Some Basic Truths About Energy Subsidies

It’s not unusual to hear people, usually change-resistant defenders of the status quo, putting down renewables as being not economically viable, because they would not be able to compete in the marketplace without the aid of government subsidies. How are these people misinformed? If I may borrow the famous phrase from Elizabeth Barrett Browning, "Let me count the ways."

First of all, it is virtually impossible to break into today’s highly competitive global marketplace unassisted, unless one has developed an entirely new product or service for which there is little or no competition. Otherwise, the 900 pound gorillas (i.e. the existing rulers of that product niche) will simply trample you by virtue of the fact that they have had years to mature their products -- reducing costs and improving reliability along the way. The U.S. government sees it as a critical part of its strategic mission to nurture innovation, which is, or at least was, a major impetus behind the U.S. patent system -- long-hailed as the greatest in the world and one of the key drivers of American dominance in the business world. Producing energy can hardly be considered a totally new product or service, even if it is done in a  new, clean, non-polluting manner that does not require any fuel.

Secondly, there is a common perception that the existing energy delivery system does not receive any subsidies. This is simply not the case. Because governments recognize energy as strategic and essential for our economic survival, not to mention the survival of generous campaign contributors, they provide all kinds of generous subsidies to the energy industry.

According to Philipp Tagwerker at the Worldwatch Institute, citing IEA estimates based on 38 industrial and developing countries, coal, electricity, oil and natural gas consumption subsidies reached $523 billion in 2011. Depending on the method of calculation used, the estimate could range as high as $1.9 trillion. In the U.S., direct government subsidies to energy companies reached $37 billion in 2010, according to EIA, about 11 percent of which went to the wind industry under the stimulus plan.

Finally, there is the fact that the price of both solar- and wind-powered electricity has been dropping radically, to the point where in many localities, including Germany, China, India and Spain, solar is already on the verge of reaching grid parity -- meaning it will hit the market at the whatever the going rate is.

It’s time to debunk that longstanding myth, as we have little time to waste in our quest to convert all of our modern economies to clean, carbon-free sources of energy as soon as possible.

Image credit: BiLK_Thorn: Flickr Creative Commons

RP Siegel, PE, is an inventor, consultant and author. He writes for numerous publications including Justmeans, ThomasNet, Huffington Post, and Energy Viewpoints. He co-wrote the eco-thriller Vapor Trails, the first in a series covering the human side of various sustainability issues including energy, food, and water in an exciting and entertaining romp that is currently being adapted for the big screen. Now available on Kindle.

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