NCPA - National Center for Policy Analysis


May 12, 2008

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, says the Wall Street Journal.

For example:

  • The total taxpayer bill was $16.6 billion in direct subsidies, tax breaks, loan guarantees and the like, according to the U.S. Energy Information Administration (EIA),
  • 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, says the Journal:

  • 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 percent of total net electricity generation, says the Journal.

All of this shows that there is a reason fossil fuels continue to dominate American energy production: They are extremely cost-effective. That's a reality to keep in mind the next time you hear a politician talk about creating millions of "green jobs."  Those jobs won't come cheap, and you'll be paying for them, explains the Journal.

Source: Editorial, "Wind ($23.37) v. Gas (25 Cents)," Wall Street Journal, May 12, 2008.

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