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There has been much debate recently about subsidy in the energy industry and for wind energy in particular. According to the EIA, in 2007, wind energy received $724 million in federal support. That’s a lot right? Well, that same year fossil fuels received $3.2 billion in subsidy.
These figures only take into account the direct subsidies. We often overlook the hidden costs, sometimes called “externalities” related to energy generation. To get a full accounting of how much the taxpayer subsidizes energy we have to look at these externalities, and chief among them are damage to human health and damage to the environment.
Burning fossil fuels releases many dangerous compounds that cause lung damage, asthma and premature deaths from air pollution, birth defects from mercury fallout, and damage to buildings, timber harvests and ecosystems from acid rain. The National Academy of Sciences, in a report requested by Congress, calculated these damages at $120 billion a year in the United States. These costs are very real and they are not reflected, or “internalized” in market prices. In effect, they are a hidden subsidy for polluting energy sources.
Coal plants are the biggest source of such external, or “hidden” costs, with domestic non-climate damages alone averaging $62 billion annually, equivalent to 3.2 cents per kWh. Climate-related damages from coal power plants are estimated to range from 0.1 cents to 10 cents per kWh. The cost for cleaning up after coal then ranges from 3.3 cents to 13.2 cents per kWh produced. This is in addition to the billions of dollars in direct subsidies.
In comparison, wind energy is clean. There are no hidden costs—a wind turbine produces no harmful chemicals so there’s no disease or birth defects, no damage to our environment. Like the rest of our electricity sources, it gets a subsidy, to the tune of 2.3 cents per kWh. But that’s a real bargain compared to coal. Between the subsidies and the health and environmental damage, coal costs 3.5-13.4 cents per kWh. That means the direct and indirect subsidies for coal are at least 50% more, and perhaps 5 times more, for coal derived electricity.
U.S. Energy Information Administration: How much does the Federal Government spend on energy-specific subsidies and support?
The numbers are in and…it’s a bit of a mixed bag. Nationally, we saw a 15% increase in capacity since the beginning of 2010. That’s an increase of 5,115 megawatts and brings the country to 40,180 megawatts. Unfortunately, that’s 50% less growth than we saw in 2009.
Minnesota, National Wind’s home state, added 22% capacity, beating the national mark. The state added 400 megawatts in 2010. The added capacity brings Minnesota to 2,200 megawatts of wind energy and bumps it to #5 in the nation for total capacity.
Internationally, the big news is that China has supplanted the U.S. as the world leader in wind energy. China added 16,000 megawatts in 2010, more than three times that of the U.S., bringing its total to 41,800 megawatts. These numbers reflect tremendous growth–China’s wind energy capacity increased by 62% last year. The U.S. had led the world in most wind energy installed since 2008 when it overtook Germany for the top spot.
Elizabeth Salerno, AWEA Director of Industry Data & Analysis, argues that 2011 is likely to be a better year for U.S. wind than 2010. “Wind’s costs have dropped over the past two years, with power purchase agreements being signed in the range of 5 to 6 cents per kilowatt-hour recently,” Salerno said. “With uncertainty around natural gas and power prices as the economy recovers, wind’s long-term price stability is even more valued. We expect that utilities will move to lock in more wind contracts, given the cost-competitive nature of wind in today’s market.” That, combined with the fact that we’ve entered the year with 5,600 megawatts already under construction, suggests a brighter outlook.
Wind energy still faces challenges, however. Chief among these is the inconsistency of federal support. The Production Tax Credit is set to expire in 2012. The American Recovery and Reinvestment Act’s Treasury grant program, set to expire in 2010, received a last-minute extension through 2011. We still lack a national renewable portfolio standard. Congress continues to pass short-term measures and pass the football on the kind of long-term, consistent standards required to ensure clean energy will have a prominent place in our future. The uncertainty caused by this inconsistent support hurts investment and slows growth. The fact that China has overtaken us is evidence of this–they’ve shown leadership, so where’s ours?