Fossil fuel industry lobbyists have obtained large and continuing subsidies for their products.
It should be noted that other forms of energy also receive subsidies. “Every energy technology we’ve had … has benefited quite substantially from the federal government,” said Jay Bartlett, a senior research associate at the independent nonprofit Resources for the Future.
Natural gas and oil producers, for instance, receive tax preferences for exploration and development costs, and receive additional tax breaks related to extraction, among others.
According to reports from the Department of Energy and the Congressional Research Service, fossil fuels have historically received more support than renewables, but in recent years the trend has flipped — and on a per unit of energy basis, renewables currently receive far more. Because many of the renewable tax subsidies are set to expire, the CRS report estimates that fossil fuels will receive more tax benefits than renewables in 2028.
Greenhouse gas emissions are also not currently factored into the costs of various forms of energy. Instead, lawmakers have generally opted for subsidies for energy sources that have lower carbon footprints, including wind.
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Lazard, an investment bank that has been calculating LCOE values for 12 years running, estimated in November 2018 that unsubsidized wind costs between $29-$56 per MWh, compared with $41-$74 for natural gas and $60-$143 for coal. With subsidies, wind became even more attractive, falling to just $14-$47 per MWh.
Lazard’s analysis also suggests that without subsidies, building a new wind farm in some scenarios is approaching cost-competitiveness with running existing coal and nuclear plants.
“In terms of coal, new wind is definitely cheaper in terms of building a new unit, and may even be cheaper than continuing to operate a coal plant that has already been built,” said Murray.
But not everyone comes up with such generous levelized cost estimates for wind — and there are limitations to using LCOE.
The EIA, which produces LCOE figures for future years, estimated in February that for wind facilities coming online in 2021, the average cost without subsidies would be $48.80/MWh when weighting by capacity. That’s compared with $46.70 for conventional natural gas and $40.50 for advanced natural gas (see Table A1a).
Unsubsidized LCOE Estimates
It should be noted that other forms of energy also receive subsidies. “Every energy technology we’ve had … has benefited quite substantially from the federal government,” said Jay Bartlett, a senior research associate at the independent nonprofit Resources for the Future.
Natural gas and oil producers, for instance, receive tax preferences for exploration and development costs, and receive additional tax breaks related to extraction, among others.
According to reports from the Department of Energy and the Congressional Research Service, fossil fuels have historically received more support than renewables, but in recent years the trend has flipped — and on a per unit of energy basis, renewables currently receive far more. Because many of the renewable tax subsidies are set to expire, the CRS report estimates that fossil fuels will receive more tax benefits than renewables in 2028.
Greenhouse gas emissions are also not currently factored into the costs of various forms of energy. Instead, lawmakers have generally opted for subsidies for energy sources that have lower carbon footprints, including wind.
...
Lazard, an investment bank that has been calculating LCOE values for 12 years running, estimated in November 2018 that unsubsidized wind costs between $29-$56 per MWh, compared with $41-$74 for natural gas and $60-$143 for coal. With subsidies, wind became even more attractive, falling to just $14-$47 per MWh.
Lazard’s analysis also suggests that without subsidies, building a new wind farm in some scenarios is approaching cost-competitiveness with running existing coal and nuclear plants.
“In terms of coal, new wind is definitely cheaper in terms of building a new unit, and may even be cheaper than continuing to operate a coal plant that has already been built,” said Murray.
But not everyone comes up with such generous levelized cost estimates for wind — and there are limitations to using LCOE.
The EIA, which produces LCOE figures for future years, estimated in February that for wind facilities coming online in 2021, the average cost without subsidies would be $48.80/MWh when weighting by capacity. That’s compared with $46.70 for conventional natural gas and $40.50 for advanced natural gas (see Table A1a).
Unsubsidized LCOE Estimates
BloombergNEF midpoint 2019 value | EIA average (capacity-weighted) in 2021 | Lazard 2018 ranges | |
Onshore wind | $37/MWh | $48.80/MWh | $29-56/MWh |
Natural Gas | $38/MWh | $40.50/MWh for advanced; $46.70/MWh for conventional | $41-74/MWh |
Coal | $78/MWh | N/A | $60-143/MWh |
Note: This table is for summary purposes only, and is meant to show the wide range of different results that can occur when groups are making different assumptions. Cost estimates are for new power plants only. Experts caution that different sets of LCOEs cannot be directly compared, and as we explain, there are challenges in comparing intermittent sources, such as wind, to baseload sources, including coal and natural gas. |