The Truth About Renewable Subsidies - the Motley Fool

http://www.fool.com/investing/general/2011/10/06/the-truth-about-renewable-subsidies-.aspx

The Truth About Renewable Subsidies
By Travis Hoium
October 6, 2011

The headlines will tell you that subsidies for renewable energy are outrageously high and like throwing money down the drain. But outside of some poor decisions (ahem, Solyndra), subsidies for renewable energy have been effective at lowering costs and require very little money from the government.

When you compare renewable subsidies to the growth stages of oil and gas, coal, nuclear energy, and biofuels, it becomes apparent that we’re nowhere near the support we gave to those energy sources. In a study done by Nancy Pfund and Ben Healey for DBL Investors (link opens PDF), some interesting statistics emerge.

• In its first 15 years, “nuclear subsidies accounted for more than 1% of the federal budget.”
  
• Over the same time frame, oil and gas subsidies accounted for half a percent of the budget.
  
• Renewable energy currently gets about one-tenth of one percent in subsidies from the federal government.
  

This relatively paltry amount of funding has helped create an industry that now employs more than 93,500 workers and is growing at 66%. China’s government has also provided a boost to renewables by giving cheap loans to manufacturers such as LDK Solar (NYSE: LDK ) ,Trina Solar (NYSE: TSL ) , and JA Solar (Nasdaq: JASO ) . Those companies have pushed costs lower and helped make solar cost-competitive with other new sources of energy.

So when you hear about First Solar (Nasdaq: FSLR ) or SunPower (Nasdaq: SPWRA ) getting billions of dollars in loan guarantees, remember to keep those numbers in perspective. The federal government is helping push a nascent industry to a point where it can be cost competitive on its own with established sources of energy. It’s been done with oil and gas, coal, and nuclear energy before, so we’re not entering uncharted territory.

<snip>