Economics, Energy and the Environment

Energy Fact of the Week: Solar Subsidies Are Off the Charts

Back in February I reviewed the Department of Energy’s data on energy subsidies here, noting that “renewables” (wind, solar, biomass, Gilligan’s bicycle, etc) received vastly larger subsidies per unit of energy produced than fossil fuels. A few critics threw a penalty flag because I was using the DOE’s 2007 data, and by golly things have changed since then. Why yes, they have: the subsidies have doubled, according to a brand new report from DOE that looks at energy subsidies in 2010.

Total energy subsidies increased from $17.9 billion to $37.2 billion, an increase of 108 percent over the three-year period. Of the increase, 77 percent was due to the infamous stimulus. And the lion’s share of the increase went to renewables, from $5.1 billion to $14.7 billion.

For some strange reason, though, this DOE report does not break out the amount of subsidy per unit of energy created, as the report on the 2007 data did. DOE does acknowledge that “Relative to their share of total electricity generation, renewables received a large share of direct federal subsidies and support in FY 2010. For example, renewable fuels accounted for 10.3 percent of total generation, while they received 55.3 percent of federal subsidies and support.” (This actually understates the amount of subsidy for wind and solar, as the largest output of “renewable” electricity is from hydropower, which receives negligible subsidy; if hydropower is stripped out, the renewable subsidies will appear even more out of whack.)

Our friends at the Institute for Energy Research decided to reconstruct the subsidy-per-unit of energy relationship using data from the DOE’s Month Energy Review, and the results are displayed in the figure below. As you can see, the subsidy for solar electricity ($775 per megawatt-hour) is so large it can’t be displayed on the chart in the same scale as other sources, or the others would disappear to near oblivion. Keep this in mind the next time you hear someone say that Solyndra failed because we don’t subsidize solar power enough.

2 thoughts on “Energy Fact of the Week: Solar Subsidies Are Off the Charts

  1. Providing subsidies for alternate energy is perhaps a good thing, but it also drives the cost of equipment for this energy to rise due to supply and demand. When the government gives a tax break for installing a solar power system then the manufacturers and retailers of these will see that a huge increase in demand is coming so they will raise the cost to the consumer. Solar power and other alternative energy systems are extremely important and are not being utilized in our economy enough. I do thank you for the information you provided showing the subsidies for this and do agree that more importance needs to be pushed towards this energy.
    Thanks

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