Tuesday, November 1, 2011

No U.S. Energy Plan? -Or- Shadow Political Energy Plan of Very Comprehensive Design?

Those that debate U.S. energy production and energy delivery have common ground in pointing out that U.S. policy makers [politicos] have no comprehensive plan for energy. Since the oil shocks of the 1970’s, for thirty plus years, no “comprehensive energy plan” has come forth from policy makers.

Contrary to popular opinion, politicos do in fact have a very comprehensive plan. It’s a political plan for energy of very comprehensive design.

Starting with FDR and his administration and minions replacing private electric production and creating “public utilities” [legal monopoly] through current subsidies, tax preferences, mandatory purchase agreements, price fixing schemes, threat of tax if profits are too high, etc., etc. a comprehensive political energy policy has developed/evolved.

Where is this comprehensive plan? Why is it not bound in a four volume set so we can peruse the plan‘s intricacies, plan direction, plan cost, etc.? Because it lies in the shadows. A shadow politico plan if you will, that specializes in pandering to special interests for political constituency building purposes. Its an energy plan based on political constituency building through the mechanism of government and funded by taxpayer dollars.

Among the many, many flaws within the shadow politico energy program there exists one major and fatal flaw: taxpayer dollar subsidy. If politicos through the mechanism of government find that all subsidies for all energy sources are removed they will find their politically built constituencies through the use of taxpayer dollars suddenly dissolve.

Pundits, talking heads, and media types like to point out Big Oil. What about Big Wind and Big Solar? What about merely calling it “Big Energy Complex”.

If it is “Big Energy Complex” who is really the big and small within this complex regarding subsidies? The political framed argument coming from many is Big Oil. Is that true?

“So I ask the question: If wind has all these drawbacks, is a mature technology, and receives subsidies greater than any other form of energy per unit of actual energy produced, why are we subsidizing it with billions of dollars and not including it in [the energy subsidy] debate? Why are we talking about Big Oil and not talking about Big Wind?” -Senator Lamar Alexander


“Well, I am one Senator who is very intrigued with the idea of looking at all of the tax breaks in the tax code. There are currently about $1.2 trillion a year in what we call tax expenditures, and those are intended to be for tax breaks we think are desirable. I am ready to look at all of them and use the money to reduce the tax rate and/or reduce the Federal debt. But if we are going to talk about energy subsidies — tax subsidies — we ought to talk about all energy subsidies.”

Renewable vs. Fossil-energy Subsidies

Senator John Cornyn of Texas has asked the Congressional Research Service to do just this. It is an excellent study, and I commend Senator Cornyn for asking for it. This is some of what it finds: According to the report, fossil fuels contributed about 78 percent of our energy production in 2009 and received about 13 percent of the Federal tax support for energy.

However, during that same time 10.6 percent of our energy production was from renewables and 77.4 percent of our energy tax subsidies went to renewables. So if we are to compare the subsidy per unit of energy, the estimated federal support per million BTUs [or British Thermal Units] of fossil fuels was 4 cents, while support for renewables was $1.97 per million BTUs.

So, federal subsidies for renewables are almost 50 times as great per unit of energy as federal subsidies for fossil fuels. [But] this would be distorted because hydroelectric power is included within renewables. Most people think of renewables as ethanol, solar, or wind and those are the renewables that actually get the subsidies, while hydroelectric does not.

So, the federal taxpayer support for renewable energy is at least 50 times as great per unit of energy as compared with fossil fuel energy. So why aren’t we including subsidies for all renewables in our debate? Specifically, if we are talking about ‘Big Oil,’ why don’t we talk about ‘Big Wind?’ The Senate seems an appropriate place to talk about ‘Big Wind.’

The subsidies are in great peril of being removed. Why? Three items have come to the surface:

(a) one set of politicos want subsidies for oil companies removed in lieu of a windfall profits tax on oil companies,

(b) a subset of the group identified in (a) above and an exogenous group want subsidies for all energy companies removed,

(c)  subsidies in general are “discretionary” spending. With the U.S. Government now at $14.9 million of national debt, spending must be cut. Subsets of both groups (a) and (b) above and yet another exogenous group want to tackle the easier aspect of discretionary spending rather than entitlements. (2)

Those politicos that have championed subsidies and the inherent ability of the subsidy [taxpayer dollars] to reward special interests and hence lend to political constituency building will find some very nasty consequences in the reduction of “discretionary spending” and the consequential removal of subsidies:

(1) those politicos championing “subsidy” will easily be identifiable as they will quickly oppose removing all energy subsidies and want to retain the particular subsidy associated with their particular constituency building exercise,

(2) the price of energy from fossil fuel will rise marginally while renewables will rise many fold,

(3) the taxpayer-voter will suddenly have transparency regarding the comprehensive political energy plan,

(4) the consumer of energy will immediately have a true price signal regarding the cost of energy choices.


(1) Energy Subsidies and Big Wind: Sen. Alexander Sets the Record Straight (renewables 50x that of fossil fuels), Master Resource, http://www.masterresource.org/2011/05/big-wind-sen-alexander/

(2) http://www.usdebtclock.org/

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