Let Renewables Compete Fair & Square? You Bet!

I frequently find myself challenged by people who want to know, “When will solar and renewable energy be able to compete on their own?” The implication of course is that the renewable energy industry is artificially propped up by unusually large public subsidies.

My favorite response is to issue a challenge of my own: “Name one source of energy that doesn’t receive a subsidy.” Here’s a hint: it’s an impossible task. The reality is that every conventional source of energy—coal, oil, and natural gas—enjoys massive government subsidies that ‘artificially’ support their markets.

You don’t have to take my word for it. A recent article in the FT reports that conventional energy sources benefit every year from $550 billion annually in taxpayer and consumer funded benefits. And no, that total does not include the massive additional subsidies offered to nuclear power.

Add up all the subsidies offered to wind and solar and I’ll bet they don’t approach even 1% of those used by conventional fuels and nuclear combined. So the next time someone tells you renewables need to compete fair and square, tell them you agree. Let’s level the playing field and eliminate all energy subsidies!

The political reality is that we're never going to get rid of subsidies. Energy, GDP, and national security are so closely intertwined that governments will always have an interest in regulating and incentivizing the energy industry. The real debate is not whether we should have subsidies. Instead, we should examine where we apply subsidies and what market outcomes we hope to shape as a result.

Comments

[ECD Fan]

But dear Mr. Harris:

According to my back-of-the-envelope calculation, the annual world energy consumption is about 1.5 * (10^14) kWh. So those $550 billion "subsidies" are actually less than half a cent per kWh. How much is Recurrent getting from Spain per kWh as a "subsidy?" No wonder Spain is reconsidering.

[Joe Garma]

Fossil fuel-based energy generation benefits far more then just subsidies in that their prices to not incorporate what economists term "externalities", such as pollution, or war for that matter.

If such energy product was priced (taxed) at a rate sufficient to clean up the pollution created from consuming such product, alternatives such as solar would been at price parity a long time ago.