By Robert Bradley Jr.
“Federal grants to support renewable energy accounted for nearly half of total federal energy-related assistance between fiscal years 2016 and 2022. Traditional fuels (coal , natural gas, oil and nuclear) received only 15 percent of total subsidies between FY 2016 and FY 2022, while renewable energy, conservation and end-use get up to 85 percent.” (Mary Hutzler, below)
A fallacious argument in the energy/climate debate is that wind and solar are cheaper than fossil fuels to produce electricity. This must be wrong because government subsidies are central to dilute, intermittent energy sources on the grid. And it To be false if examine federal accounting records (below).
In fact, the relatively small subsidies for oil, natural gas and coal become dramatically negative as the Biden Administration’s anti-fossil fuel agenda is added, 225 valuable actions.
Mary Hutzler of IER (and former director of DOE’s Energy Information Agency) prepared this analysis less than a year ago for Energy Research Institute. “Renewable energy still dominates energy subsidies in FY22” deserves to be amplified in the buildup to the FY 2023 update. Here is Hutzler’s August 9, 2023 post.
The Energy Information Administration (EIA), an independent agency of the U.S. Department of Energy, evaluate the subsidy amount that the federal government provides to energy producers for fiscal years 2016 to 2022, in its report Federal financial intervention and subsidies in energyUpdate previous grant reports.
Federal grants to support renewable energy formed nearly half of total federal energy-related assistance from fiscal years 2016 through 2022. Traditional fuels (coal, natural gas fuel, oil and nuclear) received only 15% of total subsidies from FY 2016 to FY 2022, while renewable energy, conservation and end-use received a whopping 85%.
Renewable energy subsidies doubled from FY 2016 to FY 2022, increasing to $15.6 billion in FY 2022 from $7.4 billion in FY 2016 (both in 2022 dollars). Federal subsidies and incentives to support renewable energy in fiscal year 2022 are nearly five times higher than subsidies for fossil energy, totaling $3.2 billion.
The subsidies in the EIA report do not include state and local subsidies, mandates, or incentives, which in many cases are quite large, especially for renewable energy sources. The EIA also does not include large subsidies authorized in the Inflationary Reduction Act (IRA) since its passage in August 2022. Goldman Sachs estimated costs of that bill is $1.2 trillion.
Source: Energy Information Administration
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Quick Info
- The Energy Information Administration found that subsidies for renewable energy more than doubled from fiscal year 2016 to fiscal year 2022, which preceded the Disinflation Act (the Trump climate bill). Biden) becomes law in 2022 to increase renewable subsidies.
- Coal, oil, natural gas and nuclear received 15 percent of total subsidies in fiscal year 2022, despite providing far greater amounts of energy than renewables — the largest source of subsidies.
- End-use subsidies that help low-income Americans pay their utility bills are the second-largest subsidy category after renewable energy.
- Wind and solar combined accounted for 94% of federal renewable electricity-related subsidies in fiscal year 2022, while producing a total of 5.5% of primary energy.
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Subsidies to energy end users (Low Income Heating Assistance and other similar programs) are the second highest type of subsidy after renewable subsidies. Subsidies to energy end users increased from $7.9 billion in FY 2016 to $8.7 billion in FY 2022. The largest program in this category—the Energy Assistance Program for Low-Income Families (LIHEAP), administered through the U.S. Department of Health and Human Services (HHS)—slightly reduced funding from $4.0 billion in FY 2016 to $3.9 billion in fiscal 2022, with a notable one-year increase to nearly $10.0 billion in fiscal 2021.
In 2021, funding for the Low-Income Home Energy Assistance Program, which helps with energy bills and other energy-related costs, doubled to nearly $10 billion after Congress approved additional funding for the program under the COVID-19 relief plan, resulting in end-use subsidies totaling $14.3 billion in fiscal year 2021. End-use subsidy programs help those at the bottom of the economic ladder pay their rising utility bills, but they don’t help most taxpayers.
Most renewable subsidies are tax incentives, with solar applications accounting for the largest share of those subsidies. In FY 2022, solar subsidies totaling $7.5 billion surpassed biofuel subsidies, the biggest beneficiary of tax incentives in FY 2016, had total subsidies of $3.7 billion, with wind coming in third with total subsidies of $3.6 billion in FY22.
These sources often receive additional support at the state and local level, including a biofuels credit in California of $3.70 a gallon for producing instead of refining. Other benefits in some states include “net metering” for solar, which requires utilities to buy solar energy at retail prices rather than wholesale prices.
Source: Energy Information Administration
Although renewable energy received more than half of federal subsidies in fiscal year 2022, EIA reports that fossil energy in the form of coal, oil, natural gas, and natural gas plant liquids accounted for 79.1 percent of primary energy production in fiscal year 2022. Nuclear power contributed 7.9 percent, followed by biomass at 5.1 percent, wind at 3.7 percent, hydroelectric at 2.3 percent, solar at 1.8 percent, and geothermal at 0.2 percent.
Source: Energy information agency
Federal subsidies and support for renewable energy
Renewable energy (including biofuels) accounted for 53 percent of total energy subsidies in FY 2022–up from 41 percent in FY 2016. In FY 2022, tax expenditures accounted for 98 percent hundred total renewable energy subsidies. Biofuels accounted for 42 percent of total renewable energy subsidies in FY 2022 while renewables used in electricity generation accounted for the remaining 58 percent.
The largest electricity-related federal energy subsidies are for renewables because subsidies for wind and solar each exceed subsidies for coal, natural gas, oil, and nuclear. Wind and solar combined accounted for 94% of federal renewable electricity-related subsidies in fiscal year 2022, while producing a total of 5.5% of primary energy.
Source: Energy Information Administration
The Institute for Energy Research calculated federal subsidies and support per unit of electric generation from information provided in the EIA report on renewable technologies and nuclear energy for fiscal year 2022. Because EIA does not separate electricity-related subsidies for coal, natural gas, and oil from their total subsidies, it is not possible to calculate subsidies per unit of energy produced for these sources of electricity. However, if we assume that all of the coal subsidies calculated by EIA were for electricity generation in FY 2022, the subsidy cost per unit of coal production would be $1.06 for per megawatt hour.
The chart below provides subsidy costs per unit of production for technologies for which EIA provides relevant data. On a per-dollar basis, government policies have resulted in solar generation being subsidized 76 times more than nuclear generation, and wind generation being subsidized nearly 17 times more than nuclear generation on a per-unit basis in fiscal year 2022. Nuclear power is the largest source of carbon-free energy in the United States.
Source: Energy Information Administration
Conclusion
From FY 2016 to FY 2022, most federal subsidies went to renewable energy producers (primarily biofuels, wind, and solar), low-income households, and energy efficiency improvements. From FY 2016 to FY 2022, nearly half (46 percent) of federal energy subsidies were related to renewable energy and 35 percent were related to energy use. Federal support for renewable energy of all types doubled, from $7.4 billion in FY 2016 to $15.6 billion in FY 2022.
From FY 2016 through FY 2022, tax provisions have been the largest source of federal funding. In FY 2016, the federal Income Tax Code (IRC)—with its 31 energy-specific tax provisions—provided more funding for energy than direct spending, including R&D spending. Total tax spending accounted for 70 percent of total federal funding. Since FY 2016, tax spending has continued to increase, rising to more than 75 percent of total federal funding in recent years.
By total dollars and by units produced, solar has the highest federal electricity-related subsidies in fiscal year 2022.
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