Mr Trump, Tear Down Those Energy Subsidies!

Originally posted at ThisIsEisenhower.com by John Brian Shannon

A hundred years ago in America, the federal government decided to help a new industry take its first baby-steps by legislating oil and gas subsidies which were paid for by increased citizen taxation.

It’s commonly done by governments everywhere and it’s not the worst thing for a nation to do.

Here’s how that works: (1) A new industry appears (2) the government sees economic potential (3) citizens are told they must pay more tax to support the new industry (4) the subsidies continue long after they’re no longer required (5) the subsidies tend to increase over time and expand into other areas of the business (6) until the subsidies reach obscene amounts and the taxpayers revolt.

In short: Subsidies are a ‘good thing’ — until they aren’t

United States - Energy subsidies from 1918-2009. Image courtesy of Nancy Pfund
United States – Energy subsidies from 1918-2009. Image courtesy of Nancy Pfund (PDF)

Energy subsidies accumulate over time

Arithmetic tells us that U.S. oil & gas subsidies total $442 billion from 1918-2009.

It’s worse if you add the additional $80 billion/yr in U.S. oil & gas subsidies paid from 2010-2017, which total $560 billion.

Here’s what U.S. oil & gas subsidies look like when totaled over the entire 1918-2017 timeframe: $1,002,260,000,000.

U.S. oil and gas subsidies since 1918 total one trillion dollars

And U.S. taxpayers paid every penny. That’s a trillion dollars of income tax and fuel tax paid by U.S. citizens to subsidize American oil & gas companies since 1918.

Subsidies are a fine thing for new industries taking their first baby-steps. Wherever the federal government sees economic potential for a new industry, subsidies are the way to grow the opportunity and help stabilize the new industry UNTIL it can stand on its own two feet.

But Mature Industries Don’t Need Subsidies

The problem with oil & gas subsidies is that by 1950 they were 100% redundant. No longer needed. At all.

When mature industries continue to receive taxpayer-funded subsidies long after the original need for them disappears, that revenue goes to support pro-industry advertising, pro-industry organizations and pro-industry politicians.

In that way, some $80 billion/yr in oil & gas subsidies became available for pro-industry causes as it was no longer required to support a new industry taking its first steps.

Note: Not all oil and gas subsidies are bad! Additional subsidies paid for research on ‘cleaner-burning’ fuels via high-tech additives, a transformation that began slowly in the 1970’s and continues — to remove lead from gasoline, and for catalytic converter research in the 1980’s, are two such examples. Billions of dollars were well spent and were very cost-effective. But once the research has been done and the clean-burning fuel goals have been achieved, no reason exists to continue to pay such subsidies.


Except for the dollar amounts, much that applies to U.S. oil and gas subsidies also applies to U.S. nuclear power subsidies.

So let’s skip directly to the nuclear power numbers, shall we?

Simple arithmetic tells us that U.S. nuclear power subsidies amounted to $182 billion from 1947-2009.

It’s worse if you add the additional $102 billion (conservative estimate) in U.S. nuclear power subsidies that were paid by taxpayers from 2009-2017.

Here’s what all (federal) U.S. nuclear power subsidies look like when totaled over the entire 1947-2017 timeframe: $284 billion.

U.S. nuclear power subsidies since 1947 total $284 billion

But if one were to include all nuclear power subsidy costs including; safe storage, disposal, or reprocessing of spent fuel, transportation of spent fuel to other countries for safe storage or reprocessing, the decommissioning of nuclear power sites such as Hanford, the cleanup and cost of replacement electricity due to U.S. nuclear power plant malfunctions, and future reactor design spending, nuclear power subsidies could total $500 billion. Perhaps as much as $1 trillion.

NOTE: That’s not including billions of dollars worth of grants awarded by the federal government for new nuclear power reactor designs to replace America’s aging reactors.
Nor does it include the tens of billions paid to store and defend so-called ‘spent fuel’ which is highly radioactive and useful to terrorists.
Nor does it include reprocessing costs for spent fuel.
Nor does it included shipping costs to ship spent fuel to other countries for storage or reprocessing.
Nor would it include any costs associated with nuclear power plant malfunctions.
Nor would it include any costs associated with nuclear powered US Navy ships.
Due to the sensitive nature of nuclear materials some information is difficult to obtain, therefore, the $102 billion nuclear power subsidies figure used for the 2009-2017 timeframe is an estimate.


Biofuels are a new-ish industry. It’s about where the U.S. oil & gas industry were, in their first 20-years. It’s an industry where subsidies can make a difference to get the thing up-and-running and add stability to the new industry.

Biofuel energy subsidy in the early years was subsidized at $1.00 per gallon, which then declined to $.66 per gallon, but since 2011 has fallen to $.45 per gallon.

Total U.S. biofuel subsidies amount to $31 billion from 1980-2009 and an additional $65 billion from 2010-2017.

For a grand total of $96 billion from 1980 to 2017.

U.S. biofuel subsidies have totaled almost $100 billion since 1980

Note: The original U.S. biofuel subsidies enacted by President Carter during the 1970’s fuel crisis were later expanded to allow U.S. biofuel producers to compete with the much larger and more heavily subsidized Brazilian biofuel producers.


Coal subsidies follow the pattern described in the introduction to this post (subsidy steps 1 to 6) and subsidy costs are in the same neighborhood as oil & gas.

But U.S. coal subsidies in all its forms — including so-called ‘Externalities’ might total half a trillion dollars annually

Here is what a landmark Harvard Medicine study said about the externality costs of U.S. coal:

“Each stage in the life cycle of coal—extraction, transport, processing, and combustion—generates a waste stream and carries multiple hazards for health and the environment.

These costs are external to the coal industry and are thus often considered “externalities.”

We estimate that the life cycle effects of coal and the waste stream generated are costing the U.S. public a third to one-half of a trillion dollars annually.

Many of these so-called externalities are… cumulative.

Accounting for the damages… doubles to triples the price of electricity from coal per kWh generated, making wind, solar, and other forms of nonfossil fuel power generation, along with investments in efficiency and electricity conservation methods, economically competitive…” — Harvard Medicine Full cost accounting for the life cycle of coal (PDF)

This study illustrates the most vexing problem with U.S. energy extraction, refining, processing, storage, end use, and decommissioning of energy sites — energy ‘externalities’. And such externalities aren’t limited to the coal industry.

Energy production externalities (also called ‘Indirect Subsidies’) may cost America $1 trillion per year due to higher healthcare and infrastructure maintenance costs.

Damage to infrastructure arrives in the acid rain falling downwind from fossil fuel power stations, causing damage to bridges, buildings, and roads constructed with concrete (so-called concrete spalling) and causes paint damage on cars and trucks, and is responsible for crop losses downwind or downstream from fossil fuel extraction sites or power stations, and harms aquatic life found in rivers and coastal areas near river outlets.


Terms to remember: Energy ‘kind’ and ‘type’

There are only two ‘kinds’ of energy: Non-renewable and Renewable energy.

There are many ‘types’ of energy: Natural gas-fired, oil-fired, coal-fired, nuclear energy, solar photovoltaic, solar thermal, wind turbine, hydro-electric, ocean thermal, ocean wave, ocean tidal, biomass, wood-burning, and pellet-burning.

United States – The graphic illustrates various kinds of energy. Planetary energy graphic image courtesy of Perez and Perez 2009.
United States – The graphic illustrates various kinds of energy. Planetary energy graphic image courtesy of Perez and Perez 2009.

The trend of large subsidies in a sector like the energy sector, is that subsidies reward less efficient energy producers and punish more efficient producers in relative terms.

“Just pump it Fred, we’re getting our subsidy money per barrel of oil, who cares if it’s #4 sour crude oil? We get paid to pump oil, not look for better quality oil.”

Although there’s a separate ‘oil exploration’ subsidy too.

And let’s not forget the more ‘sour’ the crude oil, the more processing it requires at the refinery, and because #4 sour is very tough on oil refinery maintenance budgets, it further increases costs at the gas pump.

The more oil you pump of whatever quality, the more subsidy money you get — and that isn’t the way to maximize the efficiency of money in the energy market.

The oil industry delivers an easy example, but every energy subsidy scheme changes the behavior of the principals involved towards lower quality energy, whether it’s subsidized non-renewable energy or subsidized renewable energy.


In the primary energy segment (electricity and district heating) the type of energy varies by region.

Hydro-electric, coal-fired, and nuclear power are astonishingly costly to build and couldn’t have been built without massive subsidies. And even with huge subsidies for R&D, construction, millions of acres of land grants, generous tax incentives and more, some of those energy types still require small per kW/h subsidies to compete in the marketplace. In their favor, all of these have been extremely reliable primary energy producers for decades, but are mature industries that no longer require subsidies as financing such projects in the 21st century is considered routine. But it wasn’t always so.

In secondary energy (transportation) oil and gas infrastructure is also costly to build and the necessary infrastructure couldn’t have been built without massive subsidies. Yet, with sufficient refinery capacity already available there is little need for new refinery capacity, and today’s fuel prices support easy financing for future capacity additions.

Especially for vertically integrated oil companies that own their oil concessions (oil fields) their own distribution system (pipelines, or rarely, rail) and their own refineries, these can thrive during times of low crude oil prices.

Removing oil & gas subsidies would cause oil companies to become vertically integrated with no loss in profits. But why bother, when there’s no incentive due to a high subsidy scheme?

That won’t be the only change. Every subsequent change to the business would necessarily be designed to improve the overall efficiency of the company, sans-subsidies. That’s been missing since 1918.

By leveling the playing field for all kinds and types of energy, the most efficient energy kind and type will become king, and energy investors will earn more profit. (Because profits are earned on the ‘spread’ — the difference between what energy costs to produce and what it can be sold for. Subsidies make markets significantly less efficient and muddy the waters)

In summary: Removing energy subsidies will cause every energy producer to concentrate their efforts on the most efficient kind and type of energy in their region of the country, instead of choosing their energy kind and type by how many subsidy dollars they can capture via their energy choice.


President-elect Donald Trump, please tear down these subsidies!

And let the marketplace determine the most efficient energy.

Federal energy subsidies should return to their proper place. That is; When the federal government sees a new industry with economic potential; To invest, subsidize, and promote that new industry using taxpayer dollars for only as long as it remains a new industry. And not one day longer.

Markets are perfectly efficient when left to their own devices. Massive, taxpayer-funded subsidies for mature industries only serve to warp the markets and punish the most cost-efficient U.S. energy producers.

People either believe in free markets or they don’t

We can’t say we believe in free markets AND THEN massively intervene in the market with humongous, taxpayer-funded energy subsidies for some kinds and types of energy, but not other kinds and types energy.

With the greatest respect Mr. President-elect, I urge you to allow all U.S. energy producers to compete in a free market by phasing-out energy subsidies for every kind and type of energy over the next five years.

New Start-Up Award Created by German Energy Agency

by John Brian Shannon | October 31, 2016

Energy Start-Ups in Germany to Receive Leadership and Robust Assistance

Under the leadership of Germany’s Frank-Walter Steinmeier, Minister of Foreign Affairs and Sigmar Gabriel, Minister of Economic Affairs, a new and exciting organization has been created to assist startups in Germany’s energy and environment space.


With three separate, but interlocking components; (1) THE START UP ENERGY TRANSITION (2) THE PROJECT (3) THE START UP ENERGY TRANSITION AWARD this organization works to facilitate and empower persons, groups, organizations and companies to excel at their maximum potential in the energy sector of the German economy.

The FIRST GLOBAL START-UP AWARD for VISIONARIES and VANGUARDS fighting against climate change. It attracts innovative start-ups and supports them in making their visions become a key success factor for the worldwide energy transition. To support this, we will organize the

The START UP ENERGY TRANSITION TECH FESTIVAL to stimulate new business models by connecting the best of all interdisciplinary stakeholders. Start-ups from around the globe will work together with customers and investors to improve their products and to kick-off new ideas.

And we created the START UP ENERGY TRANSITION NETWORK to ensure a continuous exchange of the best ideas and talents among the participants and our partners and sponsors. We want this network to accelerate co-operations and drive innovation within the international debate on climate change.

The FIRST GLOBAL START-UP AWARD for VISIONARIES and VANGUARDS will officially launch on the 22nd and 23rd of November during the DENA congress with the first annual awards ceremony taking place in March 2017 in Berlin.

German Energy Agency Assists Energy Start-Ups

The German Energy Agency (DENA) is looking for start-ups interested in participating along with other organizations that want to be involved as sponsors, ambassadors, media and network partners.

For more information


Renewable Energy dena Start Up Energy Transition Award - Banner_Startup_Energy_700x116px


kleef&co are proud to serve as Network Partners to the German Energy Agency.

China, Middle East explore cooperation potential

China, Middle East explore enormous cooperation potential

China and the Middle East
King Salman of Saudi Arabia and President Xi Jinping of China. File photo courtesy of China Daily

China, Middle East open a new era of strategic cooperation with President Xi’s visit to Saudi Arabia, Egypt and Iran.

BEIJING – With the further dovetailing of development strategies of China and the Middle East, enormous cooperation potential will be unleashed thanks to Chinese President Xi Jinping’s ongoing trip. Xi’s three-nation tour, which has taken him to Saudi Arabia, Egypt and Iran, has helped further link China’s westward opening strategy and its Middle East partners’ looking-east… Continue reading China, Middle East explore cooperation potential

Where does our energy go? Follow the money!

by John Brian Shannon.

Some 16 Terawatts of energy of all kinds, were produced and consumed in 2009 by our civilization, and experts tell us that we will demand 28 Terawatts per year by 2050. An example of energy demand is the electricity that flows into our homes and businesses. Another example is the fuel we use in our vehicles. Still another is what powers our global industrial sector.

Of the energy produced and consumed by our 21st century civilization, approximately one-third is used for transportation.

The cars we drive, the transport trucks and trains that haul our freight, and the airlines and shipping lines that transport us and our goods around the world, are all part of what we call the transportation sector. The vast majority of these vehicles use petroleum fuels to provide the motive power. Fuels such as gasoline, diesel, aviation fuel/kerosene, bunker fuel and other fuels, produce plenty of CO2, toxic emissions, particulate matter, and soot.

Of the three categories of energy users, the transportation sector is easily the ‘dirtiest-third’ and contributes the largest share of atmospheric emissions.

Another third (approx.) of total demand is consumed by industry and like the transportation sector, contributes large amounts of pollution to our atmosphere. Depending where you live in the world, the environmental effects of that pollution can range from negligible to toxic.

The last third (approx.) of demand is used to power residential buildings, commercial buildings, and various levels of government infrastructure. When you turn on the lights or heat in a building, or look at illuminated signs and streetlights on your way to your local air-conditioned shopping mall — each is an example of residential, commercial, and government energy users.

A question arises; Which of the three categories can lower their emissions at reasonable cost?

In all three categories, not using the energy in the first place is the best way to lower costs and emissions. Energy conservation beats everything else, hands down, every time.

For example, no matter how cleanly your car operates for each mile you drive it — for each mile that you don’t drive it, the car produces zero emissions. The same holds true for cities that shut off every second streetlight after midnight. No matter how efficient streetlights are these days, they still use less power turned OFF — when compared to ON.

Energy conservation differs from efficient energy use, which refers to using less energy for a constant service. For example, driving less is an example of energy conservation. Driving the same amount with a higher mileage (MPG) vehicle is an example of energy efficiency. Energy conservation and efficiency are both energy reduction techniques.

Energy conservation reduces energy services, it can result in increased, environmental quality, national security, and personal financial security. It is at the top of the sustainable energy hierarchy. — Wikipedia

For decades, very little research went into increasing efficiency or adding conservation measures in residential and commercial buildings.

Until the 1980’s, electricity wastage for commercial buildings and residential buildings was often over 80% and little attention was paid to building efficiency or conservation — back in the days of cheap electrical power — but great progress is now being made in efficient buildings and conservation as a way for building owners to reduce operating costs.

One of the most cost-effective ways to reduce overhead and to help lower emissions in buildings, is to employ efficiency and conservation measures, and to source electricity from clean, renewable energy for our residential/commercial buildings and government infrastructure. Efficiency and conservation can save building owners millions of dollars per year with rapid return on investment (ROI).

Example of a green building in Washington DC. Image via Progressive Times
A ‘green building’ in Washington DC. This office building is a LEED Certified building that uses efficiency and conservation to dramatically minimize its environmental footprint and reduce costs. Image via Progressive Times

Some buildings are notorious for their heavy electrical demand. For example, some large U.S. shopping malls have utility bills of $1 million dollars per month. Retrofitting such commercial buildings in order to save up to 80% on their monthly electricity bill has become a huge business in the United States and there is every possibility of this happening globally, as electricity costs are expected to rise (and in some regions, rise steeply) in the years ahead.

Get used to hearing the terms efficient buildings, conservation, and LEED Certification, as these represent a global multi-trillion dollar opportunity for retrofit companies, building systems equipment manufacturers and engineering firms. At the same time, opportunities for building owners to lower their electricity, water and sewage expenses by orders of magnitude — with swift payback on efficiency and conservation spending — via large reductions in operating expenses.

Some building owners may opt for a light efficiency and conservation retrofit, while others choose the so-called Deep Energy Retrofit which is applicable to commercial buildings and forecasts savings of greater than 50% will result from such efficiency and conservation upgrades.

Commercial Building RetroFit Initiative (USA)

Who would have thought retrofitting the 6,514 operable windows of the Empire State building on the 5th floor, for energy efficiency, would be time- or cost-effective?

But it was.

Retrofitting existing commercial buildings for energy efficiency is one of the greatest opportunities facing the building industry. If our existing buildings in the U.S. were a nation, its energy consumption would rank third after China and the U.S. More than a trillion dollars is currently flowing out of our buildings in the form of wasted energy.

Eighty percent of the today’s commercial square footage will be standing and operating in 2030. We estimate a conservative $1.4 trillion dollar value to be gained over the next 40 years from intervening with deep energy retrofits using whole systems design. — Rocky Mountain Institute

One stellar example of a government leading the way for consumers, for commercial building operators, and for industry, is Washington DC. Under the leadership of Mayor Vincent C. Gray, the city set a great example for other cities. Washington DC is a thought and action leader on green buildings, efficiency and conservation, renewables, and sustainable development.

The Living Building Challenge is part of numerous efforts by the city to reach Mayor Gray’s “Sustainable DC” initiative, which includes 11 key categories for environmental/fiscal improvement. The categories include goals such as cutting the energy consumption of the entire city by half, being able to bring in locally grown food within a quarter mile of the city and have it consumed by 75 percent of D.C. residents, as well as tripling the number of small businesses within the city. — Carl Pierre, InTheCapital.com excerpted from D.C. is Planning its First Self-Sustaining, ‘Living Building’

As more than 50% of the world’s citizens presently live in cities (70% by 2050, according to the WHO) it makes sense to ramp-up efforts on efficiency and conservation in cities — where much of the transportation sector operates, where there is an active industrial sector, and where there are large numbers of commercial/residential buildings and government infrastructures.

Washington DC, San Francisco, New York, and other cities are leading the world with their great examples.

What can you do to help add efficiency and conserve power in your home, commercial building, or industry?

<>

Here are some helpful efficiency and conservation information links, courtesy of the U.S. National Renewable Energy Laboratory (NREL).

Fred Hutchinson Cancer Research Center, Seattle, Washington State.

The Fred Hutchinson Cancer Research Center
Fred Hutchinson Cancer Research Center in Seattle, Washington state, is an excellent example of efficiency and conservation measures at work to save money for the building owner/operators. Photo credit: J. Housel

Fred Hutchinson Cancer Research Center (FHCRC) comprises a campus with several buildings with 532,602 square feet of floor space in Seattle, Washington. The facility was built from 1990 to 2004 and has won numerous awards for energy efficiency because of its original design but also because of its ongoing efficiency programs. For example, FHCRC staffs recommission all air-handlers, controls, and electrical equipment every two years in partnership with the controls system provider, Siemens Building Technology.

Campus maintenance is managed full time by a team of three professionals. In 2000, for example, this team performed more than 1,500 preventative maintenance operations. The performance of campus buildings is the subject of a Labs-21 case study titled Fred Hutchinson Cancer Research Center, Seattle, WashingtonPDF.

Other examples of campuses with good maintenance and energy management programs include the following.

Follow John Brian Shannon on Twitter at: @EVcentral