Direct Federal Subsidies to 'Clean' Energy Up 186.6%

August 17, 2011 - 2:47 PM

windmill, alternative energy

“With the launch today of $2.3 billion in Recovery Act tax credits for green manufacturers, we are going to ramp up manufacturing of green energy materials in this country," Vice President Joe Biden announced. (AP Photo)

(CNSNews.com) – In addition to the 2009 economic stimulus law which, among other things, created financial incentives for clean energy, a new report by the Department of Energy shows that direct federal subsidies to alternative energy increased 186.6 percent between 2007 and 2010, up from $5.1 billion to $14.6 billion.

Around the same time the report was released, a large solar energy company in Massachusetts, touted by the Obama administration as benefiting from the economic stimulus, announced it was filing for bankruptcy.

Evergreen Solar, based in Marlborough, Mass., announced it was going Chapter 11 on Aug. 15, with a debt of $485.6 million. The company had cut 800 jobs back in March and is expected to now cut another 65 positions.

In a progress report – “strengthening the economy for Massachusetts families” – on April 22, 2009, the Obama administration praised the $821-billion economic stimulus bill regarding job creation in Massachusetts. The White House said that the legislation’s “real impact is already being felt across the state.”

It added, “Because of the Stimulus Bill and New Contracts, Green Energy Companies are Looking to Hire Many New Employees,” and then quoted from the Boston Globe: “Evergreen Solar, the Marlborough-based maker of solar panels, also is hoping to hire 90 to 100 people at a manufacturing plant in Devens, said Gary Pollard, vice president of human resources. The plant, which opened last summer, is expected to employ more than 800 when it reaches full capacity.”

In late July of this year, the Energy Department’s Energy Information Administration (EIA) released a report, Direct Federal Financial Interventions and Subsidies in Energy in Fiscal Year 2010.

The report shows that in FY 2007, the total in direct federal subsidies to energy groups was $17.89 billion. From that total, $5.1 billion went to “renewables,” which are biomass, geothermal, hydro, solar, wind, and biofuels. (Coal, natural gas, oil, and nuclear got slightly more, $7.7 billion in subsidies.)

Solar specifically received $179 million in direct federal subsidies and wind received $476 million in direct federal subsidies in FY 2007.

In FY 2010, however, total direct subsidies to energy had increased to $37.16 billion, a hike of 107.7 percent.

President Barack Obama and stimulus

President Barack Obama signed an economic stimulus law, now determined by the CBO to cost $821 billion, at the Denver Museum of Nature & Science on Feb. 17, 2009. (AP photo)

From that amount, renewables received $14.67 billion in direct subsidies, up 186.6 percent. (For coal, gas, oil, and nuclear, their share fell to $6.6 billion in direct subsidies.)

Also, solar and wind got more in FY 2010, respectively $1.3 billion and $4.98 billion in direct subsidies. For solar, that represents a 626 percent increase; for wind, a 946 percent increase.

Back on Apr. 30, 2011, President Obama said, “I do have a problem with the unwarranted taxpayer subsidies we’ve been handing out to oil and gas companies – to the tune of $4 billion a year. …. I also believe that instead of subsidizing yesterday’s energy, we should invest in tomorrow’s – and that’s what we’ve been doing.”

The EIA report shows that direct federal subsidies to natural gas and petroleum went from $2.0 billion in FY 2007 to $2.82 billion in FY 2010 – an increase of 41 percent. Renewables, or clean energy, as noted, saw an increase of 186.6 percent.

“Already, we’ve seen how the investments we’re making in clean energy can lead to new jobs and new businesses,” said Obama. “I’ve seen some of them myself – small businesses that are making the most of solar and wind power, and energy-efficient technologies.”

On the issue of federal subsidies, CNSNews spoke with Daniel Kish, senior vice president for policy at the Institute for Energy Research (IER), asking him, “Do you think energy subsidies actually help alternative energy companies grow in the marketplace?”

Kish said, “No, the government’s approach, which is to just pour money into uneconomic energy sources until such time as they either become economically viable or they do enough destruction to affordable sources of energy, which they’re also doing at the same time, is a road to disaster energy-wise.”

“And all we have to do is look at Europe and their experience, which we’ve done at IER, and what we found out is that all the countries that were leading the way on all this green energy are backing off as fast as possible because they can’t afford it,” he said.

Biden, stimulus

Biden talks up the effects of the Democrats' stimulus package. (AP Photo)

“And here’s the truth, without government subsidies or mandates, none of these energy sources exist, they just simply won’t,” he said, “and because no one will buy them unless the government compels them to buy them and no one will invest in them unless the government gives them huge subsidies in return. Because, like it or not, these energy sources are not as efficient as the sources of energy that the marketplace has picked and the consumers have picked to run this country.”

CNSNews also asked Kish, “Do you think that the failure of the solar company, Evergreen, that was started in Massachusetts a few years ago, it’s failure, it’s bankruptcy is that any indication of how these subsidies can backfire?”

Kish said, “Yeah, Evergreen is a classic example. But there are many, many examples of the same thing. All of these companies’ business plans are based upon the government giving them money or the government ordering people to purchase their electricity regardless of what it costs.”

“And that’s another way the government can do it,” he said. “They call it renewable portfolio standards or something like that, but what they really are is mandates. You must buy 10 percent of your power or 20 percent or, in the case of California, 33 percent of your power from renewable sources. So if those renewable sources cost a lot more and you must buy them, or your utility must buy them and then they can pass on the costs to you, your bill’s going to go up and it’s going to cost more to make things in the United States. That’s what this is all about.”

Michael W. Chapman contributed to this report.