Shoddy accounting by feds hinders a valid cost comparison between fossil fuel and emerging renewable energy sources

Subsidies to old-school energy producers are under-reported, according to a study from watchdog group.

Reporting by Energy Information Administration tilts the playing field against renewables

By Summit Voice

SUMMIT COUNTY — A new federal report on energy subsidies is skewed in favor of fossil fuel and nuclear power, according to watchdog group that performed its own analysis to show the true scope of taxpayer funds going to oil companies, coal-burning power plants and nuclear reactors.

Consistently under-reporting direct and indirect federal subsidies to  the nuclear and fossil fuel industries enables those industries to tout how much cheaper they are than renewable energy sources, according to the Union of Concerned Scientists.

“Thanks to reporting omissions, the nation’s most highly subsidized, polluting industries will be able to use the Energy Information Administration’s flawed analysis to claim they receive far fewer subsidies than emerging, clean energy technologies,” said Ellen Vancko, manager of the UCS Nuclear Energy and Climate Change Project. “Recent independent analyses show that nothing could be further from the truth.”

The problem with the EIA’s methodology stems from the fact that the agency adopted a “snapshot” approach to measuring subsidies by only looking at a single year: 2010. By doing that, Vancko, the agency failed to count the massive federal subsidies that the fossil fuel and nuclear industries have enjoyed for decades — benefits they presumably will continue to receive unless Congress acts to limit them, Vancko explained.

Conversely, relatively new subsidies for wind and other renewables will only last for a finite period—10 years—after those facilities begin operation.

Most of the support for efficiency and conservation projects, meanwhile, came through stimulus grants. These are one-time bumps in spending, unlikely to be repeated given the fiscal constraints the country now faces. Congress chose the grants as attractive targets for stimulus spending because they were initiated quickly, supported many small scale projects— often at the household level and by small firms —and resulted in permanent cost-savings for lower-income citizens.

The EIA also failed to count subsidies that are available to the oil, gas, coal and nuclear industries that they have not as yet utilized.  For example, Congress has enacted numerous large new subsidies in recent years, such as loan guarantees and production tax credits, that would especially benefit new coal and nuclear plants.

But the snapshot accounting did not include those as-yet untapped subsidies. As a result, the EIA missed the enormous influence these programs have on the economics of new energy investments.
Last year, the UCS calculated the benefit of new, uncounted subsidies for new nuclear reactors under the Energy Policy Act of 2005 at as much as $5 billion per reactor.

Meanwhile, a February 2011 UCS report, “Nuclear Power: Still Not Viable Without Subsidies,” showed that nuclear power has benefitted greatly from subsidies since its inception more than 50 years ago—and the EIA report left them out as well.

“Extremely generous existing and new subsidies mask nuclear power’s considerable costs and risks,” said Vancko. “Yet they are not accounted for in EIA’s latest report.”

“We need to address climate change quickly and in the most cost-effective manner possible,” she said. “This requires a logical and economic transition away from carbon-intensive fuels and an accurate accounting of the subsidies provided to all energy sectors.

“The EIA needs to improve its energy subsidies accounting work if we are to properly evaluate the distortions that existing policies cause. Any future work the EIA carries out on the topic of energy subsidies must be free of political interference, include a systematic and consistent assessment of all types of subsidies over a long period of time, and ensure that the analyses are done with greater transparency and broader public input.”

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One Response

  1. It’s true that the energy industry enjoys government subsidies, but we hear very little about them except at budget time. After all, they are part of the sacred cows, right up there with tax holidays, defense spending, bank bailouts, in fact, the list goes on & on. A good case can be made with certain European countries about taxes & subsidies.

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