A report issued recently by the Energy Information Administration (EIA) confirms that federal investment in renewable energy sources like wind and solar power have jumped significantly of late.
The report, released on the EIA website on March 12, responds to a September 2014 request to the from U.S. Rep. Fred Upton (R-Mich.), who chairs the House Committee on Energy and Commerce, and Rep. Ed Whitfield (R-Ky.), who chairs the committee’s Subcommittee on Energy and Power.
The Republican congressmen sought an update reflecting Fiscal Year (FY) 2013 data of two earlier EIA reports on direct federal financial interventions and subsidies in energy markets covering FY 2007 and FY 2010.
“As in the prior EIA reports on this subject, the scope of the present report is limited to direct federal financial interventions and subsidies that are provided by the federal government, provide a financial benefit with an identifiable federal budget impact, and are specifically targeted at energy markets,” EIA said in a summary. “As requested, the report focuses on subsidies to electricity production and also includes subsidies to federal electric utilities in the form of financial support.”
As a result, not all federal subsidies were included in the report.
The total value of direct federal financial interventions and subsidies in energy markets decreased 23% between FYs 2010 and 2013, declining from $38bn to $29.3bn, EIA said.
But electricity-related subsidies, primarily directed towards fuels and technologies used for electricity production, increased in both absolute and percentage terms between FY 2010 and FY 2013, reflecting increases in both direct expenditures and tax subsidies.
Outlays from Treasury’s Energy Investment Grant program (that is American Recovery and Reinvestment Act’s Section 1603 grant program for renewable energy) increased from $4.5bn in FY 2010 to $8.2bn in FY 2013, while electricity-related tax expenditures for renewables doubled from $1.9bn to $3.8bn.
No new DOE loan guarantees were issued in FY 2013. The subsidy cost of the loans issued in FY 2010 totaled $1.7bn, but this cost is assessed at the time the loan is issued, so there was no subsidy cost for FY 2013. However, there were still outstanding debts in FY 2013 for loans issued in prior years.
Electricity-related subsidies increased 38% between FY 2010 and FY 2013, from $11.7bn to $16.1bn. This increase was largely the result of a $4.2bn increase, from $1.1bn in FY 2010 to $5.3bn in FY 2013, in support of solar energy, reflecting a large increase in the installation rate of solar facilities utilizing the ARRA Section 1603 grant payments or the 30% Investment Tax Credit. Total subsidies to wind energy also increased between FY 2010 and FY 2013, rising from $5.5bn to $5.9bn.
The changing mix of direct expenditures between FY 2010 and FY 2013 was primarily driven by ARRA’s Section 1603 grant program, according to EIA.
Wind energy received the largest share of direct federal subsidies and support in FY 2013, accounting for 37% of total electricity-related subsidies.
Renewables (excluding biofuels) received 72% of all electricity-related subsidies and support in FY 2013, yet accounted for 13% of total generation in calendar year 2013. More than three-quarters of the subsidies going to renewables were direct expenditures or tax expenditures targeting upfront capital investments for projects expected to produce energy for at least 20 years, EIA reported.
While these programs expanded long-term debt by financing more new generation and transmission projects, the increased debt was offset by lower effective interest rates and more favorable spreads between 30-year Treasury bonds and the cost of debt for investor-owned utilities in FY 2013 compared to FY 2010, according to the report, EIA said.