Subsidies for electricity production in the US show that renewables are far from commercialisation

Data for 2010 is now available from the US Energy Information Administration.  Solar and Wind power are still a long way from being commercial with just direct subsidies being equivalent to 7.8 and 5.6 cents/kWh respectively. Indirect subsidies and increased costs for alternate capacity are not included.

My view of subsidies in power generation is that they are usually counter productive and provide windfalls for developers and constructors but rarely lead to benefits for the consumers of electricity.

Factors Affecting Electricity Prices:

The average retail price of electricity in the United States in 2010 was 9.88 cents per kilowatt-hour (kWh). The average prices by type of utility customer were:

  • Residential: 11.6¢ per kWh
  • Transportation: 11.0¢ per kWh
  • Commercial: 10.3¢ per kWh
  • Industrial: 6.8¢ per kWh

Prices vary over time and by locality due to the availability of power plants and fuels, local fuel costs, and pricing regulation and structures.

The three States with the highest average price of electricity in 2010 were:

  • Hawaii (25.12¢ per kWh)
  • Connecticut (17.39¢ per kWh)
  • New York (16.31¢ per kWh)

Those with the lowest average prices in 2010 were:

  • Wyoming (6.20¢ per kWh)
  • Idaho (6.54¢ per kWh)
  • Kentucky (6.75¢ per kWh)

On average, electricity prices are highest in Hawaii, mainly because most of the electricity there is generated with fuel oil. Idaho usually has the lowest prices mainly because of the availability of low-cost hydroelectric power from Federal dams.

The EIA has now released a report on the federal subsidies for electricity generation plant which are dominated by the subsidies to the renewable (wind and solar) energy plants where these subsidies increased by 186%.

EIA releases new subsidy report.

At the request of congress, the Energy Information Administration (EIA), an independent agency of the U.S. Department of Energy, evaluated the amount of subsidies that the federal government provides energy producers for fiscal year 2010. Over a 3-year period, from fiscal year 2007 through fiscal year 2010, total federal energy subsidies increased from $17.9 billion to $37.2 billion, an increase of 108 percent over the 3-year period. Of the increase, 77 percent was due to the Obama administration’s economic stimulus law. The largest increases in federal energy subsidies were in renewable and end-use subsidies. Over the 3-year period:

  • Renewable energy subsidies increased by 186 percent from $5.1 billion to $14.7 billion. Renewables saw by far the largest jump in federal benefits. Of the $14.7 billion in fiscal year 2010, $6.2 billion (65 percent of the increase) was related to the Obama administration’s economic stimulus law.
  • Wind led the various renewables with a more than 10-fold increase in subsidy from $476 million to $4,986 million.
  • Solar subsidies increased by more than a factor of 6 from $179 million to $1,134 million and led the electricity sector subsidies on a unit of production basis.
  • Subsidies for biofuels increased by 66 percent, from $4 billion to $6.6 billion.
  • Conservation and end-use subsidies more than tripled from $4 billion to $14.8 billion. Conservation subsidies increased from $369 million to $6,597 million, a factor of almost 18. End-use subsidies increased from $3,618 million to $8,241 million, more than a doubling.

source: EIA

The subsidy in terms of electricity production units shows that solar power is subsidised to the level of 7.8 cents/kWh and wind to the level of 5.6 cents/kWh. This needs to be put into the perspective of the average price to customers of  6.8 – 11.6 cents/kWh. These are the direct subsidies and do not account for all the indirect subsidies in tax breaks or in the indirect costs that renewables generate for alternate capacity.

source: EIA

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