Renewables surpass fossil energy investments, but take a closer look at the odds

This recent Bloomberg wire story in the LA Times points to research that renewables saw $30B more in investments than fossil fuels this year. The article references a Bloomberg New Energy Finance study, saying “Electricity from the wind, sun, waves and biomass drew $187 billion last year compared with $157 billion for natural gas, oil and coal”. I’ll take that as a step in the right direction, but Ben Stills’ article from earlier in the month points out that worldwide fossil fuels receive six times the subsidies of renewable energy sources. The International Energy Agency report notes that it excluded subsidies to energy producers in that calculation too. While the news about Solyndra’s recent bankruptcy is being spun as a sign that solar and other renewables can’t make it on their own, is it any wonder? While some are busy vilifying solar subsidies in the US for a loan that went bad, Iran ranks as the highest supporter of subsidies for fossil fuels. The Solyndra loan accounts for less than a half of a percent of the subsidies to fossil fuels from Iran. The IEA correctly points out that these massive subsidies for fossil fuels are doing more harm than good. The question from my perspective is what can be done about it? These subsidies are generally fueled by a desire to drive domestic economic growth through artificially low energy prices. The basic thinking of policy makers is essentially a prisoner’s dilemma with each government focused on short term issues and the fear of unfair competition. The problem is the horizon over which they are looking. Subsidies on fossil fuels do long term harm because they are exhaustible. (They also exacerbate the problem of the externalities of carbon, but that is a topic for another day) As demand increases (because of artificial economic growth based on the subsidies) and supplies decrease, the subsidies will either have less effect or cost more. A better investment would be in a technology that is not as dependent on the price of fossil fuels. Even if only .5% of the Solyndras of the world succeed we’d be better off than Iran investing $81B in a technology that is in its demise. Conveniently, individuals can make this choice on their own. Investing in clean, distributed power is well within the grasp of individuals right now. There are even companies willing to extend their access to credit to consumers who want to make this move but don’t have the capital to purchase all of their energy for the next 25 years in a single transaction. Companies like SunRun and Solar City will pay the upfront costs and you pay them back over time. On a shorter time scale but still very real companies like General Motors and Nissan will loan you money to purchase one of their electric vehicles. Others will too. Think of how much easier that would be with six times the subsidies.
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