Compared to what?
Here’s a comment I hear frequently, even from supporters of renewable energy: “Solar energy can’t survive without subsidies and will never be price competitive on an even playing field.”
The simplest answer is “neither can fossil fuels,” which globally enjoy 4.5 to 6 times the amount of subsidies devoted to renewable energy. As one policymaker commented recently, “there is no such thing as an unsubsidized unit of energy.” The real question is, what are we getting for our investments? And what happens when we factor in the negative externalities—the costs of health impacts, environmental damage and global conflict that are passed on to the public?
American coal has enjoyed favorable treatment since the late 18th century, when it was not taxed at all. Subsequent supports have included incentives, tariffs on imported coal, tax-exempt financing, grants, low-interest loans and loan forgiveness. One study estimates that the U.S. government has lost $30 billion in revenue over the past 30 years just by charging 19th-century lease and royalty fees for coal mining operations on public lands. By contrast, renewable energy projects are charged market-rate fees.
The oil and gas industry has benefitted from special tax treatment for more than 100 years. For example, companies are allowed to expense costs that other industries must recover over the course of their investment, and deduct a flat percentage of income in a way that can result in tax deductions greater than the value of the investment. Taxpayers for Common Sense estimates that our complex system of subsidies costs American taxpayers about $7 billion each year.
Taxpayers also foot the bill for health impacts and environmental clean-up. In 2011, the Center for Health and the Global Environment at Harvard Medical School found that the life cycle of coal, from mining to combustion, costs approximately $345 billion per year in additional healthcare and environmental costs; these externalized costs mean we are really paying 21 to 29 cents per kWh for coal-generated electricity. Similar costs apply to oil and gas, and some analysts argue that we should count the cost of our military defense of energy-related resources as part of the external costs of fossil fuels.
Grid parity depends on complex factors including the local cost per kilowatt hour and installation costs, which can vary widely depending on permitting and labor costs. But the cost of solar has decreased steadily in every aspect—the cost of panels, inverters, racking and other system components as well as the cost of installation. The Energy Information Agency reports that solar PV costs decreased by 79% between 2010 and 2016 and continue to fall. The technology doesn’t pollute and, once the cost of installation is recovered, the fuel is free. We are already at grid parity in 42 states, according to Sunworks CEO Jim Nelson, thanks to the federal investment tax credit, which has been extended through 2021. Industry watchers think we won’t need the tax credit beyond that time. That’s fast work, with quantifiable benefits and no downside.
To learn more about energy subsidies: