You get what you pay for


At first glance, the LA Times’ most recent solar power expose looks like perfect fodder for the drumbeat argument from many GOP lawmakers to end federal subsidies for renewable energy projects. Big corporations building utility-scale solar in California, it points out, have been receiving huge direct and indirect payouts from the federal government, from loans to tax credits to “cheap” federal land upon which to build, and some are making huge profits. Not only that, it goes on, but California ratepayers could shell out 10 to 50 percent more for power under the state’s aggressive renewable energy approach.

"What's happening in California is a tragedy, on every front," San Diego-based electrical engineer and power plant consultant Bill Powers told the Times. "It's a huge waste of money…. I see a lot of this as just an old fashioned rip-off."

If indeed companies are making bank, why should we be paying them? Are we just padding corporate profits at the expense of regular Joes? Could they do it without the infusion of government cash? It’s possible and even likely that the answer is yes in some cases. But the bigger picture is more complex and nuanced.

For an example, look at what’s going on with the Production Tax Credit, which provides wind developers a 2.2-cent credit against their tax burden for each kilowatt-hour of energy they produce, keeping electricity rates low and encouraging development of new projects. The credit might not sound like much, but its existence is closely tied to how well the industry does in the U.S. Every time the credit threatens to sunset – as it has repeatedly done in the past and is again this December -- new investment in wind farms dries up. As 47 House Republicans called this month for the PTC to be allowed to die (sub required) – pointing to the Solyndra debacle for justification and arguing in a letter that, "Twenty years of subsidizing wind is more than enough" – hundreds of workers had been or were being laid off from major wind turbine manufacturers operating in the U.S., such as Siemens and Vestas. If you look at the American Wind Energy Association’s fact sheet for the PTC, you’ll see why: The trade group is forecasting a 100 percent drop in the amount of new wind power installed next year.

The math is simple: If no wind power is being installed, then nobody’s ordering turbines, and if nobody’s ordering turbines, then the workers who make their living building them are SOL (pardon my acronymed French).

As Joshua Green put it so astutely in his 2009 Atlantic article exploring why the U.S. has been so far behind the rest of the world on clean tech:

Plotted on a graph, the history of clean-energy production in the United States resembles the blade of a saw, rising and falling each time subsidies came and went. (In contrast) Japan, Germany, Spain, and Denmark show smooth, upward-sloping yield curves, a reflection of consistent government policy.

That consistency is important, and is often blatantly ignored in debates about whether fossil fuels or renewable energy receive better support from the feds. A recent post on The Scribe, an investigative branch of a news blog from the conservative Heritage Foundation, for example, gleefully trots out what it calls a “devastating chart” from the Congressional Budget Office to debunk “the myth that oil companies uniquely or excessively benefit from the tax code.” The Scribe rightly points out that renewable energy has, in terms of energy-specific federal tax incentives, been much better supported than fossil fuels since 2008. Indeed, the CBO found that thanks to temporary massive bumps from the stimulus act, as well as Obama’s other renewable energy programs, renewable energy, conservation and efficiency initiatives accounted for a whopping 78 percent of federal tax incentives for energy in 2011.

But that same Congressional Budget Office report clearly shows that that disparity is a recent development, and unless something changes, it’s not likely to last. From 1916 to 2005, the CBO says, U.S. energy subsidies in the form of tax breaks were primarily used to boost domestic oil and gas production. Up until 2007, in fact, fossil fuels were typically the beneficiaries of two thirds of relevant tax incentives, amounting to billions of dollars per year. And unlike the major recent tax breaks and incentives for renewables – most of which will have expired by the end of next year – those that benefit fossil fuels are permanent and thus offer the industry consistency and certainty that helps it grow and thrive.

In fact, reports the Associated Press, the shale gas revolution currently raging across the country might not have been possible without significant (and consistent) government support:

Over three decades, from the shale fields of Texas and Wyoming to the Marcellus in the Northeast, the federal government contributed more than $100 million in research to develop fracking, and billions more in tax breaks.

Now, those (in industry who helped pioneer hydraulic fracturing) say their own effort shows that the government should back research into future sources of energy – for decades, if need be – to promote breakthroughs. For all its success now, many people in the oil and gas industry itself once thought shale gas was a waste of time. "There's no point in mincing words. Some people thought it was stupid," said Dan Steward, a geologist who began working with the Texas natural gas firm Mitchell Energy in 1981.

In the end, the spat about who gets more incentives and what is financially sustainable is, perhaps, irrelevant, and misses the point. The implicit assumption in such discussions often seems to be that the direct expense of energy is ultimately the most important factor to consider – that, if renewable energy does require more support than fossil fuels to remain financially solvent in both the short and long term, then it may not the best way to invest public resources and in fact, may be wasteful. But that accounting ignores the impact of fossil-fuel-derived energy on our quality of life – from the ravages of climate change to urban kids who get asthma from smog – not to mention on the landscape. As the CBO writes, “Without government intervention, households and businesses do not have a financial incentive to take into account the environmental damage or other costs to the nation associated with their choices about energy production and consumption.”

A better world seems like something worth paying for, and paying for consistently, doesn’t it?

Sarah Gilman is the associate editor at High Country News

Image of a concentrating solar plant courtesy Flickr user Green MPs.

C Sinjin Eberle
C Sinjin Eberle Subscriber
Sep 26, 2012 06:57 AM
Hi Sarah -

Good article with lots of solid information and research. I think that we as consumers are the ones ultimately responsible for driving the choice. Unfortunately, with much of the push for solar and wind being from utility scale efforts, the massive investment in making this transition is out of most people's hands, and they don't feel all that empowered to make that choice, since it's so big. In Denver, Xcel had the WindSource program, which a family could pay a little bit each month to 'get their power' from the budding wind farms on the front range - a few years ago, when natural gas prices went up, our bill was actually lower since we had pledged to get 100% of our power from the program. I think it has since returned to being about even, but knowing that we have been supporting, through direct action of my dollars, the development of renewable energy for years is a good thing.

But in reality, the best transition that we can take is to make real efforts to de-centralize our system. These big utility scale [TECHNOLOGY XX] plants are the problem, and take the power out of the citizen's hands. Unfortunately, it almost takes building a new house to encourage this kind of thinking in any cost effective sort of way.

We also should not kid ourselves about the damage to habitat of any utility scale anything - conservationists have this love fest going about big solar and wind projects, but transmission lines, roads, and facilities still chop up valuable habitat. There is no such thing as a free lunch.

We are starting the process of designing and building a new house in southwestern Colorado - it will be grid-tied, but designed to be passive, and energy positive. We can all do our part in some small way to transition the 'power' (so to speak) out of the fat cats hands and back to the people - but only if we are proactive and diligent enough to push it.
Sarah Gilman
Sarah Gilman Subscriber
Sep 26, 2012 09:30 AM
Hi Sinjin--
Thanks for the thoughtful and informative comment. I think there is definitely a discussion to be had about which kinds approaches the government should incentivize within the broad category of renewable energy. Unfortunately, distributed generation often gets short shrift because it's not profitable for big utilities, so they lobby aggressively against things like feed-in-tariff to push consumers to build smaller generators of their own. I hope you've read Judith Lewis Mernit's excellent coverage of the big solar battle? Here's one of hers relevant to the DG discussion:
Sep 26, 2012 01:55 PM
With all due respect Sarah, you completely missed the point of the LA Times article. Bill Powers is a well respected energy expert at the forefront of distributed generation advocacy. He's the architect of the San Diego County Smart Energy and Bay Area Smart Energy Plans -- meticulously detailed energy roadmaps that are helping to move these heavily populated urban centers to 80-90% renewables cost-effectively. Bill is also an expert witness working tirelessly against numerous dirty energy projects.
The real point to be understood from the LA Times article is that engaging in the same old energy boondoggles that have characterized US energy policy for a century will not, in and of itself, create a better world. Throwing billions of taxpayer dollars and sacrificing millions more acres of public lands in the Mojave and Sonoran Deserts for remote, industrial solar will serve to enrich the same dirty energy investors (including BP, Chevron, Goldman Sachs and JP Morgan) and unnecessarily increase the environmental, political and financial cost of “clean” (but certainly not green) energy for us all.
Bill Powers and those of us at Solar Done Right and the Renewable Communities Alliance are advocating for distributed generation incentivized by equitable feed-in tariffs. It’s a whole new energy model that has the potential to stabilize renewable energy markets, diversify and move energy generation into the built environment where it belongs, and renew whole communities, not just the same old energy monopoly tycoons who have so carelessly wrecked the planet. We can and must do renewable energy right and that means not replicating our costly and destructive old energy model.

Ceal Smith
Founder, Renewable Communities Alliance
Co-founder, Solar Done Right
Sarah Gilman
Sarah Gilman Subscriber
Sep 26, 2012 02:17 PM
Hi Ceal--thanks for the comment. To defend myself and HCN, it's important that you know we're well aware of who Bill Powers is, and that we respect him greatly. He's appeared more than once in our pages, specifically in contributing editor Judith Lewis Mernit's work, most of which I've edited. I agree with you that the LA Times article had a subtext about whether subsidizing big solar was the right thing to do (however, it didn't really touch DG points you raise), but it also provided an excellent opportunity to talk about what sorts of energy the US has chosen to subsidize, and how renewable and fossil fuels shake out against each other, so that's what I chose to write about. We have already addressed the distributed generation points you raise extensively in our print coverage of the topic (see also about Mojave solar and about LADWP's Green Path North transmission line), including that linked to in my response to SinJin. The message here -- that you get what you pay for -- is meant to apply to all renewable subsidies, not just those that incentivize big plants. Interestingly, most things I've read suggest that a carbon/impact tax on various forms of energy would be the best way to incentivize a transformation in our electrical infrastructure, but since that's politically untenable, direct and indirect energy subsidies are the next best thing. Feed-in-tariffs would be an incredible boon. Let's hope we get them.
Oct 03, 2012 05:52 PM
While it was obviously not clear to those unfamiliar with the massive solar boondoggle occurring in southern CA, the LA times article is really about crony capitalism, as Bill explains.....