Money in Renewable Energy (RE)

Giant energy-related companies continue to feast on the abundance of fat government subsidies,while renewable energy industries scramble for meager scraps, trying to find the means to make RE the commonplace energy source that it should be. What are government subsidies for, and how do they impact business in the United States, including our slowly growing renewable energy industries?

The original goal of most subsidies is to lower the consumer cost of the targeted product. Subsidies are designed to work within basic market economics of supply and demand, supporting businesses so they will develop, manufacture, and sell more of a product to increase supply (such as R&D incentives) or stimulating consumer demand (such as PV rebates).

Occasionally, subsidies are used to discourage production of a product to give a competing product an advantage or to stabilize prices for the target product. An example of this is when some dairy farmers are paid to not bring milk to market, which manages supply to keep prices up so other farmers can make a living.

Most subsidies have a dollar amount associated with them and are “direct,” since the payments usually go straight to the recipient. Indirect subsidies include just about everything else, like tax breaks and international trade barriers. But in all cases, it is important to remember that somebody (taxpayers) or something (like the environment) is paying the price of subsidies.