The Fuzzy Accounting Behind Renewable Energy’s Falling Prices

by Merrill Matthews Grassroot Institute, Apr 19, 2016

Fans of the renewable energy industry like to boast that the costs of solar and wind power are dropping. What they never mention is where most of those “savings” are coming from — American taxpayers.

Just listen to President Obama’s most recent State of the Union address: “Wind power is now cheaper than dirtier, conventional power [and] solar is saving Americans tens of millions of dollars a year.”

The American Wind Energy Association claims, “wind energy is one of the most affordable forms of electricity today.” And the Solar Energy Industries Association proudly notes that “the cost to install solar has dropped by more than 73 percent.”

But these stats only show one side of the ledger. According to the U.S. Energy Information Administration, federal subsidies — including direct expenditures, tax breaks and research and development — for solar power totaled $5.3 billion in 2013, the most recent year of data. Wind power pocketed $5.9 billion. Combined, renewable largesse grew nearly 40 percent between 2010 and 2013.

Now that Congress has renewed the Production Tax Credit for wind energy as part of the December budget agreement, taxpayers will be on the hook for supporting renewables for years to come.

Renewable energy defenders point out that fossil-fuel producers are also subsidized by the federal government. But those subsidies are miniscule compared to wind and solar. In fact, the federal government now subsidizes solar 345 times more than coal, natural gas, and oil, according to the EIA. Wind is being subsidized over 52 times more than the more conventional fossil fuels.

And that’s just at the federal level. State and local governments provide lots of tax breaks and other economic support for renewables.

Researchers at North Carolina State University track 40 different state and local clean energy programs. The Center identified 1,261 rebate provisions, 84 property tax incentives, 52 sales tax incentives, 42 personal tax credits, and 9 tax deductions. In addition, the Center found 49 renewable portfolio standards, which are laws requiring electricity companies to incorporate renewable energy.

On top of that, ratepayers may be forced to pay more for their electricity.

Such tax breaks, subsidies and mandates mask the true cost of renewable energy. Economists at Utah State University confirmed this last year, writing that, “Because federal and state subsidies are intrinsic to the success of wind energy, calculations that do not include subsidies return a cost of wind energy that is artificially low.”

The existence of this vast subsidy system prompts an important question: Could wind and solar survive on their own?

Warren Buffet doesn’t think so: “[O]n wind energy, we get a tax credit if we build a lot of wind farms. That’s the only reason to build them. They don’t make sense without the tax credit.”

Proponents counter that the wind and solar industries create jobs. According to the Solar Foundation, the number of solar jobs in the United States reached 208,000 in 2015. The American Wind Energy Association claims its industry employs 73,000 people.

But those figures pale in comparison to oil and gas employment, which supports 9.8 million jobs, according to PricewaterhouseCoopers. And that figure doesn’t account for all the fossil-fuel positions that wind and solar have eliminated because electricity generators are forced to switch from fossil fuels to renewables.

Before wind and solar advocates boast about how affordable their preferred energy sources have become, they need to factor in the massive taxpayer largesse propping up the renewable industry. After accounting for both sides of the ledger, anyone can see that renewables cost far more than they save.