An Unfair Game
An interesting thing is happening in the energy subsidy game. Oil and gas have long standing subsidies dating back to the 1800's. while renewable energy companies, new to the scene, do not receive such ingrained subsidies. Time for everyone to be playing by the same rule book.
Fossil Fuels Subsidies Written into the Tax Code
As part of the tax code, the fossil fuel industry gets significant tax advantages including land rental prices that are significantly undervalued. In the last 30 years, the treasury has lost nearly $30 billion in revenue by undervaluing public lands in Wyoming and Montana where Powder River coal is mined.
Further, tax subsidies for the fossil fuel industry are extensive: the industry can write off most drilling costs in full -- and not at normal business depreciation rates. Again, as part of the tax code.
Support for Wind and Solar Volatile
As compared to the fossil fuel industry, renewable subsidies are volatile and land leasing can be expensive and complicated. None of the subsidies for renewables are permanent in the tax code the way fossil fuel subsidies are.
The Production Tax Credit, the primary subsidy for the wind industry, has continuously been allowed to expire due to Congressional inaction. As a result, renewables have been stymied by these stop/start subsidies and investors are scared off. And, the future of the Investment Tax Credit, the primary federal subsidy for the solar industry, remains unknown. The ITC is set to expire in 2016.
If the ITC and PTC were permanent, renewable investment would be more predictable, the cost for supplying equipment for projects would be less, investors would take more risks with renewable energy development projects, and, ultimately, generation costs would come down.
Because subsidies for fossil fuels are permanent, the effect is much greater: permanence provides a stable and predictable investment environment not given to renewables.Cant Beat Them, Join Them?
It is almost impossible to reverse permanent subsidies in the tax code that the fossil fuel industry enjoy. It has never happened in the U.S.; some advocates believe that a more practical solution would be to make the subsidies for wind and solar just as permanent as those for fossil fuels.
Either that, or remove all subsidies for all forms of fuel, something very unlikely to happen.