Which Energy Source Receives the Largest Subsidy?

One of the common refrains from those advocating “green” energy is that we need to stop subsidizing coal, oil and natural gas. And while they admit, even advocate for, the existence of subsidies for wind, solar and the like, they imply that if only we got rid of subsidies for oil, those other forms of energy would be more popular.

To see if this argument makes sense, we can turn to the Energy Information Administration’s “Direct Federal Financial Interventions and Subsidies in Energy in Fiscal Year 2010” released in August of this year. The study looks at how much the federal government spends on subsidies in a number of areas, and relates it to the amount of energy produced.

For electricity, when we compare the amount of energy produced and the size of the subsidy, we see that solar receives significantly more per kilowatt hour (kWh) of energy produced. The breakdown looks like this:

Energy Source Subsidy per kwh
Coal $0.0006
Natural Gas and Petroleum Liquids $0.0006
Nuclear $0.0031
Renewables $0.0154
      Biomass Power $0.0020
      Geothermal $0.0125
      Hydroelectric $0.0008
      Solar $0.9680
      Wind $0.0525

Coal receives about 6/100ths of a cent per kWh while solar receives an enormous 96.8 cents per kWh. Wind receives 5.25 cents per kWh and nuclear receives just under 1/3 of a cent per kWh.

Green advocates generally have two responses to this list.

First, they note there are external costs (i.e. carbon emissions) that are not captured here. With a $20/per ton carbon tax, however, the price of coal would go up about 2 cents per kWh and natural gas would increase in price by about 1 cent, far less than even the 5.25 cents subsidy received by wind power and far below the solar subsidy.

Second, they argue that oil requires us to spend money overseas in places like Iraq to protect our supply of oil. Oil, however, is a very small part of electric generation, so it doesn’t factor much in these numbers. This also assumes the United States would largely disengage from the world if we didn’t need oil. That certainly isn’t the case in Afghanistan, Bosnia, Uganda, Europe, Japan, Taiwan and other places where we see humanitarian and strategic interests without oil being involved.

It should be noted that the solar subsidies here, since they are for 2010, do not count the $528 million lost in the Solyndra bankruptcy alone. If that had occurred in 2010, it would have added another 50 percent to the cost of solar subsidies.

Put simply, the failure of solar and other renewables to be price competitive certainly isn’t because the federal government isn’t doing everything it can to prop them up.

Comments (7)

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  1. JerseyBill says:

    Just as your article of 1/16 states; “A fine for not using a biofuel that doesn’t exist”, come a news clip from our know-it-all Washington environmental people that the percentage of gasahol additive must increase by 25% over a short time-span. the same fuel that costs more to produce, REDUCES mpg, MORE harmful to the environment, and results in higher food prices. There certainly is some non-sensical thimking coming from our government,

  2. Robs says:

    Dividing the total subsidies for 2010 for renewables by the renewable production in 2010 is completely meaningless, 2010 subsidies had no effect on the installations producing that power, those subsidies will lead to new installations in 2011-2015 it is those new systems lifetime production that the subsidy should be divided by to determine the actual /kwh scale of the subsidies.

  3. Zac says:

    Back in 2004 I did a meta analysis of 10 different studies into the fossil fuel industry and applied it to other technologies. in the process, attempting to determine how much money they actually received in subsidies. The fact is any study that includes state and local was in the 600+ billion range. 1 study was as high as 1.2 trillion…. Per year. The industry studies would simply change their parameters so they would only include direct moneys not risk on guaranteed loans etc. they would also choose one fossil fuel such as oil or coal but not both. Because of the intense obfuscation of the numbers the studies ranged from 600 million to 1.2 trillion dollars a year in subsidies. The average was about 222.26 billion dollars per year. Given that number the entire country could be solar/wind in 6 years. Since then the balance of system cost (before subsidies) of solar has dropped 30% per year.

    If it was cheaper to go solar in 2004, which it was with natural gas a close second, how could it possibly be more subsidized to the degree shown here? My guess is your taking the solar installations installed and calculating the kwh’s produced so far. Solar has no fuel, it will produce power as long as the sun shines. There are no moving parts. Solar panels installed in the 60s and 70s still are operating today. You must calculate the kwh’s that will be produced since it is not a fuel based system such as coal or nuclear. In that case, your looking at around .06 cents per kwh for the average solar customer. Then .09 cents for the average coal customer. Finally as for subsidies, Solar gets around 150 billion currently as stated by the white house. Fossil fuels gets upwards of 200 billion… minimum.

    Solar= Better bang for the subsidized buck. Hands down.

    Go look at the article you referenced! in most of the tables solar has a lower actual percentage than coal and especially wind.

    This is blatant opinion shaping and in effect lying to the public!

    You should be ashamed.

    • Todd Myers says:

      Zac,

      I don’t know where you get your estimates of cost per kwh since they don’t match any others I’ve seen from the Energy Information Administration or elsewhere. You don’t actually provide any studies, just assertions from studies that are nearly a decade old.

      Second, you claim solar only receives $150 billion in subsidies whereas fossil fuel receives $200 billion. But solar is less than 1 percent (the report lists it as 0%) of the total energy of the country where fossil fuel represents the vast majority. So, per kwh the solar subsidy is massive compared to fossil fuel.

      Finally, are you now going to include the cost of tariffs in the cost of solar? That is an additional tax on those who buy solar. Not only are we subsidizing the purchase of solar panels, we then turn around and tax foreign panels at 30%.

      The system of subsidizing solar panels is entirely political and every independent analysis demonstrates that solar is the most expensive renewable energy source.

      Until you can actually provide a study showing solar is less expensive than fossil fuels, I will assume that your advocacy for solar has something to do with your association with bizsoliel.com.

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