Taxpayer support for renewables and efficiency: Kemp

LONDON Wed May 23, 2012 10:56am EDT

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LONDON (Reuters) - Proponents of clean energy often portray the sector as a plucky little David locked in battle with the fossil fuel industry's big bad Goliath for taxpayer support.

In the United States, President Barack Obama has tapped into this theme to push for an end to tax relief and other subsidies for oil and gas production, and an extension of federal support for renewable energy and energy efficiency initiatives.

Speaking in his state of the union address to Congress in January, the president claimed "We've subsidized oil companies for a century. That's long enough. It's time to end the taxpayer giveaways to an industry that rarely has been more profitable and double-down on a clean energy industry that never has been more promising."

But the rhetoric obscures an unprecedented push to cut energy consumption and increase the share of renewable energy generation underway at all levels of government as well as in the private sector. Federal, state and local governments, coupled with local power and gas utilities, are pouring billions of dollars a year into a vast range of initiatives to boost efficiency and renewables.

Support for efficiency and renewables is split across thousands of different programs which has tended to hide the scale of the overall effort. As a result, many energy analysts fail to appreciate the scale of the shift underway. However, the sheer amount of support being given to clean technology and energy efficiency programs suggests a revolutionary transformation of the energy system will likely occur in the next two decades.

PROGRAMME PROFUSION

In 2010/11, the federal government alone had 679 separate renewable energy initiatives spread across 23 departments and agencies, according to a report prepared for Congress by the Government Accountability Office (GAO) ("Renewable Energy: Federal Agencies Implement Hundreds of Initiatives" Feb 2012).

Four agencies and their subcomponents were responsible for almost 60 percent of renewable energy initiatives: the Department of Defense and its service components (116), Agriculture (105), Energy (92) and Interior (82).

But renewables were also being promoted in such unlikely places as the Department of Labor (via Green Capacity Building Grants offered by the Employment and Training Administration), the State Department (Greening Diplomacy and the Global Bioenergy Partnership), Justice (FBI Alternative Fuel Infrastructure) and the Bureau of Prisons (Solar Panel Manufacturing and Training).

The full list is on the internet (here). And these are just the initiatives designed to support renewables. The inventory does not include initiatives to improve efficiency.

At lower levels, there are now almost 1100 programs to support renewables offered by state and local governments, or power and gas utilities, according to the Database of State Incentives for Renewables and Efficiency (DSIRE) compiled by the North Carolina Solar Center and the Interstate Renewable Energy Council with funding from the Department of Energy.

Of these, more than half are rebates on power and gas bills offered by the utilities themselves in conjunction with local regulators (here).

In addition, there are over 1400 separate programs across the country to promote efficiency, with more than three quarters of them being offered in the form of rebates on utility bills to support conservation measures (here).

TRANSFORMATION POTENTIAL

Programs vary widely in size and funding. Many are very small. Nonetheless, the federal government spent approximately $14.7 billion on renewable energy subsidies in fiscal 2010/11, including $8.2 billion in tax expenditures (reliefs and rebates), according to an estimate by the Energy Information Administration (EIA) cited by GAO ("Direct Federal Financial Interventions and Subsidies in Energy in Fiscal Year 2010").

Another estimate by the respected Congressional Research Service (CRS) put federal revenue losses and outlays for renewable energy at $13 billion in fiscal 2010 ("Energy Tax Incentives: Measuring Value Across Different Types of Resources" 2011).

The Environmental Law Institute estimated total federal subsidies for renewable sources over the 7-year period from fiscal years 2002 through 2008 at $29 billion, according to GAO.

Billions more is being spent by the federal government on energy efficiency initiatives, as well as state and local governments and utilities.

Not every program will succeed. Some will fail or prove a waste of money, at least in narrow terms. U.S. taxpayers may wonder why they have been supporting the Greening Embassies Forum "where foreign missions meet quarterly to exchange best practices on sustainability and their operations," according to the State Department. The forum also brings in outside experts to help foreign embassies "plan the deployment of renewable energy at their missions".

But $10 billion or more per year buys a lot of research, trial and error, innovation, learning by doing and deployment.

GAO's report was written in response to congressional concerns about the sheer number of federal agencies implementing renewable energy initiatives, and the lack of a comprehensive inventory of programs, making it hard to identify potential fragmentation and duplication.

However, diversity could also be a strength as well as a weakness. The large number of programs at federal, state and local level may not be particularly efficient in a narrow sense, but it does create an interesting laboratory to see what works.

The number of initiatives and their overall scale provides an enormous impetus to the development and commercial deployment of renewable sources and energy conservation. The full impact will only become evident over the next decade.

Like the horizontal drilling and hydraulic fracturing technologies developed between the 1950s and the 1990s, which eventually revolutionized gas and oil production over the last five years, energy efficiency and renewables programs have the potential to transform the profile of energy production and consumption.

The amount of money being invested on these programs, in aggregate, strongly suggests an accelerated evolution that could start to produce meaningful effects on power, gas and even oil consumption within the next ten years.

(This story removed typo in headline)

(John Kemp is a Reuters market analyst. The views expressed are his own)

(Editing by William Hardy)

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