Subsidized energy

Wall Street Journal Editorial:

Congress seems ready to spend billions on a new "Manhattan Project" for green energy, or at least the political class really, really likes talking about one. But maybe we should look at what our energy subsidy dollars are buying now.

Some clarity comes from the U.S. Energy Information Administration (EIA), an independent federal agency that tried to quantify government spending on energy production in 2007. The agency reports that the total taxpayer bill was $16.6 billion in direct subsidies, tax breaks, loan guarantees and the like. That's double in real dollars from eight years earlier, as you'd expect given all the money Congress is throwing at "renewables." Even more subsidies are set to pass this year.

An even better way to tell the story is by how much taxpayer money is dispensed per unit of energy, so the costs are standardized. For electricity generation, the EIA concludes that solar energy is subsidized to the tune of $24.34 per megawatt hour, wind $23.37 and "clean coal" $29.81. By contrast, normal coal receives 44 cents, natural gas a mere quarter, hydroelectric about 67 cents and nuclear power $1.59.

The wind and solar lobbies are currently moaning that they don't get their fair share of the subsidy pie. They also argue that subsidies per unit of energy are always higher at an early stage of development, before innovation makes large-scale production possible. But wind and solar have been on the subsidy take for years, and they still account for less than 1% of total net electricity generation. Would it make any difference if the federal subsidy for wind were $50 per megawatt hour, or even $100? Almost certainly not without a technological breakthrough.

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The biggest enemies of growth in the wind and solar markets are the friends of the people who favor the subsidies. Wind has shown the biggest growth and even with its relatively small contribution big wind is already under attack by the environmental movement that is pushing the alternative energy spending. Solar get less attention from the anti energy lobby because its contribution is so infinitesimal. If it were more popular, they would be attacking the by products of the production of the solar cells which some claim is toxic.

Natural gas which gets the least support is a by product of many oil fields. In the early days of the oil business it was burned off in the field before some spotted its value to producing electricity and warming homes. If we were doing more exploration for oil and gas there would be more of this efficient fuel available.

The biggest impediment to a rationale energy policy right now is hatred for all forms of energy production by Democrats and environmentalist.