Saturday, June 02, 2012

Renewable Energy Receives 82X More in Tax Preferences Than Fossil Fuels, Adjusted for Output


2011Tax Preferences Production (quadrillion BTUs)Preferences per
Quadrillion  BTUs
Renewables$12.9B7.52$1,715,425,532
Fossil Fuels$1.7B81.08$20,966,946

Renewable/Fossil FuelsFossil Fuels/RenewablesRenewables/Fossil Fuels
Ratio7.610.881.8

The table above displays: 

a) The tax preferences in 2011 that went to renewables ($12.9 billion) and fossil fuels ($1.7 billion), for a ratio of 7.6:1 in favor of renewables over fossil fuels, data here;

b) 2011 production levels for renewables (7.52 quadrillion BTUs) and fossil fuels (81.08 quadrillion BTUs), for a ratio of 10.8:1 in favor of fossil fuels over renewalbes (data here); and 

c) Tax preferences per quadrillion BTUs for renewables ($1.7 billion) and fossil fuels (about $21 million), for a ratio of almost 82:1 in favor of renewables over fossil fuels.

And what kind of return have taxpayers gotten for their coerced investment in the renewable energy sector over the last few years, e.g. in terms of business success, industry profits, and job creation?  Not a very good return, and not very many jobs.  In fact, it's likely a pretty negative return.  As my AEI colleague Marc Thiessen reported in the Washington Post last week:

"Since taking office, Obama has invested billions of taxpayer dollars in private businesses [mostly in renewable energy companies], including as part of his stimulus spending bill. Many of those investments have turned out to be unmitigated disasters — leaving in their wake bankruptcies, layoffs, criminal investigations and taxpayers on the hook for billions."

And the Washington Examiner reported last week that "The wind industry has actually lost about 10,000 jobs since 2009." 

The White House here lists five reasons to repeal tax subsidies for oil companies, and some of those might be valid reasons.  But that brings up the question: Why is the government providing forcing taxpayers to provide subsidies to private energy companies in the first place?  And if the outrage for forcing taxpayers to subsidize successful, job-creating oil companies that provide more than one-third of our energy is justified, where is the outrage for forcing taxpayers to subsidize unprofitable, renewable solar and wind companies with weak job creation, at 82 times the production-adjusted level of oil companies? 

As I reported recently on CD, even the government's own forecast estimates that the renewable share of total energy demand will increase from about 7% currently to less than 11% even by 2035, while fossil fuel sources will still contribute more than three-quarters of our energy (77%) in 2035.  Even massive taxpayer subsidies won't change the economic and scientific reality that hydrocarbon energy will fuel America's economy for many generations to come.       

Update: See related analysis from my AEI colleague Steve Hayward last September on the Enterprise Blog (federal electric subsidies per unit of production).

51 Comments:

At 6/02/2012 10:32 PM, Blogger PeakTrader said...

"Where is the outrage for forcing taxpayers to subsidize unprofitable, renewable solar and wind companies with weak job creation, at 82 times the production-adjusted level of oil companies?"

Many people assume others are paying for it, and when they realize they're also paying, the outrage is directed at the oil companies.

 
At 6/03/2012 8:10 AM, Blogger Rufus II said...

California Generated 17.67% of its Electricity from Renewables, Yesterday

 
At 6/03/2012 8:11 AM, Blogger Rufus II said...

And, that Does Not include Large Hydro.

 
At 6/03/2012 8:32 AM, Blogger PeakTrader said...

Here are some comparisons between Arizona and California (and, of course, California has huge budget deficits):

Arizona - California

Commercial Power (Cents/KwH) 8.86 12.79

Industrial Power (Cents/KwH) 6.01 10.66

Individual Income Tax (Highest Bracket) 4.54% 9.30%

Corporate Income Tax 6.97% 8.84%

State Sales Tax 6.6% 8.25%

 
At 6/03/2012 8:34 AM, Blogger PeakTrader said...

http://www.locateinarizona.com/az-vs-ca.php#overview

 
At 6/03/2012 8:39 AM, Blogger Rufus II said...

Of course, California is a donor state (they get back about $0.78 for every $1.00 paid to the Federal gummint,) whereas Az is a "Recipient" State.

That said,

Wind Power is so bad that TXU Energy (the largest retail electricity provider in Tx) is giving Electricity away from 10:00 PM to 06:00 AM.

 
At 6/03/2012 8:48 AM, Blogger Jon Murphy said...

All due respect, Rufus, that argument's a non sequitur.

AZ, CA, TX have large areas where wind and solar power can be easily collected. Conversely, CO, NH, MA, VT do not. Saying "you're wrong because it works in CA" is like saying "MA's economy benefits greatly from fishing, so it would work for Colorado, too." The situations are different. That's why national policies rarely work. Cultures, terrains, climates differ from state to state.

 
At 6/03/2012 8:48 AM, Blogger Jon Murphy said...

This comment has been removed by the author.

 
At 6/03/2012 8:50 AM, Blogger PeakTrader said...

Retail Price of Electricity between States (excludes taxes and budget deficits):

http://www.electricchoice.com/electricity-prices-by-state.php

 
At 6/03/2012 8:51 AM, Blogger juandos said...

Stupid states pay more for electricity due to renewables programs

 
At 6/03/2012 8:58 AM, Blogger Rufus II said...

With even more due respect, Jon, a few days ago Germany generated approx 190,000 Megawatt Hrs of Electricity from Solar.

Have you checked out the lattitude of Germany?

Colorado? Booming Wind, and Solar Industries. Geothermal to come, I'd imagine.

Mass? Renewables starting to take off there, also.

Vermont? I think they get a higher percentage of their electricity from Renewables than any other State.

Iowa, South Dakota: 20% of Electrity from Wind (not to mention 4 Billion Gallons, or so, of Ethanol/annually.

The list could go on. Of course the fossil fuel companies, and their sock-puppet think tanks don't like it; but that doesn't mean "we" have to stay stupid.

 
At 6/03/2012 8:59 AM, Blogger juandos said...

According to the EIA the average price per kWh is 9.83 cents. California paid 13.01 instead...

 
At 6/03/2012 9:02 AM, Blogger Auntie Ann said...

The ratio of the middle column is inverted in comparison to the other two. It should be: 0.093.

 
At 6/03/2012 9:15 AM, Blogger PeakTrader said...

California's energy policies is one reason why living standards have been falling for the masses.

They're working harder for less, if they have a job.

 
At 6/03/2012 9:17 AM, Blogger Rufus II said...

What about when all those Solar Panels, Geothermal Plants, and Wind Turbines are "paid off," and Nat Gas and Coal are "who knows what price?"

 
At 6/03/2012 9:18 AM, Blogger Mark J. Perry said...

The middle column is supposed to be inverted and the label reflects that: Fossil fuels/renewalbles.

 
At 6/03/2012 9:20 AM, Blogger Rufus II said...

In their latest Dutch Auction California contracted to buy 20 Yrs. of Solar Electricity for $0.09/KWhr.

 
At 6/03/2012 9:25 AM, Blogger PeakTrader said...

Rufus, so, you're willing to lose, for who knows how long, until they pay off?

 
At 6/03/2012 9:31 AM, Blogger Rufus II said...

As I wrote this post: 17.8 GW of solar and 9.2 GW wind, as well as approximately 3 GW of hydropower and 3.5 GW from biogas produced about 60% of the total electricity demand at 1 pm here in Germany.
Source: Clean Technica (http://s.tt/1dg4f)


From an article I was, just now, reading.

 
At 6/03/2012 9:34 AM, Blogger Rufus II said...

Peak, the only thing cheaper than Wind, right now, is nat gas; and, you and I, both, know that these prices for nat gas can't last.

And, the cost of Solar is dropping like a rock. $2.50/watt for installed wind farm is the number that's currently being bandied around the most.

 
At 6/03/2012 9:37 AM, Blogger PeakTrader said...

One way to make renewables pay off is to basically destroy fossil fuels, e.g. raising gasoline prices to European levels.

 
At 6/03/2012 9:41 AM, Blogger Rufus II said...

How do you figure? Ethanol was $1.97/gal on the CBOT yesterday.

 
At 6/03/2012 9:43 AM, Blogger Rufus II said...

By the way, the southernmost major city in Germany, Munich, is 3 Degrees lat. North of Montreal.

 
At 6/03/2012 9:46 AM, Blogger PeakTrader said...

Here's what an electrical and electronic engineer said about solar panels:

"I have worked on power generation programs...Even with your abundant generosity of figures, solar loses out as not being cost effective. Your 20 years of service is far from accurate. Batteries and inverters are only good for four or five years. Basic maintenance of the system is ignored and panel damage is to be expected also.
Most of all, solar panels don’t do well out in the sun and rain. The power generation declines rather rapidly as the solar panels age. I truly believe the solar generated electricity will never prove to be cost effective if solar panels are used."

 
At 6/03/2012 9:54 AM, Blogger Rufus II said...

Your injuneer don't know squat. He's either ignorant or lying. They're taking 30 yr old solar panels down that are still "within factory specs." The rest of his screed was silly, also.

 
At 6/03/2012 10:02 AM, Blogger Buddy R Pacifico said...

Rufus asks:

"
Have you checked out the lattitude of Germany?"


Yes, and solar only provides 3% of Germany's 3% of the country's energy.

Futher, according to a January Der Spiegel article:

"The only thing that's missing at the moment is sunshine. For weeks now, the 1.1 million solar power systems in Germany have generated almost no electricity. The days are short, the weather is bad and the sky is overcast."

It seems to me the best place for solar is hot, sunny climes, where peak elctricity generated from solar arrays supplies energy to air conditioners, during the hottest part of the day.

 
At 6/03/2012 10:08 AM, Blogger Rufus II said...

Yes, and you're not-so-cleverly switching the field from "Electricity" to "Energy."

The trick to renewables is doing what California is accomplishing - building out the "Solar," and "Wind" at the same time.

That gives you Solar on hot summer days, and wind on cold winter nights.

Throw in some Geothermal, Biogas, and Hydro for Baseline, and you're off to the races.

 
At 6/03/2012 10:18 AM, Blogger Jon Murphy said...

Mass? Renewables starting to take off there, also.

No...no it's really not. Outside of the coast line, there are virtually no renewables in Massachusetts.

 
At 6/03/2012 10:22 AM, Blogger Rufus II said...

There's a Mass "outside" the Coast Line?

Who knew?

:)

 
At 6/03/2012 10:28 AM, Blogger Buddy R Pacifico said...

Rufus,

German solar electricy only provides 3% of Germany's power supply.

From the Der Speigel article (did you read it?):

"Solar farm operators and homeowners with solar panels on their roofs collected more than €8 billion ($10.2 billion) in subsidies in 2011, but the electricity they generated made up only about 3 percent of the total power supply, and that at unpredictable times.

 
At 6/03/2012 10:36 AM, Blogger Jon Murphy said...

Rufus-

All those stats you provided on renewables are laudable, but we are still discussing an energy source that is accounts for only about 7% of our current production. The government estimates that will no change much over the next twenty years (assuming no technological breakthroughs, of course).

Look, I'm not arguing against renewables themselves. Personally, I like them. But compared to other alternatives, they are not that great, energy-wise.

As far as a return on investment, what have we gotten for the billions of dollars spent? A marginal gain in percentage produced? Don't you think that money could have been spent elsewhere? What if we took those billions and put it into social programs? Or lowered taxes? Or gave it to the Post Office? Something that would have a better return?

Let's get rid of subsidies to oil and gas and renewables. Let's let these companies stand on their own two feet. Let merit, quality, and use decide where we get our energy from. It will be cheaper for all involved.

 
At 6/03/2012 10:36 AM, Blogger Jon Murphy said...

There's a Mass "outside" the Coast Line?

Who knew?

:)


hahaha true. Most civilized men do not venture there. Dragons are said to roam the Berkshires.

 
At 6/03/2012 10:45 AM, Blogger Rufus II said...

PT, from Reuters

Norbert Allnoch, director of the Institute of the Renewable Energy Industry (IWR) in Muenster, said the 22 gigawatts of solar power per hour fed into the national grid on Saturday met nearly 50 percent of the nation's midday electricity needs.

"Never before anywhere has a country produced as much photovoltaic electricity," Allnoch told Reuters. "Germany came close to the 20 gigawatt (GW) mark a few times in recent weeks. But this was the first time we made it over."

The record-breaking amount of solar power shows one of the world's leading industrial nations was able to meet a third of its electricity needs on a work day, Friday, and nearly half on Saturday when factories and offices were closed.

Government-mandated support for renewables has helped Germany became a world leader in renewable energy and the country gets about 20 percent of its overall annual electricity from those sources.

Germany has nearly as much installed solar power generation capacity as the rest of the world combined and gets about four percent of its overall annual electricity needs from the sun alone. It aims to cut its greenhouse gas emissions by 40 percent from 1990 levels by 2020.


Updated Info from Reuters

 
At 6/03/2012 10:51 AM, Blogger SteveBrooklineMA said...

What is the point of this analysis? Would you measure the profitability of a company based only on its expenses? The Government takes in many times more dollars in tax revenues as a result of fossil fuels than it pays out in tax expenditures. Just the gas tax alone dwarfs fossil fuel tax breaks. The bottom line is that fossil fuels are a cash cow for the government. Can the same be said for solar and wind?

 
At 6/03/2012 10:52 AM, Blogger PeakTrader said...

A 2009 study from RWI Essen of the effects of the Renewable Energy Sources Act concluded that:

Using photovoltaics in emission reduction is 53 times more expensive than the European Union Emission Trading Scheme's market price, while wind power is 4 times more expensive, thereby discouraging other industries from finding more cost-effective methods of reducing emissions.

Although renewable energy subsidies increase retail electricity rates by 3%, they reduce the profits of German electrical utilities by an average of 8%, making them less competitive with other European utilities.

Despite lavish subsidies, Germany's photovoltaic industry is losing its market share to other countries, particularly China and Japan.

It stifles renewable energy innovation by arbitrarily awarding subsidies to different technologies, instead of according to their cost-effectiveness.

 
At 6/03/2012 10:53 AM, Blogger Rufus II said...

Think of it as an "insurance" policy, Jon.

What if a few of us are right about "peak oil," and an impending (a few years) peak in Coal, and Nat Gas Production?

Plus, Wind, at less than $2.00/Watt, installed, and Solar (for "peak" periods,) in the $2.50/Watt range, is cheaper than Nuclear, and Coal now, and with Nat Gas, soon.

 
At 6/03/2012 10:54 AM, Blogger juandos said...

"What about when all those Solar Panels, Geothermal Plants, and Wind Turbines are "paid off," and Nat Gas and Coal are "who knows what price?""...

Isn't that about sametime that they'll have operated past their due date and have to be replaced?

Meanwhile piles of unrecyclable and possibly toxic blades and solar panels are laying around waiting for their own solutions...

 
At 6/03/2012 11:02 AM, Blogger Rufus II said...

Juandos, If I were forced to bet on it, I'd bet that most of the Solar Panels in use, Today, will be generating electricity 75 years from now (actually, it may be more like 200 yrs. We just don't know.)

One thing is for sure; they're degrading very, very slowly - a whole heck of a lot slower than was projected just a few years ago.

As I posted above, they're taking thirty year old panels down that are still within "factory specs."

 
At 6/03/2012 11:38 AM, Blogger juandos said...

"As I posted above, they're taking thirty year old panels down that are still within "factory specs.""...

Yeah those ones in Germany have also lasted that long but guess what?

Those panels started off with less than 15% efficiency and it hasn't gotten any better...

From the Chicago Tribune May 31, 2012: Money meant for wind, solar power loses steam as customers shift from utility giants

ComEd, Ameren supply most of budget for Illinois Power Agency, but as customers switch to other electricity suppliers, support for renewable energy dries up

 
At 6/03/2012 11:52 AM, Blogger Rufus II said...

Another study has confirmed what many in the utility business have known for years: windpower lowers wholesale power prices.

Released this week, the study finds wind generation could reduce wholesale prices by as much as 25 percent in the Midwest, cost-savings are then passed on to consumers, possibly saving as much as $200 per year on the average energy bill.

The research, completed by Synapse Energy Economics, confirms a similar finding from the Illinois Power Agency, which earlier this year announced that renewable energy sources have lowered wholesale power prices in Illinois by approximately $176 million in recent years.

According to a story from RenewablesBiz:


The study, titled “The Potential Rate Effects of Wind Energy and Transmission in the Midwest ISO (MISO) Region,” evaluated the electric power market in the upper Midwest including all or most of North Dakota, South Dakota, Nebraska, Minnesota, Iowa, Wisconsin, Illinois, Indiana, Michigan and parts of Montana, Missouri, Kentucky, and Ohio.

“The Midwest has a lot of wind but you do need transmission to tap into that market,” Fagan added. Currently, about 10 GW of wind are operating in the MISO system.
The benefits of putting more wind onto the grid more than outweigh the costs to build the transmission required, according to the report.


Illinois is Catching Up

 
At 6/03/2012 12:00 PM, Blogger Rufus II said...

The "Politics" in Illinois Are Incredible, aren't they? :)

 
At 6/03/2012 1:56 PM, Blogger juandos said...

" wind generation could reduce wholesale prices by as much as 25 percent in the Midwest"...

Compared to what?

Now that Kenyan Kommie Klown and his EPA Schutzstaffel have hosed both the coal powered electricity plants and the consumers I guess there could be an argument made that wind power could save money...

 
At 6/03/2012 1:57 PM, Blogger juandos said...

"The "Politics" in Illinois Are Incredible, aren't they?"...

No kidding rufus...

You've nailed it...

 
At 6/03/2012 2:55 PM, Blogger Ron H. said...

"California Generated 17.67% of its Electricity from Renewables, Yesterday"

Yaaawwwn...

What's your point - that taxpayers are paying a huge amount for California electricity?

Gotta love the disclaimer in your reference:

"notice. No inference, decision or conclusion should be made based on the information in this report or any series of these reports."

In other words, don't conclude that this information has any practicle use, it's just some pretty colored graphs to look at.

 
At 6/03/2012 3:44 PM, Blogger Ron H. said...

"There's a Mass "outside" the Coast Line?

Who knew?
"

Is this your way of conceding the point?

 
At 6/03/2012 4:28 PM, Blogger Ron H. said...

Rufus, the bottom line question is this:

If wind and solar sources of electricity are cheaper than, or becoming cheaper than conventional sources, why do they require 82X as much subsidy?

I'm with Jon M. on this. Let's remove all subsidies and let the market decide where our electricity comes from.

I understand from your previous comments that you don't believe in markets and allowing people to decide for themselves, but instead trust the benevolence of politicians and bureaucrats who know better than you do what is in your own best interest, but you should really ask yourself some basic questions before going along for the ride and parroting what others have written.

 
At 6/03/2012 6:35 PM, Blogger marmico said...

According to the Congressional Research Service, from 1968 through 2010, estimated revenue losses associated with targeted tax incentives for the oil and gas sector sum to $193.4 constant billion. That's alot of retiring allowances for the Lee Raymond's of the world.

See Table B-3 for the details.

So the feds should spend $10 billion constant dollars per year on renewables for the next 20 years just to catch up to the fossils.

 
At 6/03/2012 8:48 PM, Blogger juandos said...

"According to the Congressional Research Service, from 1968 through 2010, estimated revenue losses associated with targeted tax incentives for the oil and gas sector sum to $193.4 constant billion"...

Ahhh yes, nothing like numbers from the halls of double billing, the CRS...

Well marmico I see one rather large flaw (and I'm sure there are many more) in the CRS sales pitch, the federal government collects more in excise taxes on each gallon of gasoline or diesel than the net profit that's made by the oil companies...

 
At 6/04/2012 7:16 PM, Blogger gadfly said...

@Rufus II

What if a few of us are right about "peak oil," and an impending (a few years) peak in Coal, and Nat Gas Production?

Plus, Wind, at less than $2.00/Watt, installed, and Solar (for "peak" periods,) in the $2.50/Watt range, is cheaper than Nuclear, and Coal now, and with Nat Gas, soon.


Now that it has been established that Oil and Gas are not fossil fuels, we can bury the "peak" theory.

There are numbers being thrown around that new coal and gas plants will produce electricity at $4 per kwh and wind and solar have come down to $7/kwh- which are much lower than today's reality at probably double that number.

Wind and solar generators require backup from hydrocarbon, nuclear or water power stations. Nobody is adding that cost into the faux numbers for renewables. Neither is the there a future cost subtraction from conventional plant costs for expensive and unneeded CO2 technology.

 
At 6/09/2012 11:13 AM, Blogger Numarx said...

Mmm Pizza

 
At 6/09/2012 11:13 AM, Blogger Numarx said...

Mmm Pizza

 

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