Wednesday, May 09, 2007

Contrasting Subsidies

I see that Wal-Mart is installing solar panels at selected stores in sunny California and Hawaii. In the process, it will take advantage of sufficient state and federal incentives for solar power so they will "achieve savings over their current utility rates immediately". Given the high capital cost per kW of current photovoltaic technology, those subsidies will have to offset at least half the installed cost of solar panels, because you can bet that Wal-Mart has already negotiated the most preferential rates for conventional power with its local utilities. Good on them for capitalizing on a way to use green energy to lower their costs, but how does this differ from domestic oil and gas subsidies that are routinely labeled as "corporate welfare"? Our attitudes about energy are highly conflicted, and if we're not careful, we'll end up with a robust green energy sector supplying a small fraction of our total energy needs, while becoming even more reliant on foreign suppliers for the fossil fuels that will still supply the majority of our energy needs for another couple of decades.

This isn't a rant against subsidies for solar and other new energy technologies. It makes sense to help these power sources become competitive by advancing their technology and growing to a scale at which their costs come down to a comparable level with conventional energy. This approach provides benefits for both energy security and greenhouse gas management. But in our enthusiasm for all things green, we can't lose sight of the fossil fuels that still comprise 86% of our total energy supply, and especially the domestic oil and gas that, without new technology and access to reserves that are presently off-limits, will continue to decline, while our imports grow from worrying to truly alarming levels. Ethanol can't replace all the oil we import, and wind and solar power won't be big enough for many years to substitute for the natural gas we need to make fertilizer and heat our homes, or provide on-demand power in many regions.

The obvious distinction is the enormous profitability of the fossil fuel sector. It's hard to justify any subsidy that, even indirectly, benefits Super-majors earning billions of dollars per quarter, compared to the skimpy profits (if any) earned by alternative energy firms. But Wal-mart is hardly a struggling small business, and spending tax dollars to make them more profitable--even as it makes them greener--seems no more or less defensible than forgoing tax revenues--in the form of royalty relief granted when oil prices were low--to encourage oil companies to drill in US waters, rather than in another hemisphere.

A couple of weeks ago, one of my postings attracted a comment saying, "someone sounds a little drill happy / anti environment to me ", and I suppose this one might draw more of the same. But from my perspective, the sooner we can shed the "romance of green" and start dealing with energy in a consistent way, on the basis of its economic, environmental and engineering attributes, the more effective we can be in dealing with our two conjoined problems of energy and climate change. That means treating domestic oil and, in particular, natural gas as valuable components of energy security, and far from the worst contributors to climate change.

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