Comment by IkmoIkmo | Hacker News Reader

Comment by IkmoIkmo | Hacker News Reader

Because it's mostly oil that's cheap, and barely any of it is used to generate electricity (electricity being the key industry of renewables). Coal and gas is down, too, but not nearly as much, and don't have a long-term low-cost forecast as strongly as oil does right now.

Further, despite the green-energy rhetoric (which I'm largely supportive and in favour of, despite it being a bit disingenuous sometimes), renewable subsidies are huge, or at least have been as of late.

Further we're seeing wall street come in with securitisation of renewables, making it a bit easier for renewable companies to finance everything. At the end of the day, you can't be disruptive without capital in a capital-intensive (energy in general, including renewables, have large startup costs) industry. Securitisation allows relatively new entrants like solar city raise financing essentially by factoring 20 years of utility bills, without having to sell out the company.

Beyond that, renewables are still tiny and if they weren't growing like they do, it'd be pretty strange tbh.

And lastly... they're really getting cheap, and at some point there's a threshold moment you cross.

>renewable subsidies are huge, or at least have been as of late.

relative to what? Fossil fuels in the US still get huge subsidies.

This is true, but subsidies for for renewable sources is significantly higher on a cost/kw amount (the number consumers care about.) What is more, renewable are not taxed ANYWHERE NEAR the same rate as fossil fuels which in the United States can be crazy high. For example, in California over half the cost of a gallon of gas is State and Federal Taxes.

And then, even with the lower taxes and larger subsidies, many places have to put price controls on the sale price of renewable energy like setting the production price on residential solar to the retail price instead of the wholesale price.

I think parent is European, perhaps Dutch even (judging by his post history). Here in Europe I don't think fossil fuels are subsidised.

The UK certainly subsidizes fossil fuels.

http://www.theguardian.com/environment/2015/nov/12/uk-breaks...

'A spokesman for the Department of Energy and Climate Change said: “We are committed to meeting our decarbonisation targets – we’ve made record investments in renewables and are focusing on lower-carbon secure energy sources, such as nuclear and shale gas. However this will not happen overnight - oil and gas will continue to play a role so we can ensure hardworking families and businesses have access to secure, affordable energy.”'

Keep in mind that there's a lot of spin and misleading statements made in this area. The article repeats the words "tax break" over and over, but it never actually explains what this means.

But if you Google the actual change being discussed:

"Effective tax rates on production from older oil and gas fields will be reduced from 80pc to 75pc immediately, and backdated to january, while on newer fields it will be cut from 60pc to 50pc, Oil & Gas UK, the industry body said. The changes serve to entirely reverse the tax grab on the sector in the Chancellor's 2011 budget."

Or to put it another way, the UK taxes newer oil fields as 50%, which is a horrible subsidy compared to how they taxed it two years before that, but no change from how they taxed it before that. And in general the UK has (even after the change) some of the highest taxes on petroleum production in Europe.

Question: If the UK has above average tax rates, does that mean it has no subsidy at all? Or is there some "natural" tax rate and any deviation from that is a subsidy? Does it even make sense to call the way you set the amount of money you take from someone a "subsidy"?

I always assumed this tax/subsidy was to account for the fact that the oil/gas belongs to the country. In that framing, giving away natural resources below market rates is a definite subsidy.

> In that framing, giving away natural resources below market rates is a definite subsidy.

So...what's the "market rate" for taxes on a new well in the UK's territorial waters in the North Sea? Given that the UK has a monopoly on allowing wells to be drilled in that area, isn't the market rate whatever the UK says it is, and thus there is always zero subsidy by definition?

Or should we compare to what other countries charge for other wells in other areas? Should we adjust for, eg, the difficulty of drilling in the North Sea compared to, eg, off the coast of Brazil and if so, how? Should we only compare to EU countries, or only to rich countries, or do we compare to everyone? And if, as is the case, the UK has relatively high taxes compared to others, in what way would it be accurate to call it a subsidy?

The definition of what is and is not a subsidies is extremely difficult to agree on, but many studies show renewable subsidies are large relative to fossil fuel subsidies. From Wikipedia:

"On March 13, 2013, Terry M. Dinan, senior advisor at the Congressional Budget Office, testified before the Subcommittee on Energy of the Committee on Science, Space, and Technology in the U.S. House of Representatives that federal energy tax subsidies would cost $16.4 billion that fiscal year, broken down as follows:

Renewable energy: $7.3 billion (45 percent) Energy efficiency: $4.8 billion (29 percent) Fossil fuels: $3.2 billion (20 percent) Nuclear energy: $1.1 billion (7 percent)"

(If you add in more items than the CBO does, you'll get different numbers, but this rapidly gets problematic. For example, in the US, R&D spending is not taxed, and can be deducted from gross revenue before calculating a tax bill. For some people, that means that the US subsidizes R&D for fossil fuel research, but since the US subsidies all R&D, I don't feel like this qualifies as a specific subsidy to fossil fuels. If you disagree, then renewable and fosssil fuel subsidies start to look more even, but nuclear subsidies dwarf both of them.)

As others have posted, what constitutes a subsidy is tricky. It's a word that's used in many different ways in different contexts.

Fact is, actual direct subsidies for fossil are quite low, they range in the billions. i.e. say the costs of oil businesses to produce and sell oil profitably is $100 per barrel, but they receive $10 from the government per barrel and sell at $90, that's a pre-tax or 'direct' subsidy. That's usually what we talk about when we talk about subsidies, a company receiving extra money, financial support.

This ranges in the hundreds of billions worldwide, which is a fraction of a percent of the world economy. Significant, yes, but not in the grander context.

Then there's post-tax subsidies, these range in the trillions. They're not actually money received by oil companies, and therefore it's misleading to the 'everyday man' to talk about subsidies because that's what the everyday man thinks about when he hears the word 'subsidy'.

What are these subsidies? Well say there's smog from cars that run on oil, and smog causes cancer and cancer causes healthcare costs and lost labor force due to death. Put a price on that, and you have a cost of oil that society has to pay for, that isn't priced into oil. You can price it in through tariffs and taxes and such, not doing so means oil companies generate costs onto society that they're not having to pay for. And if you add it all up, it's trillions of dollars, and that's when you get to the oft-cited 'subsidy figure' of $5 trillion from an IMF study. This isn't money these companies are receiving, it's money they're not being forced to pay up.

Now you can think what you want. I'm of the opinion these externalities should be priced in, and paid for by oil companies (and indirectly by the customers, who will change behaviour as fossil becomes more expensive, which changes investments geared towards renewable). Regardless, I don't think it makes sense to talk about a 'subsidy', unless you're having a chat with policy makers or economists. But in every day conversations with people, people don't use the word subsidy this way.

Either way, that's just a side note. The main point is this, it's obvious that fossil subsidies are substantial, but how big are they relatively to renewable? A fair way to compare is to look at the amount of subsidy per unit of energy. And they're gigantic for renewables.

For example: http://www.forbes.com/sites/timworstall/2013/11/13/renewable...

Regardless of whether those numbers are exactly right, most studies confirm this disparity, hell if you follow the industry you'll find virtually all CEOs of all solar companies talk openly about this. e.g. the SolarCity CEO has a couple of entrepreneurship videos on youtube speaking to uni students about this. And that's fine, understandable and acceptable. It's obvious the world won't sustain itself without renewables, it's also obvious we have to hit some harsh deadlines, and that we couldn't let the market create the financial incentives by itself to get the hundreds of billions of investments necessary to get a renewable industry running that has a chance of success. I support the ridiculously high subsidies, it's the only way we'll get there.

Don't forget the amount of money we've spent attempting to militarily stabilize the Middle East. If those countries didn't have oil we wouldn't care about them nearly as much.

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