Energy Incentives: The Power Behind the Power

Author:  Crabb, Bryan | Zweibel, Ken
Organization:  GW Solar Institute | California Solar Energy Industries Association
Report Date: 
2012
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Summary: 

The report discusses Federal Incentives for all energy sources, including solar, wind, biofuels, hydrologic, coal, oil, natural gas and nuclear. It provides historical context for subsidies and tax incentives that have helped energy subsidies develop into mature technologies, and compares renewable energy Federal incentive totals to conventional energy incentive totals starting 1950 to today. The report also compares the incentives received by both conventional and alternative sources during their start up phases.  

Key Take-Aways: 
  • Solar energy subsidies and incentives are temporary, compared to fossil fuel subsidies that are more permanent, and solar energy subsidies and incentives have done more with less funding with significant decreases in cost from $30 per watt in 1975 to less than $5 per watt by the 1990s.
  • Beyond this analysis, solar development supported by the 30% Federal Investment Tax credit has been shown to provide a significant return on investment to the federal government. In a typical solar project, the revenue returned from developer, construction and owner taxes is calculated to be higher than the initial federal tax credit, providing an average internal rate of return of 10%.
  • The tax code provides permanent provisions that benefit some energy technologies, namely coal, nuclear and petroleum & natural gas, after they have reached maturity. Domestic coal and oil extraction was specifically promoted through the Revenue Acts of 1916 and 1918 which introduced “discovery value” into the tax code which has acted as a permanent incentive for these energy sources. These incentives amount to a government investment of approximately $172 billion from 1950–2006. 
Key Facts: 
  • From 1950-2010 all renewable sources received $81 billion in Federal Incentives, compared to $369 billion by oil, $104 billion by coal, and $121 billion by natural gas.
  • Nuclear power, oil and gas were supported at levels that were ten times higher during their 15 years of development, compared to renewable energy.
  • In the last decade, from 2002–2008, mature, conventional energy sources still received 71% of available dollars while renewables received just 29%.
  • All energy technologies required government action to become cost effective and reliable. For example, natural gas became commercialized through the Public Utility Regulatory Policy Act (PURPA), which required utilities to procure gas, and through governmental technology investments and the Federal Energy Regulatory commission’s Order 888, which opened up the transmission grid to independent power producers.