Total Energy Subsidies Decline, but Solar Soars

March 16, 2015 By Karen Henry

EIA Energy Subsidies Energy ManageWhile the total value of direct federal financial interventions and subsidies in energy markets decreased 23 percent from $38 billion to $29.3 billion between fiscal years 2010 and 2013, solar subsidies skyrocketed from $1.1 billion to $4.5 billion in 2013, according to an updated report from the US Energy Information Administration (EIA). Declining solar costs and state-level policies supported additional growth.

EIA’s updated study focuses on direct federal financial interventions with an identifiable federal budget impact and are specifically targeted at energy markets.

Between FY 2010 and 2013, the share of tax expenditure in total financial interventions and subsidies to the energy industry declined from 46 percent to 42 percent, while the share of direct expenditures grew from 39 percent to 44 percent, reflecting a move from subsidies for renewable liquid fuels such as ethanol to subsidies for renewable electricity, particularly solar. Since FY 2010, the government has eliminated the Volumetric Ethanol Excise Tax Credit (VEETC) for fuel ethanol, and biofuels’ share of total renewable energy subsidies fell from 45 percent in FY 2010 to 12 percent in FY 2013.

Meanwhile, the government revised tax credits for the solar power industry, allowing subsidy applicants to receive grants in lieu of tax credits. These grants, known as Energy Investment Grants or Section 1603 grants, were one of the few energy subsidy programs created by the American Recovery and Reinvestment Act of 2009 that still had a substantial budgetary impact by FY 2013.

Section 1603 grants increased nearly $4 billion between FY 2010 and FY 2013, while electricity-related tax expenditures for renewables doubled from $1.9 billion to $3.8 billion. Electricity-related subsidies, primarily directed toward fuels and technologies used for electricity production, increased between FY 2010 and FY 2013, reflecting increases in direct expenditures and estimated tax subsidies. Wind subsidies increased moderately, going from $5.5 billion in 2010 to $5.9 billion in 2013. Support for conservation and end-use programs was at $7.9 billion in FY 2013, down from $15.6 billion in FY 2010. Federal subsidy support for fossil fuels dropped from almost $4 billion in FY 2010 to $3.4 billion in FY 2013, with support for oil and natural gas declining by almost 20 percent.

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