Energy subsidies: a complicating factor

Ottawa-based energy economist Robert Lyman has provided this summary of a recent paper on energy subsidies in the United States.
December 12, 2016

The Energy “Subsidy” Debate – Some Additional Fuel for the Fire

One of the recurring side debates that always seems to rage between those who favour large public spending to reduce greenhouse gas emissions and those who argue that such expenditures are not justified, concerns whether energy markets are already “distorted” by existing subsidies to fossil fuel industries.
There are many complex elements to this debate, including the question of what actually constitutes a “subsidy”, who benefits from it (producers or consumers?), whether the costs of environmental effects caused or avoided should be included in the calculations, whether tax subsidies (i.e., deductions and credit that provide incentives for investment) should be weighed against the revenue received by governments when the investments occur, and so on. There are few simple answers.
With that preamble, I think John Petersen, a lawyer and investment analyst with special expertise in energy storage technologies, has provided some valuable additional information in his recent article on the subsidies provided by United States governments to Tesla Corporation and its counterpart SolarCity (both owned largely by Elon Musk). Tesla manufactures electric cars (EVs) and SolarCity manufactures the batteries needed by EVs and other users. The details of Petersen’s calculations can be found in his article here:
The combined U.S. federal subsidies to Tesla and SolarCity per vehicle sold in 2015 include $2,400 for the solar panels, $2,100 for energy storage technologies, $2,250 for GHG emission credits, and $7,500 for EV investment tax credits, for a total of $14,250. In addition, in states like California that offer zero emission vehicle (ZEV) tax credits, each vehicle sold qualifies for a $7,750 tax credit. The combined federal-state subsidy is thus $22,000.
If you assume that an average EV will save 600 gallons of fuel per year during a ten-year useful life, the combined subsidies work out to $3.67 per avoided U.S. gallon in ZEV states and $2.38 per avoided gallon in non-ZEV states. That is equivalent to $413 per tonne of GHGs avoided in ZEV states and $268 per tonne avoided in non-ZEV states.
Petersen also offers some comparative information on federal subsidies provided to different energy sources produced in the United States, based on data from the Energy Information Administration for 2013 (the most recent year available).
The following table shows the subsidies paid, the energy produced in 2013 from that source, and the subsidy per million British Thermal Units (BTU) to provide a common standard of comparison.
U.S. Federal Subsidies to Energy Production 2013
Energy Source                       Subsidies        Energy Production    Subsidies per
(millions)           (trillion BTU)              MMBTU
Coal                                            $1,085                     20,209                   $0.05
Oil and Natural Gas                  $2,346                     43,695                   $0.05
Hydropower                               $395                      2,579                   $0.15
Nuclear                                      $1,660                      8,117                   $0.20
Biofuels                                     $2,445                      4,495                   $0.54
Geothermal                                 $345                         220                    $1.57
Wind                                          $5,936                      1,549                   $3.83
Solar                                          $5,328                         286                  $18.63
For comparison, the current spot price of natural gas in the United States is $2.96 per MMBTU.
Petersen notes that it is not entirely fair to compare subsidies in one year to the production in that year, as the subsidies are intended to increase production over time, and it takes several years in some cases before the up front investment results in production. Still, the difference in magnitude between the per-BTU subsidies to conventional fossil fuels and the renewable fuels is striking. For example, the per-BTU subsidies to wind producers are 76 times as high as the subsidies to coal, oil and natural gas.
It is unfortunate that comparable information is not available for Canada.

What's your reaction?


  • Barbara
    Posted December 12, 2016 4:46 pm 0Likes

    Storage costs of projects from around the world are available at:
    DOE Global Storage Database.
    Tehachapi Wind Energy Storage Project, California
    Commissioned, July 1, 2014
    Lithium-ion Battery
    8,000 kW
    Duration at rated Power: 4 hrs.
    Cost ~ $50 million
    DOE funding ~ $25 million
    Enter the country name for projects and costs.
    There may be an Alberta storage project under Canada.

  • Jjoe
    Posted December 12, 2016 6:04 pm 0Likes

    On a different subject. The leaning Tower of Ferndale is back in operation. It must have been at least 8 months on a slant.

  • Bert
    Posted December 12, 2016 8:14 pm 0Likes

    “It is unfortunate that comparable information is not available for Canada.”
    I think if this information was available for Canada,digesting it would probably make me sick and puke.

  • Parker Gallant
    Posted December 12, 2016 8:40 pm 0Likes

    I took a run at one (pumped hydro) proposed for Ontario back in 2013. Find it here:

    • Barbara
      Posted December 13, 2016 12:48 am 0Likes

      Oct.1, 2014
      ‘Centre for Urban Energy tackling Toronto’s energy storage problem’
      Lithium ion SuperPolymer batteries.
      Cost allocated for this project $8 million including the batteries.
      Found two more Toronto area energy storage projects online.

      • Barbara
        Posted December 14, 2016 10:58 pm 0Likes

        DOE Global Energy Storage Database
        ‘150 kW Ryerson University Energy Storage System’, Lithium-ion
        Appears to be a Community Energy Storage unit/ CES project.
        The Database includes other Ontario energy storage projects with some additional projects planned in the near future.
        Internet search: DOE Global Energy Storage Database, Ontario energy storage projects.

    • Barbara
      Posted December 14, 2016 12:42 am 0Likes

      Another project:
      Ryerson University Centre for Urban Energy, Nov.18, 2015
      Minister Murray Unveils Pole-Top Project: Sometimes Thinking inside the Box is a Good Thing
      The energy storage unit for this project employs lithium-ion batteries.

    • Barbara
      Posted December 14, 2016 9:12 pm 0Likes

      DOE Global Energy Storage Database
      ”660 kW-Toronto Hydro-HydroStor-Underwater Storage’
      Commissioned Nov.18, 2015
      660 kW
      Duration at Rated Power: 1 hr.

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