EIA Study: Clean Power Production Soaring, Policy Costs Falling

Posted By Lowell F. on July 31st, 2011

The Checks and Balances Project has obtained and posted the controversial new study by the U.S. Energy Information Administration (EIA), “Direct Federal Financial Interventions and Subsidies in Energy in Fiscal Year 2010.” According to Brendan DeMelle of DeSmogBlog, even the acting Administrator of EIA, Howard Gruenspecht, reportedly called the report “garbage” and “reminded staffers within earshot that the EIA was a government agency that was supposed to do impartial analysis, ‘not provide talking points to members of Congress.’”

Having worked at EIA for more than 17 years, including as a senior economist, I can attest to the integrity of the people who work there, as well as to the value placed on EIA’s independence by its management.  It is with that perspective in mind that I looked through this report.  In doing so, I was struck by several things.

First, EIA was very clear where the request for this report came from — three members of Congress, all of whom have received significant donations over the years from the oil and gas and fossil-fuel-fired electric power industries. In addition, all three of these representatives clearly have pro-fossil-fuel agendas, as you can see from Project Vote Smart’s issue ratings. For instance, Rep. Bartlett and Rep. Chaffetz each received an abysmal, 10% rating from the League of Conservation Voters in 2010, while Rep. Blackburn actually received a zero rating. Clearly, these representatives are no friends of clean energy.

Second, EIA was direct that the way the Congressional inquiry was formulated specifically excluded a number of important government handouts to dirty energy — accelerated depreciation schedules, tax deductions, limits to liability, etc.  The report didn’t even touch the vast amounts of permanent, serious damage to public property and health (“externalities”) caused by  the fossil fuel industries. Including these factors would have made an enormous difference in this study, but EIA was specifically not allowed to consider them.

Third, even with all the restrictions placed on EIA by the three fossil-fuel-friendly representatives, if you closely examine this report, it actually comes out quite well for the major “renewables” — wind, solar, and geothermal.

Take a look at Table ES2 (“Quantified energy-specific subsidies and support by type, FY 2010 and FY 2007) in the EIA report: “renewables” received about $8.5 billion in non-ARRA (one-time-only economic “stimulus” money) “quantified energy-specific subsidies” in 2010. Of that total, however, about $7.6 billion went to biomass or biofuels (e.g, corn ethanol for use as a transportation fuel). As a result, only about $525 million of non-ARRA-related subsidies in 2010 went to solar ($346 million), wind ($134 million) and geothermal ($45 million).

To put this into perspective: The nation’s top counter of government handouts to energy industries is arguably Doug Koplow. In 2003, Koplow carried out what is still the most definitive inventory. At the time, 8 years ago, Koplow found that traditional energy sources were given a $52.3-billion-a-year check from the federal government.

Also important to note: non-”stimulus” (alternately, we can call them “business as usual”) subsidies for wind, solar and geothermal in 2010 were down about $140 million from 2007, when approximately $669 million in subsidies went to solar ($179 million),wind ($476 million) and geothermal ($14 million).

Now, perhaps the most important finding from a clean energy perspective: While business-as-usual subsidies for solar, wind, and geothermal were falling sharply between 2007 and 2010, production of solar, wind, and geothermal power was simultaneously rising sharply. For instance, wind power generation nearly tripled, from 34,450 thousand megawatt hours in 2007, to 96,647 thousand megawatt hours in 2010. Also, solar power output more than doubled during that same time period, from 612 thousand megawatt hours in 2007 to 1,299 thousand megawatt hours in 2010.

The result of these two opposing trends between 2007 and 2010 — soaring clean energy production and lower business-as-usual (e.g., not one-time, “stimulus”-related money) subsidies — means that ongoing subsidies per unit of clean power produced declined sharply during this time period.

For instance, in 2007, wind power received federal subsidies, as defined in this report, of approximately 1.4 cents per kilowatthour.  In 2010, this figure (again, excluding ARRA money) fell to just 0.14 cents per kilowatthour, a decline of 90%. Solar power subsidies per unit of output also fell during that time period, by about 9%. Overall, clean power (defined as wind, solar and geothermal) subsidies per unit of output fell by a whopping 66% between 2007 and 2010.

Finally, putting these numbers into perspective with other fuels, wind power subsidies per unit of output in 2010 were only about half those given to natural gas and petroleum liquids, and also about half those doled out to nuclear power.  Coal’s ratio of subsidies to power generated was lower than for any of these, but that figure is skewed heavily by several factors, such as that coal is a mature industry that has been receiving subsidies for about a century now (in contrast, renewables are just starting to take off, even without a “level playing field”). In addition, there is absolutely no incorporation of health and environmental costs, or any other “externalities” into calculations of coal’s cost, even though “externalities” are elephant in the room.  As a recent Harvard study found, these externalities are on the order of $500 billion per year, in the United States alone. Add that number into your calculations, and then see how much government is explicitly and implicitly supporting coal – and other fossil fuels – in this country.

The bottom line: Production of clean energy over the past few years has been soaring, albeit beginning from a low baseline, as befits what is essentially a nascent industry. At the same time, business-as-usual subsidies for these energy sources have been falling. Meanwhile, fossil fuels continue to be heavily underwritten, despite having been on the government dole for about a century now, and despite the tremendous damage these fuels have done to our country’s environment, economy and national security.  

Unfortunately, the EIA study did not look at any of those things. Why not? Because three members of Congress wanted to force EIA into putting its credibility behind a propaganda exercise. The careful reader will see that EIA was able to avoid doing that, though I doubt the three members of Congress who asked for it will let the report’s inconvenient details get in their way. As for a study looking at the full range of corporate welfare, as well as externalities? That’s a study that more enlightened members of Congress might want to request EIA, or another federal agency, to carry out in the near future.

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