I listened to a professor recently give a talk on the "State of Electric Utility Policy".  The lecture brought up the two Energy Policy Acts of 1992 and 2005.  Within these Acts various incentives were created in the name of energy efficiencies and non-fossil fuel energy sources.  In wanting to be balanced, the professor brought up what supporters and critics have noted regarding the Acts' tax incentives.

I was taken aback when I heard something along the lines of, “those who don't like subsidies say that because the fed has focused on creating competition at the wholesale electricity level, introducing subsidies for renewable energy really makes for a distorted and unbalanced market.”  I wasn't startled because the professor said it.  I was startled assuming this was indeed what critics claim.

Subsidies are tricky to quantify as they come in various forms such as grants, low-interest loans, and  tax credits.  Regardless, I could not agree more that subsidies distort the market.  Of course they do.  That is their purpose.  

One of the government’s responsibilities in a free market based society is to lead society in a beneficial direction when the free market won’t or takes too long.  An example is a federal tax credit up to $7500 for the purchase of an electric vehicle.  This is in place to encourage the transition from gasoline to electric powered cars.  Subsidies represent a tool the government has to make transitions happen.

To provide a sense of magnitude when it comes to energy subsidies, a Congressional Budget Office testimony in 2017 presented a paper to a Congressional subcommittee showing in 2016, out of a total of $18.4 billion dollars in federal energy subsidies, renewable energy enjoyed the largest share of 59% ($10.86B) with fossil fuels getting 25% ($4.60B).  

As one who believes we need to move away from fossil fuels in favor of renewable energy and as quickly as possible, I don’t want to wait for the already favorable economics of renewable energy to work its way through the electric generation industry under current conditions.  The government should transfer the fossil fuel subsidies over to the renewable energy to further accelerate the transition.  The goal of decarbonizing our electricity generating capacity as quickly as possible can and should be advanced through subsidies.

Criticizing renewable energy subsidies because it hastens decarbonization?  I say, bring on the subsidies!