U.S. Federal Renewable Energy Subsidies Accelerate Energy Transition but Pose Risks to Grid Reliability and Consumer Costs
New report highlights the consequences of soaring renewable energy subsidies on the U.S. electricity market, urging policymakers to reconsider the role of government intervention.
AUSTIN, TEXAS [August 28, 2024] – A new report from The Energy Alliance, authored by Bill Peacock, raises concerns about the escalating federal subsidies for renewable energy, which have surged from $74 billion between 2010 and 2019 to a projected $244 billion from 2020 to 2029. The report argues that these subsidies are the primary drivers of the ongoing energy transition from fossil fuels to renewable sources like wind and solar. However, this shift comes with significant drawbacks, including rising electricity costs and declining grid reliability.
The report, titled “U.S. Federal Renewable Energy Subsidies are Driving the Energy Transition,” details the substantial increase in government support for renewable energy, particularly in the wake of the Inflation Reduction Act (IRA). According to the report, the IRA has nearly tripled projected subsidies for wind and solar power from $66 billion to $174.8 billion for the period of 2023 to 2029. This surge in funding, while boosting the growth of renewable energy, has also led to increased electricity prices and has compromised the reliability of the U.S. electric grid.
“The energy transition driven by federal subsidies is leading to higher costs and greater grid instability,” said Bill Peacock, the report’s author. “Renewable energy subsidies are not only larger than those for fossil fuels but are also significantly altering the energy market, leading to unsustainable outcomes.”
The report highlights several key points:
Exaggerated Claims on Fossil Fuel Subsidies: The report challenges common assertions that fossil fuel subsidies are disproportionately large, showing that renewable energy subsidies are, in fact, much greater.
Rapid Growth of Renewable Subsidies: Federal support for renewable energy is expected to increase by 230% from the previous decade, while subsidies for fossil fuels have decreased by 40%.
Impact on Grid Reliability: The report cites recent incidents, such as Texas’s Winter Storm Uri, as evidence that the increasing reliance on renewable energy is undermining the stability of the U.S. electric grid.
Rising Economic Costs: States like California and Texas are experiencing significant increases in electricity prices, which the report attributes to the growing penetration of renewable energy sources.
The report also notes that the transition to renewables, while environmentally driven, has economic implications that are often overlooked. In states like California, where renewable energy now constitutes nearly half of all in-state electricity generation, residential electricity prices have soared to the highest levels in the nation.
“Policymakers need to carefully consider the long-term impacts of these subsidies,” Peacock added. “The current approach is distorting the energy market and leading to outcomes that could be detrimental to consumers and the overall economy.”
The Energy Alliance urges lawmakers to re-evaluate the role of federal subsidies in the energy sector and calls for the elimination of all energy subsidies, allowing market forces to determine the most efficient and reliable energy mix.
The Energy Alliance, a project of the Texas Business Coalition, aims to raise awareness of key energy market issues, focusing on reliability, affordability, and efficiency. The organization advocates for the elimination of all energy subsidies as a necessary step toward restoring a competitive and reliable electricity market in Texas.
More information and the full report can be viewed here.