Comparison subsidies for coal/nuclear and renewables: apples versus oranges?

The 4th myth in the Greenpeace brochure is:

The growth of renewable energy in Germany is only possible thanks to subsidies

This is the summary of how they try to debunk it:

Support for renewable energy in Germany is nothing compared to the aid that has gone to coal and nuclear power in the last forty years. It received 631 billion euro of aid, compared to 67 billion euro for renewable energy. Also the support for renewable energy reduces year after year.

That doesn’t make much sense. Those three sentences raise more questions than they answered. What do they consider renewables this time (solar and wind or also hydro and/or biomass)? What is their exact definition of a “subsidy” and is that the same for both renewables and coal/nuclear? Even if these are the same or similar, is it fair to compare both subsidies over a 40-year time frame considering coal and nuclear were there from the beginning and renewables only got traction in the last years of that period? They suggest that subsidies for coal/nuclear are high, contrary to those for renewables that are low and ever lowering. Is that really true?

Let’s start with that reduction over time. What is reducing exactly? It is probably not the total subsidies given to renewables. I think that is overall still rising because the installed capacity is still increasing. I suppose they mean the feed-in tariff is lowering over time. If I look at the tariffs in 2014 (up to and including 7/2014 and from 8/2014) which is the time of the last data used, this was true for onshore wind an solar, but it was not true for offshore wind. But I would agree however that all feed-in tariffs will lower eventually.

But more importantly: what are they calling a subsidy? From the text in the brochure I gather that they mean the feed-in tariff:

This support is based on the principle of the “feed-in tariff”, this guarantees renewable energy sustainable access to the grid at a cost equivalent to that of the production. The European Court ruled in 2001 that feed-in tariffs are not governmental aid, which made rapid development of renewable energy possible.

That renewables get access to the grid equivalent to that of production depends on what the definition is of “the production”. If they mean by it “production of electricity”, then I don’t agree. At the time the brochure was published, the feed-in tariff was 3 times higher than the market price for onshore wind and about 5 times for offshore wind. For solar the feed-in tariff was lower (and lowering). If they mean “production of the mills/panels” then I think it might be true. But it is still drives up the cost above the market price. Whether the European Court decreed that the feed-in tariff is not considered governmental aid or not, it is still an extra cost imposed by the government.

On the other hand, it is not really explained what that subsidy for coal and nuclear consists of. My initial assumption was that it could not be a feed-in tariff. Looking somewhat deeper into coal/nuclear subsidies, I encountered lots of hand-waving, but not much specifics. Finally, in the Subsidies and costs of EU energy report by Ecofys I found a description of what are considered subsidies for coal and nuclear:

  • transfer of risk
  • fiscal exemptions for certain users of certain types of fossil fuels
  • support for R&D
  • support for building new power plants, usually in the form of governmental guarantees
  • explicit or implicit limited liability in case of major accidents (reduced insurance costs)

Indeed, quite different from what I would think are subsidies. Furthermore, are these governmental supports also counted at the renewables side? For example, I can’t imagine that there are no R&D costs for renewables or that no R&D costs were compensated by the government or that the renewable industry receives no fiscal exemptions. To me, this looks far from an apple-to-apple comparison.

But there is that incredibly big elephant in the room.

Fossil fuels and nuclear energy got a lot more subsidies than renewable energy. Source: German Energy Transition

Fossil fuels and nuclear energy got a lot more subsidies than renewable energy. Source: German Energy Transition

I think it is unfair to compare energy sources that were already there in the 1970s with an energy source that is only getting traction in the last years. Even if it were two comparable subsidies, the most recent one would inherently be in the advantage.

Also, even if those two numbers are comparable, coal and nuclear were the backbone of energy supply in those 40 years, while renewables were, ahem, the largest supplier of electricity only in 2014. The produced energy by coal and nuclear over this period would overwhelm that of renewables. I would love to see those subsidies calculated as euro per produced MWh. That would be an very interesting number.

In the end, are more subsidies given to coal/nuclear than to renewables? That completely depends on one’s definition of “subsidy” and on the time frame. Varying these two controls, one can prove that no/few/plentiful subsidies were given to any of both sides. Which renders this discussion completely meaningless without clear definitions.

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2 thoughts on “Comparison subsidies for coal/nuclear and renewables: apples versus oranges?

  1. poitsplace

    They made this claim about the oil industry in the US. THEN…they tried to stop it. Suddenly all the subsidies vanished. They were generally tax breaks…and it wasn’t the tens or hundreds of billions of dollars per year often quoted…it was tax breaks that any business would have (granted, some special tax breaks that deal with the fairly reasonable things not covered by normal tax codes). And some of them…were things the critics of such policies would have pushed for themselves (again…double counting a self-fulfilling prophecy). Forbes had an article on it. http://www.forbes.com/sites/energysource/2012/04/25/the-surprising-reason-that-oil-subsidies-persist-even-liberals-love-them/#3058f8a61e86

    I’m guessing that some other “subsidies” they counted were more in a form of government intervention, like loan guarantees. The obvious problem with loan guarantees of course is that they get repaid. It’s simply money the government puts up because the cost of making a new nuclear plant is astoundingly high. I’m not saying it’s good or bad, but I understand the reasoning behind it

    And when you see the figures for world-wide subsidies, most of those numbers are for places like Saudi Arabia, Venezuela, etc…developing nations where they’re sharing the “wealth” by letting people have fuel at or somewhat below cost OR as part of social programs. In the case of socialist nations like Venezuela, they’re are literally citing policies that they themselves favor (fuel for the poor) as a bad subsidy.

    This is all radically different from subsidies to renewables, which are likely hidden because they occur at multiple levels. They’re probably not counting individual tax breaks to home solar producers. They’re not counting the legally enforced policies that force power companies to “subsidize” wind/solar by doing irrational things, like using renewable AT ALL even though overall costs for its use are higher. When spot prices go negative several times a year…where do they think that magic negative money comes from? Any fraction below the cost of producing/providing the energy is money that would not have been lost normally, and is therefore a subsidy to renewables (like when spot prices go completely negative).

    And they most certainly do not count any carbon taxes paid as a subsidy because it’s an added cost to conventional energy that they hate, but for the purposes of any comparison it would be one of the only things that deserves a double-counting because it adds costs to one type of energy (the one that ironically backs up the other) and then it’s used as a subsidy for the others. You can see how absurd it is to not include it in the subsidies lists when you consider doing it for anything else…like say, putting a tax on every phone producer EXCEPT apple, then giving that money to apple. In doing so you would not only be decreasing the cost of iphones (or increasing profits) artificially, you’d be artificially increasing the costs of their competition.

    As always, sorry to ramble. I hope some of this was useful.

    Reply

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