Why A Realistic Energy Policy Must Eliminate Fossil Fuel Subsidies

Now that the presidential election is over, perhaps we’ll see some reality injected into our energy policy.  The existing energy policy professes to encourage “energy independence”.  That policy in action embeds permanent subsidies, tax credits, and tax breaks in the US federal tax code for highly profitable fossil fuel industries.

Have these favorable treatments given us energy independence?  No, and that’s because reliance on fossil fuels is at odds with price stability or economic security.  We don’t get price stability with fossil fuels.  Some readers will remember the price shocks and economic fallout from the first oil embargo in the 1970s; and others may recall the historical volatility of natural gas prices.  And the future could be much more expensive than the rosy projections of today. No one in the energy business today thinks that natural gas will always be as cheap as it is now – for the reasons noted by Vice Admiral Dennis McGinn (USN, ret.) in my previous article.  Fossil fuel prices are inherently unstable because they are subject to global economic and political forces.

Capitalism dictates that commodities will flow to the highest prices, onshore or off.  There’s no guarantee that any oil or natural gas extracted within the borders of the USA will stay here.  There’s no guarantee that any oil transported via a Keystone pipeline from Canada to Houston will stay in the USA either. Building a policy of energy independence on assumptions that these commodities will remain inexpensive and onshore is shortsighted and wishful thinking.

And here’s the question we should pose to everyone that expresses concerns about subsidies for renewables.  Why complain about subsidies for renewables and remain silent on the subsidies for fossil fuels?

There’s a great story relayed in Matthew and Luke in the Bible’s New Testament in about people who focus on removing the motes in their neighbors’ eyes when they are utterly ignorant of the planks in their own eyes.  For the renewable subsidies critics, it’s time to remove your planks. If you are upset about the subsidies for renewables, then you should be apoplectic about the permanent subsidies for fossil fuel businesses – which have always dwarfed the temporary subsidies for renewables. This website offers an interesting visual on fossil fuel subsidies.

The Big Five oil companies alone – Exxon, BP, Chevron, Shell, and AmocoPhillips – get $2.4 Billion USD annually in tax deductions.   In our current fiscal situation, why should American taxpayers be this generous to hugely profitable multi-national corporations when we do not get energy independence in return?

If renewable subsidies critics really want a level playing field for energy, if they truly want economic and energy security via energy independence, then they need to strenuously advocate for the elimination of every tax break, investment credit, and loophole for fossil fuels.   They should consider doing likewise for the subsidies going to the nuclear industry.

Should we give serious credence to criticism of temporary governmental subsidies for renewable energies while the permanent fossil fuel energy subsidies exist?  No.  That criticism is akin to focusing on the mote instead of the plank.

We’re modernizing the electric grid into a Smart Grid that can take advantage of all the benefits of clean, domestic, and renewable energy sources.  Renewable energy sources do not suffer from price instability like natural gas or gasoline.  Armies don’t need to be deployed to protect the sun, wind, or tide, like they are for fossil fuel supply lanes.  A realistic energy policy that eliminates fossil fuel subsidies in favor of these domestic and clean renewable energy sources helps us gain the short and long-term benefits of the Smart Grid, and true energy independence too.


Electric Vehicles and the End of Big Oil

The Gulf of Mexico oil spill now polluting fragile wetlands of several states is an environmental and economic disaster.  This is the downside of an addiction to oil, and it should serve as a potent reminder of the strategic value that electric vehicles will have to eliminating significant sources of carbon emissions and that crap coating every remaining living sea creature unlucky enough to be in the Gulf right now.  

Electric vehicles (EVs), a key component of the Smart Grid, serve many beneficial purposes.  First, even those that get electricity from fossil fuel power plants still have a far lighter impact on the environment than gas powered vehicles.  The cumulative greenhouse gas emissions from coal power plants powering EVs are still less than the cumulative emissions from millions of gas powered vehicles.

EVs also help shape electricity loads through smart charging, which uses communications and charging control software to manage the timing, pace, and extent of charging loads from utility to EV and manage the load stored in the EV.  It can respond to fluctuations in demand on the grid, so it charges when electricity is readily available and suspends charging when it senses peak load times.  EVs can help stabilize the grid, and avoid grid purchases of expensive peak power, keeping costs down for everyone.

EVs can earn money for their owners through carbitrage.  Carbitrage is defined in the 2nd Edition of the Smart Grid Dictionary as:  “The capability for an EV or PHEV (Plugin Hybrid EV) or charging station to communicate with the electrical grid to schedule charge/discharge activities based on conditions including pricing signals, tariff agreements, TOU (Time Of Use), DR (Demand Response) programs, and manual overrides by car owners.”  Just imagine – one day there will be an iPhone app that calculates how much money that sweet little EV you’ve been thinking about purchasing will earn for you.  Contrast that to the mental subtraction of a couple thousand dollars we all do as we drive a gas-powered car off the dealer’s lot.

EVs are much cheaper to operate than gas-powered vehicles, and electricity pricing has more predictability to it than barrels of oil.  And then there’s the convenience factor.  I can’t wait to eliminate filling up the tank as one of my chores.  How much better it will be to pull into my garage and plug in the EV – which my smart charging system will juice up when prices are at the lowest. 

But even more significantly, a shift to EVs means the beginning of the end of costly Big Oil.  You can take your pick of studies that calculate the sum total of US federal and state subsidies that go to these companies.  The eye-popping numbers range from $330B between 1950 – 2003, to a mere billion dollars a year.  That’s right fellow US taxpayers, at least a billion dollars a year in subsidies to mature, profit-engorged multinational oil corporations.  I’d much rather see those sorts of subsidies going to domestic, renewable energy  and EV businesses that will make the petroleum spewing a mile deep in the Gulf as obsolete and cringe-inducing a fuel as whale oil.   Wouldn’t you?