Do We Still Need Renewable Energy Subsidies?

Jason Lomberg, North American Editor, PSD



Earlier this year, President Trump’s budget proposal toyed with the notion of draconian cuts to renewable energy subsidies and R&D. And while the $1.3 trillion spending bill ultimately passed without the proposed reductions, the episode reignited the energy subsidy debate. To wit – yay or nay?

On the one hand, we’ve seen tremendous renewable energy gains in this country. The U.S. leads the world in wind energy production. And while U.S. solar is getting trounced globally, we’ve made incredible progress. Solar panel installation is booming, though Trump’s tariffs on imported solar panels and modules threatens to upend the entire industry.

While Trump’s original budget proposed shrinking the DOE's Office of Energy Efficiency and Renewable Energy by 65%, the final omnibus spending package increases that office's budget by 14 percent to $2.32 billion.

We’re definitely throwing a lot of cash at renewable energy. But are government subsidies necessary? If you buy into the imminent threat of anthropogenic global warming, then subsidies for renewable energy is a moral imperative. But strictly from a market perspective, the answer is far from certain.

The University of Texas estimated that U.S. energy subsidies per megawatt hour in 2019 would be dramatically higher for alternative energy -- $0.5 for coal, $1- $2 for oil and natural gas, $15- $57 for wind and $43- $320 for solar.

The conventional belief says that subsidies bring down the cost curve for wind and solar. Some would take it a step further – that pollution from fossil fuels caused nearly 7,000 deaths over a 10-year period, according to a Berkeley National Lab researcher.

Meanwhile, studies from the International Energy Agency claim that fossil fuel subsidies are actually 10x higher globally than renewable energy grants.

Chris Edwards from the aptly-titled site Downsizing the Federal Government feels differently. From the outset, he claims, subsidies “can steer … private resources in the wrong direction, away from the most efficient energy solutions.”

Writing for The Hill, Ryan M. Yonk, Ph.D., and Jordan Lofthouse note that “renewables … don't produce consistent baseload power like fossil fuels. Wind and solar power, two of the most heavily subsidized energy sources, are also two of the most unreliable.”

And “without constant taxpayer support,” they claim, “many renewable energy industries cannot survive.”

Critics also point to the numerous renewable energy boondoggles like Solyndra, Abound Solar, and countless other failed investments.

Even Warren Buffet, one of the biggest fans of subsidies, admits that renewable energy can’t survive on the open market. “On wind energy, we get a tax credit if we build a lot of wind farms,” Buffet said back in 2014. “That's the only reason to build them. They don't make sense without the tax credit."

But again, the economics of renewable energy are nigh irrelevant if your top concern is stopping climate change. Can’t put a price on saving the environment (though renewable energy providers certainly do). And it’s completely possible that renewable energy will one day compete with fossil fuels independent of federal outlays.

What do you think? Let us know online! Do we still need renewable energy subsidies? Or can (or should) renewable energy compete on equal footing on the open market?