite subsidies.   

Meanwhile, the solar and wind industries saw significant growth only in the last decade. It stands to reason that these sectors would receive taxpayer support – they generate well-paying jobs and reduce pollution.

These technologies also continuously become more efficient, while their prices steadily decline. In fact, according to Lazard, unsubsidized utility-scale wind and solar farms are now cheaper than new coal power plants and are competitive with natural gas power plants.

This month, solar developer John Weaver provided an analysis of a recent Energy Information Administration report, which described 2016 federal direct spending, research and development, and tax expenditures on energy technologies.

Solar power is subsidized by the federal government with the 30 percent investment tax credit, or ITC, Weaver explained. Both large and small solar arrays qualify. The credit is based on the costs of a solar project. He notes that the outlays for this credit have dropped by half since 2013.   

“This speaks specifically to the falling price of solar power as the tax credit is directly based on project costs, and not system sizes,” Weaver said.

According to EIA, just over $1 billion in subsidies leveraged up to $30 billion in investment. Weaver suggests a higher number for subsidies, but, anyway you look at it, the solar ITC in 2016 leveraged much more investment than it cost.

Data from the Federal Energy Regulatory Commission show that since 2009, solar power capacity has multiplied by more than 89 times and wind power capacity has increased sixfold.

New coal and nuclear construction hasn’t seen the same success. The recent foray into new nuclear construction is reminiscent of the old days of construction delays and multi-billion-dollar cost overruns. Of new nuclear plants, one has been cancelled – the other is dependent on ratepayer support to get completed. Only one new nuclear unit has come online in the last 20 years. The new coal plants recently under construction or completed were total boondoggles.

But Congress is still dumping money into these technologies. According to EIA, the total combined tax expenditures for coal and nuclear power for years 2010, 2013 and 2016 were well over $4 billion combined. This doesn’t include the pay-as-you-go subsidy dumped on ratepayers at the state level to essentially force construction of these financially risky projects.

In addition, fossil fuels receive significant subsidies for development, extraction, investment and processing. A collaborative effort by Friends of the Earth, Taxpayers for Common Sense and the R Street Institute, known as the Green Scissors campaign, tracks federal tax expenditures for the energy sector. An analysis by the group concluded that fossil fuels received nearly $11 billion in subsidies in 2016.

The only reason nuclear power became a viable option in the first place was because Congress passed the Price Anderson Act in 1957 to shift the bulk of the costs of a major nuclear accident onto the public. These costs could come close to $1 trillion, according to CNN

By contrast, subsidizing wind and solar investment has yielded very positive results. Any complaints from the fossil fuel and nuclear industries about those subsidies are hypocritical at best.

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