J and D's Corner

From the Letters Archive

This was my second in an exchange involving solar energy subsidies, which are covering our local Antelope Valley with both windmills and solar panels. 

Jenkins, the CEO of a local PV solar outfit marketing primarily small residential installations, started the exchange by publishing a defense of solar subsidy.  I took exception to his distortion of the subsidy concept in my preceeding letter, which pointed out there is a distinction between a direct subsidy payment and the tax code provisions that allow deduction of various business expenses, saying  "The disingenuous love to refer to this deduction of expenses to arrive at taxable income (profit) as a subsidy, the theory apparently being that the government actually is the rightful owner of ALL money, and if they don’t take some of it away from you they are giving you a “subsidy”.

He came back with a reply, so one good reply deserves another, right?


To:  AV Press
Date: 11/20/2011
Re:  What is a Subsidy?

I rarely make the effort to reply to a comment on one of my letters.  In this case, however, I owe an apology to Stephen Jenkins of the solar firm ACS Inc.  Mr. Jenkins, in looking back I see I did indeed misspell your first name, for which I sincerely apologize.  The old saw about the importance of rendering a name correctly in anything published still holds!

Now that we’re in it though, let’s recap the thrust of the exchange: I had taken exception to the over-broad use of the term “subsidy” in the debate about the relative cost of solar vs. fossil energy.  Mr. Jenkins’ firm is involved in the solar panel (PV) business, which as we are all aware is the recipient of massive direct taxpayer subsidy courtesy the government. 

My letter did not address whether or not this direct taxpayer subsidy of PV solar is good or bad, although I do personally feel there are better, more practical and cost-effective pathways toward reducing our use of fossil fuels.  What I was writing about was the oft-repeated statement that “80% of U.S. energy subsidies go to fossil energy producers”.

Since oil companies do not receive the type of generous direct taxpayer subsidy payments government doles out to solar, how was this 80% figure arrived at and what does it include?   

If you try to research the matter you immediately find yourself awash in a quicksand swamp of conflicting numbers and definitions.  Is not taxing a company on the cost of doing business (labor, equipment, depreciation, leases, operating expenses, etc.) really a ”subsidy”?  In the ordinary world, of course not, but in the energy debate it somehow seems to be.  They also throw in things like the cost of operating various government bureaus, government research activities, consumer rebates on hybrid cars and on and on.  The result of all this fuzzy figuring is really fuzzy numbers, producing quotes ranging from $4 billion to $100 billion in annual “fossil subsidies”.  Plenty of spread for finding a figure that best supports your personal viewpoint. 

So is there really some foundation for the “80%” figure?  The “big 3” U.S. oil companies do about $772 billion in yearly gross business vs. the solar industries’ approximately $5 billion, so I guess if you are counting every deductable expense in the business tax code as a “subsidy” and then comparing the two industries, then sure, and more besides.  But I’d still prefer actual numbers for real subsidies, and definitely without the verbal duplicity.  

John Wilson