Fossil Fuels & Nuclear Lion’s Share of DOE R&D Subsidies

Opponents of renewable energy (it’s hard to believe they exist) claim that renewables cannot compete economically with oil, gas, and nuclear power.  I have discussed the fallacy in this argument from an economic theory point of view here, but it is also important to point out that the subsidies for renewables are a tiny fraction of those for coal, oil, and gas.  Many reports on this topic focus on the comparison of overall subsidies to fossils and nuclear vs. oil & gas, but in the context of all the criticism that the Department of Energy (DOE) has gotten after one of their many investments in renewables failed, I thought it would be interesting to look at the comparison of just DOE R&D funding on fossils and nucelar vs. renewables.

The non-partisan Congressional Research Service published a recent report documenting the history of R&D funding by technology.  The conclusion: whether you look back 65 years or just over the last 10 years when R&D investment in renewables R&D have spiked, DOE spending on R&D for fossil fuels and nuclear has been far greater than spending for renewables R&D.  The below figure from the report shows the share of R&D spending by technology type from 1948-2012.  About 75% of DOE R&D funding have gone to nuclear or fossil fuel technologies:

The fact is that R&D is good for society and is under-provided by markets thanks to the economic concept of “market failure” discussed here.  It may be entirely appropriate to invest in R&D on even mature industries like fossil fuels and nuclear.  But it is inarguably wrong to oppose such investments in renewables when fossil fuels and nuclear power have benefited from such investments for many decades.

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About Cyrus

Cyrus Tashakkori is Vice President at Pioneer Green Energy, a wind and solar power developer based in Austin, TX. He has an MBA and a Masters in Public Policy from the University of Texas in Austin and a Bachelor's in Science & Economics from the University of North Carolina, Asheville.
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2 Responses to Fossil Fuels & Nuclear Lion’s Share of DOE R&D Subsidies

  1. constantine says:

    Very interesting post. And it’s great to see the numbers put together like this.

    And I completely agree with where you’re coming from.

    But just to do it, let’s make some discussion here, because you present the case as if there is none to be made. (I do believe I read the word “inarguably” up there…)

    So 75% of DOE R&D funding has gone to nuclear and fossil fuels. A few questions then:

    A. What fraction of our energy comes from renewables? Quite a bit less than 11.6% (look, I agree, we want to change this… but that 11.6% looks a lot bigger if you divide by the size of the sector).

    B. What part of that 75% has gone into making fossil fuels / nuclear technology more “green”? I don’t know the answer to this question. But given that the world’s consumption of fossil fuels isn’t going away any time soon, we SHOULD be investing in “green fossil fuel R&D” whatever that might be. Indeed, maybe in the short term, this is the best or maybe only way to avoid the tipping point of global warming? Just throwing that idea out there as a thought experiment, because if the investment choice is in my hand, my instinct is to reflexively, always go for renewables. I’d love to get some info on this.

    • Cyrus says:

      Great points and questions Constantine. I think the direction of your question is the general concept of “what value do/did we get for each $ we spent on each technology”. But I don’t think comparing $s spent on R&D weighted for the % share as you suggest is the right way to think about it. R&D and more broadly energy subsidies are designed to address the market’s under-investment in R&D (see my post here for a discussion of this form of market failure). The US Government first started investing in oil & gas over 90 years ago, and nuclear over 60 years ago. Why? Because those industries needed a lift and American society benefited greatly as a result of their development. It was a good investment and helped get these industries off the ground.

      By comparison, we have been subsidizing the wind industry for just 20 years (again, vs. 90 years for oil and 60 for nuclear). I don’t have the statistics on the specific positive impact of government investment on fossils and nuclear over the many decades, but I do know that the cost of wind power electricity has permanently come down 90% over 20 years, and this has been a direct result of government subsidies. The real metric for comparing return on dollars spent in R&D funding should be this kind of bang-for-buck assessment. How much had we subsidized oil & gas and nuclear on/around the 20th year of our investment in those industries? How mature were those industries on the 20th year? How would that energy compare with the current price of wind energy? The “bang for buck” metric would get us closer to a useful comparison.

      I don’t have an answer to this question, but it’s hard to imagine another energy subsidy that has worked so successively to get an industry off the ground, create the conditions needed for a new industry to form (conditions like a manufacturing base, financing structures, accounting methods, supply chain development, a service industry, transportation, regulatory developments, etc.) and resulted in such dramatic improvements in the commercial viability of a technology.

      I am 100% in support of R&D funding and am not arguing against any particular investment in R&D funding. But when opponents of renewables argue that markets, not governments, should pick winners & losers, they point to massively subsidized and fully mature energy sources that have had the benefit of decades of R&D funding and other investments that facilitated their commercialization.

      Let me know what you think, and thanks again!

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