As Subsidies Phase Out, Wind Still Powers Ahead

March 8, 2018

So called “conservatives”  like to talk about the subsidies received by renewable energy sources like wind and solar – but don’t mention that those subsidies are on the way out.
Meanwhile, smart business people are making long-term investments in wind power, for instance, precisely because the subsidies have worked as hoped — allowing a learning curve and economies of scale to drive down prices and create a viable renewable industry.

Similar process playing out in the UK, as the video above indicates.
So who really works for, and believes in, a free market?

New York Times:

Congress does not plan on subsidizing renewable energy indefinitely. Under tax legislation passed in 2015, the credits for wind will phase out by 2020 and for solar by 2022. Both industries say that they have been preparing for this eventuality for years by cutting costs, but that changing the rules so suddenly in the current tax bill would have created major disruptions for projects that are already underway.

Popular Mechanics:

The Hywind wind farm is the world’s first floating wind farm, located about 15 miles off the coast of Scotland. Unlike other offshore wind farms, Hywind isn’t anchored to the seafloor. Instead, Hywind relies on buoys and anchors to stay afloat even in high winds or waves. This makes floating wind farms like Hywind a great choice for regions where traditional offshore wind farms aren’t viable.

“The west coast of the USA, Japan and Hawaii are all places that need a lot of energy and that are consistently windy, but where the sea is very deep,” says Hywind engineer Halvor Hoen Hersleth. “Floating wind power is ideal for these areas.”

But for floating wind farms to be successful, they have to be more than just versatile. They also have to be profitable, which means generating enough energy to justify the large construction costs. Fortunately, the Hywind farm seems to have succeeded in this area as well, reaching a 65 percent capacity factor over the past three months.

A generator’s capacity factor is the ratio between the amount of electricity it generates and the maximum amount of energy it could possibly produce. Most baseline plants, like nuclear or natural gas plants that run continuously, have around a 100 percent capacity factor. Many renewable energy facilities like wind or solar farms have a much lower capacity factor, around 30 percent or so.

Given that, a 65 percent capacity factor for the Hywind farm is pretty good. Granted, winter winds tend to blow stronger than summer ones, so we could see this number drop over the rest of the year. Still, this is much higher than typical for wind farms, which bodes well for the concept of floating wind turbines in general.

Andrew Faces in The Hill:

The coal and nuclear plants supposedly harmed by increasing amounts of renewable energy are also beneficiaries of government subsidies. And rather than renewables, cheap, abundant and subsidized natural gas is of much more concern to coal and nuclear facilities because these “base load” plants cannot react quickly to market signals like a new, efficient gas-fired energy facility, as the Department of Energy’s grid study recently concluded.

 

Let’s look at some of the implicit incentives for fossil fuels and nuclear energy.

Coal plants, for example, do not bear the full cost of the byproducts they create to generate electricity (e.g., emissions, solid waste, cooling water discharge, etc.). Experts can disagree on the cost of these, but no one disagrees that the profits from these investor-owned coal plants go to the shareholders.

Furthermore, only “mineral or natural resource” businesses such as oil, natural gas and coal (but not wind or solar energy) are able to use a government-subsidized financing structuring called a “master limited partnership” (MLP). These publicly-traded vehicles are not subject to corporate taxation and are extremely tax efficient, which allows those privileged businesses to access investment capital at low rates for large infrastructure projects. This implicit tax subsidy lowers the cost of gas-fired electricity, in addition to other implicit subsides available only to oil and natural gas.

Finally, the nuclear industry is the beneficiary of the Price-Anderson Act, which became law in 1957 (and is regularly renewed—most recently in 2005 for 20 years) as an incentive for the private production of nuclear power. In short, because investor-owned utilities cannot acquire insurance in the marketplace to cover its potential exposure in case of a nuclear disaster, the act covers liability from nuclear incidents above $13.6 billion—with the remaining cost covered by taxpayers. The Japanese government has estimated the cost of the Fukushima nuclear disaster to be $188 billion. Should such a tragedy befall a nuclear plant in the United States, in addition to the untold social and emotional loss, the Price-Anderson Act means taxpayers would be on the hook for $174.4 billion.

In reality, the key to increasing prosperity would be to eliminate all energy subsidies, which are often buried deep in government statutes for the benefit of fossil fuels and/or nuclear energy. The production tax credit (PTC) for wind energy and the investment tax credit (ITC) for solar face fierce opposition from special interests that derive their wealth primarily from oil and gas, which state their opposition to the PTC and/or ITC because they want “the market, not government, to pick winners and losers.”  Yet their concern doesn’t extend to the subsidies discussed above, which are at least equal to the tax subsidies for renewable resources.

Vox:

Adding everything up: $14.7 billion in federal subsidies and $5.8 billion in state-level incentives, for a total of $20.5 billion annually in corporate welfare.

Of that total, 80 percent goes to oil and gas, 20 percent to coal. On the right, subsidies are broken down by stage of production. Extraction gets the most.

fossil fuel subsidies(OSI)

Notice that asterisk by remediation, which refers to the cost of cleaning up environmental messes and abandoned infrastructure left behind by fossil fuels. Shady insurance, bonding, and liability-cap policies mean that taxpayers are probably on the hook for lots more than this in the end, but it’s difficult to quantify in advance.

In addition, worth noting that we subsidize fossil fuels thru “externalities”, like our cardiovascular health, the poisoning of water supplies and food sources by mercury and heavy metals, and the occasional two trillion dollar war for oil.
Time for a change.

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10 Responses to “As Subsidies Phase Out, Wind Still Powers Ahead”

  1. earl Says:

    I think the sky news interviewer could have juxtaposed the observation about wind power “subsidies” with some recognition of the fact that Fossil Fuels still get in excess of $5tn in subsidies every year according to a study published in the journal World Development.
    If people knew how much fossil fuels get in subsidies then even conservatives would balk.
    But why oh why is a commentator online (me) fact-checking the ‘News’ media? Isn’t it the job of the news media to do their fact-checking and present a balanced report?
    https://www.theguardian.com/environment/climate-consensus-97-per-cent/2017/aug/07/fossil-fuel-subsidies-are-a-staggering-5-tn-per-year

  2. Gingerbaker Says:

    ” allowing a learning curve and economies of scale to drive down prices and create a viable renewable industry” is not the only reason to pursue RE subsidies. Another reason is to ensure the RE is built fast enough to save humanity as we know it.

    Subsidies are how any government can spend actual money to fight AGW. Every penny spent on a RE subsidy buys actual RE infrastructure, and every penny spent will have what is almost certainly the best ROI in human history.

    We can spend money now to buy RE, or we can wait and spend thousands of times more for AGW adaptation over the next ten thousand years. Ending RE subsidies is the very definition of false economy.

    If we want to save more money over the long run, we should increase our RE subsidies by orders of magnitude, not agree that they should be ended.

  3. pendantry Says:

    Time for a change.

    Yeah. Can’t see it happening any time soon, though…

    • J4Zonian Says:

      Hear, hear, Gingerbaker,

      and saying eh, not right now is not an acceptable response. WE in the US either MAKE it happen now or civilization is unlikely to survive another hundred years, let alone 10,000. I’m unaware of many people who are more of the 3 main facts in the world right now than the people who come to this site; those facts are:
      the situation is dire (both serious and urgent);
      we’re not doing nearly enough to avoid catastrophe;
      but we could.

      • pendantry Says:

        Perhaps I was unclear. I want it to happen. But while YOU in the US have a moron for a president it’s not going to happen. And while WE in the UK are faffing about over ‘Brexit’ instead of dealing with the important stuff, it’s not going to happen.

        • J4Zonian Says:

          No, you were clear. And I don’t mean any harsh criticism; it’s a nearly universal attitude. But wishing is not acting, and only acting, boldly and strategically, will prevent Climate Götterdammerung. We in the us have to change the fact that we have a malignant narcissistic moron for a president and a malignant narcissistic corporate-owned Congress, and that corporations are set up expressly to manifest our psychopathic (unable to connect to life in ourselves, each other and the rest of nature) tendencies. (A really really really bad combination.) The fascists have so much money and power now that elections may or may not be enough; we therefore have to engage in whatever peaceful means are necessary to accomplish it* in time. In the US people tend to rally ’round, ie, stop criticizing and suddenly worship, any president involved in a hot war, (even if not especially malignant narcissistic morons,since they so perfectly mirror our society back to US). So it’s possible that all the current Whites’ House resident has to do to win re-election, and pull along many otherwise vulnerable climate denying delayalists, is start one.

          *IT being a massive, immediate reversal of civilization’s direction, and a met-WWII level citizen-government-business-religious mobilization to establish a sustainable society.

      • J4Zonian Says:

        oops, typo–“I’m unaware of many people who are more AWARE of the 3 main facts…”

  4. J4Zonian Says:

    The figure I keep reading for onshore wind capacity factor is 37%, significantly different from the number given in the article. And coal and gas burners, especially gas peakers, get in the mid-50s– about half of that suggested in the article. They’ll get lower and lower as we get more serious about climate and clean safe resilient renewables continue to get cheaper. Once they’re built they’re so cheap to run they’ll be run all the time, replacing fossil and fissile fuels with much higher ongoing costs, making the F&FFs’ economics even worse, in a downward spiral leading to inevitable closure of all F&FFs once we clear the barriers (ie, capitalism–an addiction that prioritizes profit for a few over survival of civilization and millions of species) to a 100% RE energy system. And wind is partly dispatchable; while it can’t be ramped up from the maximum available at a particular time, it can be ramped down. Deep ocean ‘floating’ turbines (with solar attached?) should reach even higher capacities.

    https://www.greentechmedia.com/articles/read/worlds-first-floating-offshore-wind-farm-65-capacity-factor#gs.oB1UwOE

    The Japanese government is wildly misunderestimating the cost of Fukushima (or lying about it). Since it’s an ongoing accident no one knows what it will eventually cost but I’ve seen credible estimates of $500 billion.
    https://thinkprogress.org/the-nukes-of-hazard-two-years-after-500-billion-fukushima-disaster-nuclear-power-remains-staggeringl-499d0b74a128/

    (The UN estimated the cost of Chernobyl at $236 billion.)

    “The fossil fuel industry…spends more on lobbying against clean energy … than the renewable industry gets in subsidies.” nhsolarguy

    http://grist.org/climate-energy/apocalypse-now-climate-change-is-going-to-kick-our-asses/#comment-902391898 Oil subsidies from a (badly-functioning) supposedly non-dirty coal burner
    http://grist.org/climate-energy/turns-out-the-worlds-first-clean-coal-plant-is-a-backdoor-subsidy-to-oil-producers/?utm_source=newsletter&utm_medium=email&utm_term=EDIT%20Climate%20%26%20Energy&utm_campaign=climate

    Besides the straightforward subsidies, there are huge externalities–

    and various nefarious subsidies

    The US coal industry is going out, not with a whimper, but with a burst of rent-seeking
    “Picking winners” doesn’t look so bad when you’re losing.
    David Roberts Aug 26, 2017
    The US coal industry is dying — but not with any dignity. As the end approaches, its sense of aggrieved entitlement is increasingly naked, its demands for government handouts increasingly frantic. As dread builds, shame has left the building.
    https://www.vox.com/energy-and-environment/2017/8/25/16201218/us-coal-industry-handouts

    I’m shocked—shocked!—to find cheating going on in this establishment.

    Coal corporations sell coal (called captive transactions) to their own subsidiaries to avoid royalty payments and increase subsidies….
    https://thinkprogress.org/coal-companies-are-selling-coal-to-themselves-to-get-more-government-subsidies-996ce96b33b3/

    https://climatecrocks.com/2017/08/07/fossil-fuels-still-getting-huge-subsidies-not-enough-they-want-more/

    “States are misusing funds earmarked for cleaning up coal mines
    The Office of Surface Mining Reclamation and Enforcement is failing to properly oversee state spending, according to a new watchdog report.”

    “Today, there are more than five thousand abandoned coal mines that have yet to be cleaned up across the United States.”
    https://thinkprogress.org/abandoned-mine-land-fund-oversight-report-bd17459d9bd4

    Externalities, things caused by action or substance not included in its cost, are there, that is, not closed, by policy. So they’re another form of subsidy.
    In the US, at least 155,000 people die every year from fossil fuels and millions are injured or sickened. Globally, pollution cause 9 million deaths a year, mostly air pollution from fossil fuels. Millions more have died, been hurt or sickened or been made refugees in the US’s wars for oil. Low birth weight babies, birth defects, lower IQ, aggressiveness, impulsivity and other physical and behavioral effects are caused by fossil fuels.

    All this has gotten much worse in the last year.

  5. rhymeswithgoalie Says:

    AHA! Leave it to you lefties to conveniently leave out the military costs of keeping wind farms out of enemies’ hands and the cost to clean up spills of PV panels from overturned trucks!


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