With the recent closing of Amonix’s solar manufacturing plant in North Las Vegas, in addition to the bankruptcy of Solyndra and several other government-aided solar companies, tough questions are being asked about renewable energy subsidies – and they should be. These questions concern every taxpayer.
But any debate on energy subsidies had better include oil, natural gas, coal and nuclear – each has received far more subsidies than solar, wind and geothermal combined.
And let us be clear: Neither Solyndra nor Amonix is a "scam." Each produced quality solar panels – but their competitors were able to sell theirs at a lower price. While Solyndra received a $535 million loan guarantee from the Obama administration, Amonix was awarded $15.6 million in grants approved by the Bush administration.
Governments generally subsidize industries – and invest in them – when the industries are developing new and promising technology that is not yet profitable for the private sector. Governments use subsidies as incentives – in the form of tax breaks, regulations and grants – for research and development. Jet aircraft, telecommunications, computers, the Internet and many major medical breakthroughs were all subsidized in their early stages. It can be risky. But despite Solyndra, the default rates on clean energy loan guarantees have so far been far less than the Department of Energy originally forecast.
The bigger problem, in my view, occurs when mature, highly profitable industries continue to receive heavy taxpayer subsidies. From 2002 to 2008, according to the nonpartisan Environmental Law Institute, $72 billion in subsidies went to fossil fuels, while $12 billion went to non-polluting renewables – and that includes hydropower, which is not a new technology.
– The U.S. government offered enormous tax incentives, financing and government help to promote oil and natural gas exploration in the United States, Middle East and elsewhere after World War II. The investments were a fantastic success – but they have continued to the present day at between $3.5 billion and $4.3 billion per year, while these companies have become the most profitable and powerful on the planet. Roger Bezdek, a long-time energy CEO, economics professor and former research director for the Department of Energy, analyzed U.S. energy subsidies from 1950 to 2010. He estimates that oil received $369 billion in inflation-adjusted subsidies, natural gas got $121 billion and coal got $104 billion.
These figures do not include billions of dollars spent every year to keep the Persian Gulf open and global oil prices stable. This may be smart foreign policy, but it costs billions of dollars every year -paid in taxes funding the defense budget, instead of at the gas pump.
These fossil fuel subsidies also do not fully include pollution costs. For example, automobile exhaust accounts for 85 percent of air pollution in Las Vegas. We all pay the costs of asthma and other illnesses in health-care costs, not at the pump.
– Nuclear generates just more than 19 percent of U.S. electricity, and like natural gas and coal, does it reliably. But your electricity bill does not include the cost of loan guarantees required for investors to back new nuclear plants (that average 250 percent in cost overruns). They are loan guarantees, just like Solyndra received, but for a lot more money. Nor does it include most of the $100 billion-plus projected costs to dispose of the waste – wherever it eventually winds up. It doesn’t include subsidies paid to mine uranium in the Southwest. And it doesn’t include the costs to treat Americans stricken by cancer from the uranium tailings left behind.
And who pays the insurance for a catastrophic accident, natural disaster or terrorist attack? Mostly, you do. That’s right: the Price-Anderson Act caps company liability at just more than $12 billion, with taxpayers on the hook for the rest. For comparison, cost estimates for the Fukushima earthquake-tsunami-meltdown run up to $250 billion over just the next 10 years. The Price-Anderson Act was passed in 1957. The first U.S. nuclear power plant opened in 1958. Without Price-Anderson, there would never have been a nuclear industry.
– Bezdek estimated that renewables received about $45 billion before 2006, about half in research and development. President Obama’s Stimulus Act more than doubled this investment in solar and wind power. In my opinion, this was a smart overall investment: they are new technologies that produce little or no pollution or greenhouse gases – and that benefits all of us. And unlike coal, oil and nuclear, prices for solar are falling fast (natural gas prices are historically low but highly volatile).
People often ask me, "Do you think solar can ever compete?" My answer: Solar can compete right now – on a level playing field, that is.
Jim Rossi is a graduate student in UNLV’s History Department and Urban Sustainability Initiative focusing on solar energy, and works for the nonpartisan Nevada Institute for Renewable Energy Commercialization (www.nirec.org).