About to be Published: A Comprehensive Handbook on Solar Energy

‘Sun Towards High Noon: Solar Power Transforming Our Energy Future’ will be published in paperback by Pan Stanford Publishing on March 22nd. It will be listed at $34.95 but a 30% discount is available along with free shipping when ordered online at www.crcpress.com (Promo Code STA01). The latest volume in the Pan Stanford Series on Renewable Energy, it was edited by Dr. Peter F. Varadi, a solar energy pioneer and author of an earlier volume in the series ‘Sun Above the Horizon: Meteoric Rise of the Solar Industry’ (see below). Peter is also a contributing author in this new volume, along with Wolfgang Palz, Michael Eckhart, Paula Mints, Bill Rever, John Wolgromuth, Frank Wouters, and Allan Hoffman.

The broad scope and comprehensiveness of the book can be seen in its detailed Table of Contents reproduced below:

1. Meteoric Rise of PV Continues 1
1.1 Sun above the Horizon 2
1.2 Sun towards High Noon 6
2. New PV Markets Sustaining Mass Production 9
2.1 Utilization of the Terrestrial Solar Electricity 10
2.2 Solar Roofs for Residential Homes 13
2.3 Grids, Mini-Grids, and Community Solar 24
2.4 Commercial PV Systems 32
2.5 Utility-Scale Solar 43
2.5.1 Current Status 47
2.5.1.1 Concentrating solar power systems 47
2.5.1.2 Concentrating photovoltaic systems 50
2.5.1.3 Flat-plate photovoltaic systems:
fixed and tracking 51
2.5.2 Future Prospects 54
2.6 Important Large Market: Solar Energy and
Clean Water 56
2.6.1 Desalination and Disinfection: Introduction 56
2.6.2 Desalination 56
2.6.3 Disinfection 62
2.6.4 Conclusion 63
2.7 Quality and Reliability of PV Systems 64
2.7.1 Module Qualification Testing 65
2.7.2 Module Safety Certification 67
2.7.3 Module Warranties 68
2.7.4 Failure Rates in PV Systems 70
2.7.5 Module Durability Data 71
2.7.6 ISO 9000 72
2.7.7 IECQ and IECEE 72
2.7.8 To Further Improve Long-Term Performance 73
2.7.9 International PV Quality Assurance Task Force 75
2.8 Storage of Electrical Energy 83
2.8.1 Introduction 83
2.8.2 Why Is Electrical Energy Storage Important? 83
2.8.3 What Are the Various Forms of Electric Storage? 85
2.8.4 Applications of Energy Storage and Their Value 92
2.8.5 Capital Costs of Energy Storage 93
2.8.6 Concluding Remarks 94
2.9 Solar Energy and Jobs 95
2.9.1 Introduction 95
2.9.2 What Are the Facts? 95
2.9.3 Concluding Remarks 100
3. Financing 101
3.1 Financing of PV 102
3.2 Subsidies and Solar Energy 104
3.2.1 Introduction 104
3.2.2 What Forms Do Energy Subsidies Take? 104
3.2.3 What Is the History of US Energy Subsidies? 105
3.2.4 What Has All This Meant for Solar PV? 108
3.2.5 Concluding Remarks 110
3.3 Wall Street and Financing 111
3.3.1 Policy Drivers for Solar Energy Financing 111
3.3.1.1 The importance of policy to financing 113
3.3.2 Federal Policies 114
3.3.2.1 Federal RD&D 114
3.3.2.2 Public Utility Regulatory Policies Act 117
3.3.2.3 Investment tax credits 118
3.3.2.4 Commercialization and deployment 120
3.3.2.5 Government purchasing 122
3.3.3 State and Local Policies 123
3.3.3.1 Renewable Portfolio Standards and RECs 123
3.3.3.2 Solar Set-Asides and SRECS 123
3.3.3.3 Net energy metering 124
3.3.3.4 Leading state examples 124
3.3.4 International Policy for Solar Energy Financing125
3.3.4.1 Policies of individual governments 126
3.3.4.2 International agencies 129
3.3.4.3 Multi-lateral development banks 131
3.3.4.4 Impact of NGOs on government policy 132
3.4 Solar Market Segmentation and Financing Methods 136
3.4.1 Utility-Scale Solar Project Financing 136
3.4.2 Commercial & Institutional Rooftop Financing 136
3.4.3 Community Solar 137
3.4.4 Residential Rooftop Financing 137
3.4.4.1 PPA model 138
3.4.4.2 Inverted lease 138
3.4.4.3 Loan-to-ownership 139
3.5 Solar Project Financing 140
3.5.1 Traditional Power Generation Financing 140
3.5.2 PURPA and the Development of Non-Recourse
Financing 140
3.5.3 Conditions Required for Project Financing 142
3.5.4 Overall Capital Structure: Equity, Tax
Equity, and Debt 143
3.5.5 Tax Equity Using the Investment Tax Credit 144
3.5.6 Bank Loans 145
3.5.7 Institutional Capital 146
3.5.8 Project Bonds 147
3.6 Capital Market Investment in Solar Securities 148
3.6.1 Equity Market Investment in Solar Companies 148
3.6.2 Yieldcos and Other Portfolio Companies and
Funds 150
3.6.3 Green Bonds 153
3.6.4 Securitization 155
3.7 Summary 157
3.8 Glossary 158
4. Present and Future PV Markets 161
4.1 The Global View of PV 162
4.2 The Present and Future of Neglected PV Markets:
Africa and the Middle East 164
4.2.1 Introduction 164
4.2.2 Africa 166
4.2.3 Middle East and North Africa 183
4.3 The Present and Future Market in the Americas 192
4.3.1 The United States of America 194
4.3.2 Canada 204
4.3.3 Countries in Latin America 205
4.4 The Present and Future Market in Europe 208
4.5 The Present and Future Markets in Asia 220
4.6 The Present and Future Markets in Australia
and in Oceania 231
4.7 Global Community Unites to Advance Renewable
Energy: IRENA 236
4.7.1 Start of IRENA 238
4.7.2 Hermann Scheer
4.7.3 IRENA’s Roots and Early Days 241
4.7.4 Institutional Setup 246
4.7.5 Hub, Voice, Resource 247
4.7.6 IRENA’s work 248
4.7.7 The Way Forward 252
4.7.8 Glossary 254
5. The Impact of Solar Electricity 255
5.1 The Impact of Solar Electricity 256
5.2 In the Twilight of Big Oil, in Retrospect, PV Was
a Missed Boat 259
5.3 PV and the Brave New World of the Electric Utilities 267
6. Outlook to the Future 281
About the Contributors 291
Index 295

The value of this new book is captured in the two back cover comments:

“This comprehensive and timely book provides the reader with a very thorough technical, regulatory, and financial overview of the global solar (PV) industry. Featuring internationally eminent contributors from the who’s who of solar industry experts, this book offers insights, analysis, and background on all the key issues facing this rapidly growing industry. It will be an invaluable reference and resource for scholars, investors, and policymakers dealing with the emerging solar power phenomenon.” (Branko Terzic, Atlantic Council, Former Commissioner/U.S. Federal Energy Regulatory Commission)

“The long-term welfare of people on our planet depends on an energy system heavily dependent on solar energy. This solar energy handbook presents a well-documented, comprehensive, and insightful view of solar energy’s past, present, and future. Its preeminent contributing authors include solar energy pioneers, visionaries, and practitioners who bring a wealth of experience and insights into solar energy markets, financing, policy, and technology.” (Karl R. Rabago, Executive Director/Pace Energy and Climate Center, Elisabeth Haub School of Law, Pace University)

Addressing Climate Change – A Needed Policy

The following editorial appeared today (25 April 2015) in the Washington Post:

““CLIMATE CHANGE can no longer be denied,” President Obama said in Everglades National Park on Wednesday. “It can’t be edited out. It can’t be omitted from the conversation.” No matter how much, Mr. Obama might have added, Republican presidential hopefuls would like to neglect the matter.
Since the GOP presidential season began, Sen. Ted Cruz (Tex.), the first major Republican to declare his candidacy, sounded the most extreme note on global warming, insisting that his attacks on scientists make him akin to Galileo standing up to 16th-century theological authorities. Shortly after announcing his candidacy, Sen. Marco Rubio (Fla.) offered some vague doubts about how much humans contribute to climate change. Former Florida governor Jeb Bush, who has not yet formally entered the race, said that he is “concerned” about climate change and that the United States should negotiate with other nations about it, but he also suggested that the private economy has already addressed the problem and that he’s more worried about the “hollowing out of our industrial core.”
The common element among GOP leaders is resistance to the notion that the government needs a significant policy against greenhouse-gas emissions. What would the national conversation be like if Mr. Obama got his way and they accepted the need to act with ambition?
Ironically, it wouldn’t be kind to some of Mr. Obama’s policies, but that’s not his fault. Because of the GOP’s abdication, the Obama administration has cobbled together a climate plan from legal authorities it could exercise without Congress’s say-so. The result is an awkwardly designed and inefficient approach. A more reasonable Congress could shape a more efficient plan, with an eye toward sparing the economy gratuitous pain.
Economists have known for decades how to do this. First, the government should eliminate energy subsidies of all kinds — for fmossil fuels as well as renewable energy. Then Congress should put a significant tax on carbon-dioxide emissions and set it to rise over time. The resulting market forces would decide how the economy would move to a greener state. Consumers and businesses would have more reason to consider wasting less electricity, buying efficient appliances and investing in products that require less carbon dioxide to make. Generators of electricity would have an incentive to use cleaner fuels and renewable sources of energy — when it makes economic sense, not when the Environmental Protection Agency decides they must. Companies that exploit giveaway subsidy policies would have to compete fairly.
Republicans, meanwhile, could return any revenue raised to taxpayers, either directly or by reducing taxes on labor, on corporations or in any manner of their choosing.
The nation’s climate debate has been impoverished by the absence of responsible conservative voices. A revenue-neutral carbon tax is a reform Republicans should love. It could end irrational federal subsidies, lower the GOP’s most-hated taxes and harness market efficiency to provide some insurance for the planet at a minimal cost. Instead, the party’s would-be leaders appear to be looking for any way to avoid engaging seriously.”

I don’t always agree with the Post’s editorial positions, but on this subject I agree strongly.  My views on the need for putting a price on carbon emissions to allow market forces to address global warming and climate change are well documented in several of the posts you will find on this blog web site. I also agree, and have written, that government subsidies to energy companies are unbalanced and need redress if not outright elimination so that energy technologies can compete on a level playing field. I also agree that using the resulting revenue proceeds of putting a price on carbon emissions to address inequities and reduce other taxes is a basis for bipartisan cooperation between Democrats and Republicans.

It is more than time for the U.S. Congress to get on the right side of history and address the global warming issue in a way that protects the long-term interests of the nation and the larger global community.

Looking Back at Energy Policy in the 1970’s

Recently I have spent some time cleaning up some boxes in my basement, as ‘requested’ by my wife. Three of the boxes contained personal files from my several years as Staff Scientist with the U.S. Senate Commerce Committee in the mid 1970’s. This was the period following the Arab Oil Embargo of 1973-4 when the U.S. first began to think seriously about energy policy. The history of this period is still largely to be written, and it promises to be a rich history. It also represents a unique period in recent American political history in that Democrats and Republicans occasionally cooperated to pass legislation that was deemed to be in the national interest.

Reviewing the files in the boxes took me several days because I.found the contents much more interesting than anticipated after 35 years of non-attention. I also will donate the files to the Senate Archives after I have absorbed more of and thought more about the contents.

The Oil Embargo focused U.S. attention on the country’s significant and increasing dependence on imported oil from unstable and often unfriendly parts of the globe. While only about a quarter of total oil consumption was affected at the time, the Embargo was a rude shock to Americans when they had to endure higher prices and long lines at gas stations and even alternate day access to the pumps based on their license plate numbers.

Suddenly, energy became a dominating issue and the Ford Administration and the Congress were struggling to reassure the American public and devise policies that addressed this increasing import dependence. Lots of disagreements ensued, particularly on oil pricing, but attention also began to be focused on limiting energy demand and indigenous energy resources. Thus was born a large push for greater use of America’s large resources of coal and for increased use of nuclear power. Most economists talked of the one-to-one relationship between gross national product and energy consumption (not true, as has subsequently been demonstrated) and a favorite theme of nuclear supporters at the time was to call for a “doubling every decade”, meaning that we should double the number of nuclear power plants every ten years until the turn of the century. It was also a time when domestic oil production had just peaked and natural gas supplies were thought to be in limited supply. This led to restrictions on the use of natural gas, reduced use of oil for power generation, announcements of many new nuclear power plant construction projects, increased attention to reducing energy demand in buildings, industry, and transportation, attention to non-fossil fuel energy resources (read ‘renewables’), and calls for a national energy strategy. In the intervening years we’ve made progress on a number of these issues, some more than others, but we still lack a national energy strategy, a critical missing piece as we penetrate further into the 21st century.

A major step forward was the passage in 1975 of the Energy Policy and Conservation Act (EPCA – Public Law 94-163), the country’s first comprehensive energy legislation. It passed that summer in the House by more than a 3:1 margin and by 3:1 in the Senate, triggering a 3-month House-Senate Conference to iron out differences. The bill, as finally negotiated, was signed by President Ford just before Christmas that year despite Republican threats of a Presidential veto. It created many features of our current energy scene, which are discussed below. I also want to recognize those I consider the major legislative leaders, both Republican and Democrat, who fought for this legislation across party lines and brought it to the President’s desk. I do not believe that they have yet received the full recognition that they richly deserve.

EPCA’s primary goals were to increase energy supply, reduce demand, put a focus on energy efficiency, and give the President more tools with which to respond to energy supply disruptions. It’s primary actions were to:
– establish the Strategic Petroleum Reserve. The need for such a reserve had been recognized for decades, since the 1940’s, but the Oil Embargo underscored the critical need for such a reserve.
– Part B/Title III established the Energy Conservation Program which gave “authority to develop, revise, and implement minimum energy conservation standards for appliances and equipment.” It also authorized an appliance labeling program, to assist consumers in making energy- and cost-wise purchasing decisions.
– Part A/Title III established the Corporate Average Fuel Economy (CAFE) standards for new automobile fleets. This legislation, which remained unamended for 32 years, is still the nation’s most impactful energy conservation measure.
– other provisions included loan guarantees to encourage domestic coal and oil production by smaller firms, and additional presidential authority to act in times of emergencies.

The principal legislative leaders behind EPCA (see photos below) included Fritz Hollings (D-SC) who was the prime mover in the Senate of the CAFE legislation, Warren Magnuson (D-WA) who chaired the Senate Committee On Commerce, Henry ‘Scoop’ Jackson (D-WA) who chaired the Senate Committee on Interior and Insular Affairs, Ed Muskie (D-ME) who chaired the Senate Committee on Environment and Public Works, Chuck Percy (R-IL), Ted Kennedy (D-MA), and John Tunney (D-CA), all strong Senate supporters of energy conservation, John Dingell (D-MI) who chaired the House Energy and Commerce Committee, Harley Staggers (D-WV) who chaired the House Science and Technology Committee, and Phil Sharp (D-IN) who shepherded the CAFE legislation through the House. One must also give credit to President Gerald ‘Gerry’ Ford of Michigan who signed the bill into law despite severe pressure not to from many of his constituents and advisors. All deserve the thanks of a grateful nation for putting national interest ahead of party politics as we don’t do too often today.

My final thought is the recognition that critical energy issues were clearly identified in the 1970’s, 40 years ago, but that progress since then has been slower than then hoped for. This has hurt the country in terms of preparing for the future (wje still lack a national energy policy codified by the Congress), less job creation and economic growth in clean energy industries, and unnecessary environmental degradation. We have made progress in the years following the scary wake-up call to the nation following the Oil Embargo and the Iran-Iraq War of the late 1970’s when global oil production was curtailed. Nevertheless, we can and must do better in the future if we are to successfully combat global warming and climate change (this became a public issue only after Jim Hansen at NASA began to talk about the issue in 1979) and ensure America’s place in the emerging and inevitable renewable energy society.

In order, left-to-right: Sen. Ernest ‘Fritz’ Hollings, Sen. Warren Magnuson, Sen. Henry ‘Scoop’ Jackson, Sen. Ed Muskie Sen. Ted Kennedy, Sen. John Tunney, Sen. Charles ‘Chuck’ Percy, Rep. John Dingell, Rep. Harley Staggers, Rep. Plil Sharp.

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Thoughts On U.S. Energy Policy – Updated

In October 2008, just prior to the U.S. presidential election, I drafted a piece entitled ‘Thoughts on an Energy Policy for the New Aministration’. It was published about a month later and republished as my first blog post in May 2013. I said at that time “What I find interesting about this piece is that I could have written it today and not changed too many words, an indication that our country is still struggling to define an energy policy.” This post is my attempt to look back at what I said in 2008 and 2013 and see if my perspectives and views have changed.

In that piece I started off by listing 14 items that I labeled as ‘facts’ on which most can agree. These ‘facts’ are reproduced below, followed by my comments on what may have changed since 2008.

1. People do not value energy, they value the services it makes possible – heating, cooling, transportation, etc. It is in society’s interest to provide these services with the least energy possible, to minimize adverse economic, environmental and national security impacts.

2. Energy has always been critical to human activities, but what differentiates modern societies is the energy required to provide increasingly high levels of services.

3. Population and per capita consumption increases will drive increasing global energy demand in the 21st century. While not preordained, this increase will be large even if others do not achieve U.S. per capita levels of consumption.

4. Electrification increased dramatically in the 20th century and will increase in the 21st century as well. The substitution of electricity for liquid transportation fuels will be a major driver of this continued electrification.

5. Transportation is the fastest growing global energy consumer, and today more than 90% of transportation is powered by petroleum-derived fuels.

6. Globally energy is not in short supply – e.g., the sun pours 6 million quads of radiation annually into our atmosphere (global energy use: 460 quads). There is considerable energy under our feet, in the form of hot water and rock heated by radioactive decay in the earth’s core. What is in short supply is inexpensive energy that people are willing to pay for.

7. Today’s world is powered largely by fossil fuels and this will continue well into the 21st century, given large reserves and devoted infrastructure.

8. Fossil fuel resources are finite and their use will eventually have to be restricted. Cost increases and volatility, already occurring, are likely to limit their use before resource restrictions become dominant.

9. Increasing geographic concentration of traditional fossil fuel supplies in other countries raises national security concerns.

10. The world’s energy infrastructure is highly vulnerable to natural disasters, terrorist attacks and other breakdopwns.

11. Energy imports, a major drain on U.S. financial resources, allow other countries to exert undue influence on U.S. foreign policy and freedom of action.

12. Fossil fuel combustion releases CO2 into the atmosphere (unless captured and sequestered) which mixes globally with a long atmospheric lifetime. Most climate scientists believe increasing CO2 concentrations alter earth’s energy balance with the sun, contributing to global warming.

13. Nuclear power, a non-CO2 emitting energy source, has significant future potential but its widespread deployment faces several critical issues: cost, plant safety, waste storage, and weapons non-proliferation.

14. Renewable energy (solar, wind, biomass, geothermal, ocean) has significant potential for replacing our current fossil fuel based energy system. The transition will take time but we must quickly get on this path.”

What has changed in my opinion are items 9, 11, and 12. The availability of large amounts of home-grown natural gas and oil at competitive prices via hydraulic fracturing (fracking) of shale deposits has turned the U.S. energy picture upside down. It may do that in other countries as well. Whereas the U.S. was importing over 50% of its oil just a few years ago, that fraction is now under 40% and the U.S. is within sight of becoming the largest oil producer in the world, ahead of Russia and Saudi Arabia. Whereas in recent years the U.S. was building port facilities for the import of LNG (liquified natural gas) these sites are being converted into LNG export facilities due to the glut of shale gas released via fracking and the large potential markets for U.S. gas in Europe and Asia (where prices are higher than in the U.S.).

The phenomena of global warming and climate change due to mankind’s combustion of carbon-rich fossil fuels are also becoming better understood, climate change deniers have become less and less visible, and the specific impacts of climate change on weather and water are being actively researched. An important change is the substitution of natural gas for coal in new and existing power plants, which has reduced the share of coal from 50% just a few years ago to less than 40% today. This has reduced U.S. demand for domestic coal, which is now increasingly being sold overseas.

The second part of the 2008 article was a set of 10 recommendations that are reproduced below:

1. Using the bully pulpit, educate the public about energy realities and implications for energy, economic and environmental security.

2. Work with Congress to establish energy efficiency as the cornerstone of national energy policy.

3. Work with Congress to provide an economic environment that supports investments in energy efficiency, including appropriate performance standards and incentives, and setting a long-term, steadily increasing, predictable price on carbon emissions (in coordination with other countries). This will unleash innovation and create new jobs.

4. Consider setting a floor under oil prices, to insure that energy investments are not undermined by falling prices, and using resulting revenues to address equity and other needs.

5. Work with Congress to find an acceptable answer to domestic radioactive waste storage, and with other nations to address nuclear power plant safety issues and establish an international regime for ensuring nonproliferation.

6. Establish a national policy for net metering, to remove barriers to widespread deployment of renewable energy systems.

7. Provide incentives to encourage manufacture and deployment of renewable energy systems that are sufficiently long for markets to develop adequately but are time limited with a non-disruptive phaseout.

8. Aggressively support establishment of a smart national electrical grid, to facilitate use of renewable electricity anywhere in the country and mitigate, with energy storage, the effects of intermittency.

9. Support an aggressive effort on carbon capture and sequestration, to ascertain its feasibility to allow continued use of our extensive coal resources.

10. Remove incentives for fossil fuels that are historical tax code legacies that slow the transition to a new, renewables-based, energy system.

I still support these recommendations, buttressed by the following observations:

– more public education on global warming and climate change has taken place in recent years, and a majority of Americans now accept that global warming is driven by human activities.

– there is a lot of lip service given to the need for increased energy efficiency, and President Obama’s agreement with the auto industry to increase Corporate Average Fuel Economy (CAFE) standards over the next decade is an important step forward. What is lacking, and slowing needed progress toward greater efficiency, is a clear policy statement from the U.S. Congress that identifies and supports energy efficiency as a national priority.

– with the shutting down of the Yucca Mountain long-term radioactive waste storage facility in Nevada, the Obama Administration is searching for alternatives but believes the country has time to come up with a better answer. This may be true, or may not, and only time will tell. It is not a uniquely American problem – other countries are struggling with this issue as well and most seem to favor deep geological storage. This is a problem we will definitely be handing down to our children and grandchildren,

– net metering as a national policy, as is true in several other developed countries, has gone nowhere in the six years since 2008. It is another example of a lack of Congressional leadership in establishing a forward-looking national energy policy.

– progress has been made on moving renewable energy into the energy mainstream, but we have a long way to go. NREL’s June 2012 report entitled ‘Renewable Electricity Futures Study’ made it clear that renewables could supply 80% of U.S. electricity by 2050 if we have the political will and make appropriate investments. The study puts to rest the argument used by the coal and other traditional energy industries that renewables can’t do the job. The public needs to understand that this canard is inaccurate and not in our country’s long term interests.

– the need for a national grid, and localized mini-grids (e.g., on military bases), has been recognized and appropriate investments are bring made to improve this situation. A national smart grid, together with energy storage, are needed to assure maximum utilization of variable clean energy sources such as wind and solar. Other renewable energy sources (geothermal, biomass, hydropower, ocean energy) can be operated as baseload or near base load capacity. And even intermittent wind and solar can supply large amounts of our electricity demand as long as we can transfer power via the national grid and use averaging of these resources over large geographical areas (if the wind isn’t blowing in X it probably is blowing in Y).

– the carbon capture and sequestration effort does not seem to be making much progress, at least as reported in the press. My blog post entitled ‘Carbon Capture and Sequestration: Is It a Viable Technology?’ discusses this issue in some detail.

– with respect to reducing long-standing and continuing subsidies for fossil fuel production, no progress has been made. Despite President Obama’s call for reducing or eliminating these subsidies the Congress has failed to act and is not likely to in the near-term future. This is a serious mistake as these industries are highly profitable and don’t need the subsidies which divert public funds from incentivizing clean energy technologies that are critical to the country’s and the world’s energy future.

– today’s electric utility sector is facing an existential threat that was not highly visible just a few years ago. This threat is to the utility sector’s 100 year old business model that is based on generation from large, centralized power plants distributing their energy via a radial transmission and distribution network. With the emergence of low-cost decentralized generating technologies such as photovoltaics (PV), these business models will have to change, which has happened in Germany and will eventually happen in the U.S. Keep tuned as this revolution unfolds.

As a final word I repeat what I have said in earlier posts: we need to put a long-term, steadily increasing price on carbon emissions that will unleash private sector innovation and generate revenues for investments in America’s future. This is a critical need if we are to successfully address climate change, create new U.S. jobs in the emerging clean energy industry, and set an example for the world.

Subsidies For Energy Technologies: Are They Fair?

Subsidies for energy technologies is a complicated and contentious issue and one that a few studies have tried to illuminate for the rest of us. For what I consider informative and balanced discussions I would refer you to
– ‘Reforming Fossil-Fuel Subsidies to Reduce Waste and Limit CO2 Emissions while Protecting the Poor’, Global Subsidies Initiative of the International Institute for Sustainable Development (iisd), September 2012
– Ken Silverstein’s October 23, 2013 piece in the e-journal energybiz entitled ‘Fossil Fuels and Green Energy Feed Mightily at the Public Trough’
– ‘Analysis & Projections: Direct Federal Financial Interventions and Subsidies in Energy in Fiscal Year 2010’, U.S. Energy Information Administration (EIA), August 1, 2011
– ‘Federal Financial Support for the Development and Production of Fuels and Energy Technologies’, Congressional Budget Office (CBO), March 2011.

There are many other useful sources of information as well. Of course vested interests on all sides of the energy debate have taken their shot at this topic. For example, the views of the fossil fuel industries can be found in the publications of the Institute for Energy Research (IER) and often in the pages of the Wall Street Journal. Supporters of subsidies for renewable energy technologies are active as well in expressing their views via statements by trade associations such as the American Wind Energy Association and the Solar Energy Industries Association. All in all, a difficult subject to get one’s objective hands around, but I will try (foolishly?) in this blog post. Admittedly a strong advocate for rapid progress toward a renewable energy future, I will try to be as balanced as I can in my discussion, as I truly want to better understand this subject and believe that informed public opinion is the long term prerequisite to a sustainable energy future. I will let you judge how successful I have been.

I start with a few definitions and some ‘facts’ that all sides in this debate can hopefully agree upon.
– “Subsidies are one of many policy instruments used by governments to attain economic, social and environmental objectives.” (iisd)
– “Energy subsidies, in particular, are often used to alleviate energy poverty and promote economic development, by enabling access to affordable modern energy services.” (iisd)

The EIA, in its analysis, refers to ‘energy subsidies and interventions’ in five categories: direct cash expenditures to energy producers and consumers, tax expenditures via provisions in the tax code, R&D expenditures for increasing energy supplies or improving energy efficiency, loans and loan guarantees for certain energy technologies, and electricity supply programs targeted at specific geographical regions (e.g., TVA and BPA). The discussion in this blog post touches on the first four.

U.S. tax code energy incentives were first established in 1916 and until 2005 were focused on stimulating domestic production of oil and natural gas. Incentives for improved energy efficiency and renewable energy (solar, wind, ….) were introduced starting in 2006 and by 2011 accounted for 78% of a substantially increased amount of federal energy-related tax expenditures in that year. However, it is important to recognize that this large support for ‘clean energy’ was due to passage of the American Recovery and Reinvestment Act of 2009 (ARRA), and did not imply a reduction in tax code incentives for fossil fuels or nuclear energy. To put some numbers into this discussion, CBO estimates that tax preferences (“..special deductions, special tax rates, tax rates, tax credits, and grants in lieu of tax credits..”) in 2011 amounted to $20.5 billion. An additional $3.4 billion was provided in FY 2012 by DOE in R&D support for fossil fuels, nuclear energy, energy efficiency, and renewable energy.

CBO also points out that of the four major tax preferences operative in 2011, only four were permanent parts of the tax code (the energy efficiency part of ARRA expired at the end of 2011 and the tax preferences for renewable energy were scheduled to expire by 2013), of which three were directed at fossil fuels and one at nuclear energy.

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A quick word about nuclear energy: the Atomic Energy act of 1946, following the end of WWII, created a framework for government control of civilian nuclear power plants for electricity generation. Industry was concerned about potential liability in the event of a nuclear accident and the limited amounts of liability coverage initially offered by the insurance market, so in 1957 Congress passed and President Eisenhower signed into law the Price-Anderson Act, which has been renewed several times since, and “..governs liability-related issues for all non-military nuclear facilities constructed in the United States before 2026. The main purpose of the Act is to partially indemnify the nuclear industry against liability claims arising from nuclear accidents while still ensuring compensation coverage for the general public.” (Wikipedia). In its latest incarnation the Act requires the nuclear industry to cover the first $12.6 billion of damages, with costs above that to be covered by retroactive increases in nuclear utility liability or the federal government. Regardless of one’s view of nuclear energy, I believe it is fair to say that a U.S. civilian nuclear power industry would not exist without the Price-Anderson Act.

What is my take on all this, an issue I followed closely through my many years in federal service and still follow? Energy is clearly a driving force in economies, and prominence of nations at various points in history have reflected their energy sources – e.g., the Dutch with wind power in the 1600’s, the British with coal in the 1800’s, and the U.S. with oil in the 20th century. So energy is critically important and U.S. policies to encourage oil, natural gas and coal production were central to America’s emergence as a leading economy and nation. However, the context has changed – we now have well-established fossil fuel industries, supplying approximately 80% of global energy today, and we now understand that combustion of fossil fuels puts large amounts of pollutants and carbon dioxide into the atmosphere. These carbon emissions, which mix into the global atmosphere regardless of where they are generated, cause global warming as they change the earth’s energy balance with the sun and create climate change that seems irrefutable and which we are struggling to better understand. So the world has a conundrum: use of fossil fuels helps improve human welfare in lots of ways, but that use is creating a problem that is a severe threat to the planet’s health. These considerations have led to major efforts to develop and deploy clean energy technologies – improved energy efficiency to reduce our need for carbon-emissive fossil fuels, and renewable energy technologies (solar, wind, geothermal, biomass, hydropower, ocean) that do not emit carbon dioxide during power generation. Nuclear power is also a non-carbon-emitting power source that is receiving increased attention.

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Some people, including President Obama, have called for a phase-out of oil industry incentives, especially in light of unusually high profits recorded by major oil companies such as Exxon and Shell. This seems reasonable, as high oil prices today are providing adequate incentive to these companies. A complicating factor is that smaller, independent producers drill most of the onshore U.S. oil wells today, and are responsible for creating the wells that are delivering increasing amounts of home-grown shale oil and gas that are reducing consumer costs, creating domestic jobs, and bringing some factories back to the U.S. from overseas locations. If jobs and national security are our immediate priorities, then incentives for this domestic production by small producers should be maintained. The hitch is that this should not slow down national investment in clean energy technologies which are critical to our long-term economic and national security interests. This is where Congress has to exercise wise judgement as it sets national energy policy – taking care of today’s needs while investing in the future. The transition from today’s fossil-fuel-dependent world will take time, but it would be irresponsible to not look down the road and make necessary investments today that put us firmly on the road to a sustainable energy future. Without government intervention of this type, “..households and businesses do not have a financial incentive to take into account the environmental damage or other costs to the nation associated with their choices about energy production and consumption…unless the government intervenes, the amount of research and development (R&D) that the private sector undertakes is likely to be inefficiently low from society’s perspective because firms cannot easily capture the ‘spillover benefits’ that result from it.” (CBO). Our current energy pricing system does not take into account the ‘externalities’ of energy use such as public health effects and dependence on other countries for part of our energy needs.

In the end it comes down to values, as reflected in policy and budgets. When I first came to Washington, DC and worked on Capitol Hill I was told quickly that ‘budgets are policy’. I feel strongly that we lack a forward-looking national energy policy, which I ascribe to a failure by Congress to do its job of looking to the future, anticipating issues that will face the country, and taking the necessary steps to begin addressing those issues. When such a policy vacuum exists in Washington states often take the lead out of necessity, and that is happening now. We can clearly do better at the federal level to serve our long-term national interests.