The View From 1776

Questionable Energy Economics

      http://www.thomasbrewton.com/index.php/weblog/questionable_energy_economics/

President Obama says repeatedly in his stump speeches that government “investment” in green energy is a way to create large numbers of new jobs and as a way to reach energy independence.  Neither assertion is true.  Moreover, green energy is extraordinarily inefficient, a bottomless pit for taxpayers’ money.


Rather than creating new jobs in the United States, the Obama administration is wasting millions of dollars on failed or ineffective green energy companies, some of which are creating more jobs, via imports, in China than here.  This in the face of super-abundant quantities of natural gas, the cleanest and most cost effective fuel for production of electricity.

These quotes from The Energy Subsidy Tally, an op-ed piece in the Wall Street Journal, tell the tale of government’s feckless extravagance:

President Obama traveled to Iowa Tuesday and touted wind energy subsidies as the path to economic recovery. Then he attacked Mitt Romney as a tool of the oil and gas industry. “So my attitude is let’s stop giving taxpayer subsidies to oil companies that don’t need them, and let’s invest in clean energy that will put people back to work right here in Iowa,” he said. “That’s a choice in this election.”

The facts come in a 2011 report from Mr. Obama’s own Department of Energy. The report—“Direct Federal Financial Interventions and Subsidies in Energy in Fiscal Year 2010”—identifies $37.16 billion in federal subsidies. These include special tax breaks, loans and loan guarantees, research and development, home heating assistance, conservation programs, and so on.

...The natural gas and oil industry received $2.8 billion in total subsidies, not the $4 billion Mr. Obama claims on the campaign trail, and $654 million for electric power. The biggest winner was wind, with $5 billion. Between 2007 and 2010, total energy subsidies rose 108%, but solar’s subsidies increased six-fold and wind’s were up 10-fold.

...The folks at the Institute for Energy Research used the Energy Department data to calculate a subsidy per unit of electricity produced. Per megawatt hour, natural gas, oil and coal received 64 cents, hydropower 82 cents, nuclear $3.14, wind $56.29 and solar a whopping $775.64.

So for every tax dollar that goes to coal, oil and natural gas, wind gets $88 and solar $1,212. After all the hype and dollars, in 2010 wind and solar combined for 2.3% of electric generation—2.3% for wind and 0% and a rounding error for solar. Renewables contributed 10.3% overall, though 6.2% is hydro. Some “investment.”

Zooming out for all energy, the Congressional Research Service did its own analysis of tax incentives last year. It found that in 2009 fossil fuels accounted for 78% of U.S. energy production but received only 12.6% of tax incentives. Renewables accounted for 11% of energy production but received 77% of the tax subsidies—and that understates the figure because it leaves out direct spending.

By the way, these subsidy comparisons don’t consider that the coal, oil, and natural gas industries paid more than $10 billion of taxes in 2009. Wind and solar are net drains on the Treasury.