As competition between different energy sources often seems like a zero-sum game, one of the primary accusations that each energy source (nuclear, renewables, oil, gas) levies against the others is that they rely on government support, distort energy markets and waste taxpayer money.
These arguments are beside the point.
Government support underpins most — if not all — energy sources. Instead of arguing for an elusive “free market,” we should recognize that, if we are to meet our climate goals, government intervention is crucial to support the development and commercialization of new technologies while actively creating markets that value the qualities we want to see in an advanced energy system: zero carbon emissions, energy reliability and resilience.
Dependence on government is a criticism made especially frequently against newer energy technologies — for example, the federal Production Tax Credit (PTC) and Investment Tax Credit (ITC) for wind and solar energy, respectively, and the inclusion of nuclear power in state renewable portfolio standards.
At the same time, advocates for clean energy accuse fossil fuels of benefiting from longstanding government policies that are rarely debated in the public discourse. However, government funding for research and development is critical for new technologies; this is as it should be.
Comparing apples to oranges
It can be difficult to compare the dollar amount of subsidies that different types of energy sources receive from the federal government. There are questions about what kind of federal aid constitutes a subsidy, i.e., whether to compare direct production subsidies or if other factors should also be included in the comparison.
Experts debate whether to include subsidies given to overseas projects, a lack of accounting for the social cost of carbon, and indirect support like military spending on security for energy transportation or tariffs on imported goods (like solar panels) to protect U.S. manufacturers.
Furthermore, it can be difficult to compare fixed subsidies — like those for oil and gas — with impermanent subsidies like the PTC and ITC for renewables. It is all too easy to manipulate statistics on subsidies by choosing which numbers to include and exclude; therefore, arguments against any type of energy source based on the support that it requires from the federal government may be inherently flawed.
The federal government provides critical support to innovative energy technologies through its system of 17 national laboratories, which are funded through the Department of Energy, although most are managed privately. Some of the national laboratories were founded during World War II, with the mission of researching and developing nuclear weapons technologies.
The Idaho National Laboratory leads research, development, demonstration and deployment for nuclear energy, with a budget in 2018 of $1.2 billion. The March 2018 federal budget included $2.3 billion for the Department of Energy’s Office of Energy Efficiency and Renewable Energy, $353 million for the Advanced Research Projects Agency-Energy, and $6.3 billion for the Office of Science, which funds some of the national laboratories.
Government funding has supported each energy sector; for example, The Breakthrough Institute notes that “public-private partnerships and federal investments helped push hydraulic fracturing in shale into full commercial competitiveness.”
Challenges "too great" for private sector alone
A second major area where the federal government is able to invest on a scale that is well beyond the capacity of the private sector is the Department of Defense. With a budget for 2019 of $716 billion — the highest of any federal department — the Department of Defense is able to develop and pioneer technologies that will eventually make their way to commercial use.
The U.S. military has led the way in areas as diverse as space technologies, communications and mobile solar energy. It is imperative that the development of advanced energy technologies like small modular reactors, which have both military and civilian applications, be funded in their initial stages by the Department of Defense and not merely left to the private sector.
Only the federal government is able to provide resources on such a large scale to support research and development in new energy technologies, especially for advanced nuclear energy, improvements in carbon capture, and storage and transmission technologies for wind and solar energy.
Given the climate crisis and the dire predictions in the U.N.'s Intergovernmental Panel on Climate Change report, it is necessary that energy markets find a way to account for the social cost of carbon. Furthermore, the deleterious effects of greenhouse gas emissions, combined with the necessity of scaling up the technologies that would mitigate GHG, are too great for the private sector to overcome on its own.
The U.S. government can — and must — play a critical role in support of new energy technologies.
****
Jennifer T. Gordon is deputy director of the Atlantic Council Global Energy Center.