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Sunday, January 31, 2016

DOES RENEWABLE ENERGY STILL NEED GOVERNMENT HELP?

Here is a quote from an article written three years ago in FORBES by Paul Nahi (right), CEO of Enphase Energy, a provider of micro-inverter systems for the solar industry:

One might question the rationality of this position,* given the fact that between 1994 and 2009 the U.S. oil and gas industries received a cumulative $446.96 billion in subsidies, compared to just $5.93 billion given to renewables in those years. (The nuclear industry, by the way.  received $185 billion in federal subsidies between 1947 and 1999.) Certainly, subsidies are a useful tool to help establish an emerging industry. But where there is no projected end to funding, subsidies stop being a catalyst, and start becoming a crutch. This is especially true when companies supported by subsidies become powerful enough to influence governments to perpetuate their support.

* Nahi's position was to terminate government subsidies for solar.  But that was when oil sold for more than $100/barrel.  Today?  With petroleum at around $30/barrel, he would not dare publish that article.

So to go on with his publication, during that 15-year period, fossil fuels, thus, gained nearly a hundred times more government subsidies than the renewable energy industry.  So why was this paper entitled:  Government Subsidies:  Silent Killer of Renewable Energy?  Basically, he argued that government definitely should level the playing field, but, more so, focus on demand creation and not supply management.  He cited those now infamous failed solar company as one example of this problem.

Here is another comparison showing oil/gas getting "only" 13 times more in historical subsidies than clean energy:


In case you were wondering, that orange bar is almost three times larger than the green clean energy option.  The orange mostly represents ethanol from corn.  

In any case, these studies create their own comparative boundaries, sometimes to skew the final results, and you can get an order of magnitude difference in the final analysis.  The bottom line, though, is that fossil fuels have certainly received a lot of government help over the past century...and continues to feed at the trough.  Why?  Because their lobbyists are smart, effective and, like the military-industrial complex, farm lobby and unions, ingrained in our decision-making process.  For example, where do political candidates get most of their funds to remain in office?  Then there are the other gray benefits that could well be more influential.  I know.  I worked in the U.S. Senate in DC for three years.

Here is yet another bar graph, for you probably noticed that the fossil subsidy has been ongoing from 1918.  To my surprise, the nuclear percentage as a share of the Federal budget continues to be abnormally high:


Now, what should government do when oil is at around $30/barrel and biofuel companies have no real chance to compete?  Jacob Sullum, senior editor at Reason Magazine, decried the fact that all the Democratic candidates and  9 of the 11 Republican ones competing in the Iowa caucus this coming Monday have expressed their support for corn ethanol.  To quote:

The RFS (Renewable Fuel Standard) raises food prices and imposes a hidden tax on motorists because ethanol is more expensive than gasoline and produces less energy per gallon. Between 1982 and 2014, Manhattan Institute Senior Fellow Robert Bryce found, ethanol cost an average of 2.4 times as much as an energy-equivalent amount of gasoline.

Senator Ted Cruz is known to want to scrap the RFS, and the state director of America's Renewable Future (ARF--a biofuel organization) is Eric Branstad, whose father, Terry Branstad (left), is that six-term (yes, 6 terms--longest serving governor in U.S. history) Iowa governor who has regularly lambasted Cruz.  Maybe it has more to do with Cruz's personality, but there is something about ethanol and the farm belt that has long been troubling me.  The difference in Donald Trump beating Ted Cruz in Iowa could have everything to do with ethanol.  I should add that Marco Rubio is also anti-ethanol, but has smartly kept under the radar on this topic.  For example, he avoided participating in an Iowa agricultural summit because he just had to attend a wedding.


So, does the renewable energy industry still need government help?  Yes, of course, because  most green alternatives still need some time to ultimately become sufficiently competitive to reduce energy importation, remediate global warming, and solidify energy security.  However, there are a few truly dumb solar options that deserve to be dismissed, with ethanol from corn being a prime example.  But be careful what you say in Iowa.

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