SubsidiesBY: HEAMON WILLIAMS

What is a Subsidy?

A subsidy is a benefit given by the government to groups or individuals usually several forms: cash payment (Direct spending) Tax reductions The energy industry in particular heavily

regulated/subsidized by government The Government spends around $9-13 billion

annually on civilian energy research and subsidies (increase in last 10 years)

Types of Subsidies

1. Subsidies that increase revenue (Tax breaks)2. Subsidies that lower the cost of production

(Direct Spending lowers fixed costs)3. Subsidies that are not linked to production or

input (Wage boosts and research grants etc.)

Why Do We Have Them?

• Stabilization of the economy

• Government Fiscal Policy• Largely Democratic

support• More affordable service

(notice price difference when subsidy introduced)

Solar EnergySolar

Special Treatment for Solar?

Solar is not the only subsidized industry in the energy sector

Compared to fossil fuels solar receives 1/6th of the funding/tax breaks

Meant to stabilize the economy Compare to the ‘07-’08 bailouts

How Are They Distributed?

*Subsidy distribution within the energy sector

Anti-fossil fuels edition

Now a pro-fossil fuels chart…

Source: congressional tax budget Notice how here subsidies for

fossil fuels is $22,500,000 vs. $70,200,000 in previous slide

What is Happening?

Data manipulationWho benefits?Political influence, corporate pressure,

public pressureEvery country is different (see Saudi

Arabia later)

Political Influences on Subsidies

Democratic policy VS. Republican policy

Left: wants more government intervention. They support more subsidies and like the government to control the economy as best it can.

Right: wants less government intervention and believes in a free market theory with laissez-faire economics. They believe that generally subsidies are an unfair advantage provided to industries that can not stand on their own.

*Upcoming election key

Solar ITC Option and Why You Should Care

Scheduled to run out in 2016, was extended by congress (30%) If allowed to run out, Bloomberg projects a ripple effect that

would crush the energy sector (Bad timing with Oil’s current state)

Estimates a drop in Solar projects up to 70%, loss of around 100,000 jobs

New extension runs through 2022 when the industry will have advanced to sustainable levels

Not the Only Option…

Gov’t is not the only entity with money1. Private investors2. Financial intermediaries

Subsidies may not be needed much past 2022Improving technology of cells

Solar Subsidies Today

Industry is stable thanks to Congress’ extension of the ITC

Direct Government spending has been steadily increasing under Obama’s terms however this could shift

Nevada an example of what could go wrong if we reverse this in the future (solar has left state)

Saudi Arabia

Cutting spending on all alternative energy sectors

Attempt to combat drop in oil’s value over last year

Long-term effects

Thank-you – Questions?

CitationsThe Conservative Case for Solar Subsidies - The New York Times. (n.d.). Retrieved from http://www.nytimes.com/2016/01/05/opinion/the-conservative-case-for-solar-subsidies.html?_r=0

Subsidy Definition – Investopedia. (n.d.) Retrieved from http://www.investopedia.com/terms/s/subsidy.asp

Frishberg, Manny. Research Technology Management. 2nd ed. Vol. 57. Industrial Research Institute, 2014. Print.

Lacey, Stephen. "Congress Passes Tax Credits for Solar and Wind: ‘Sausage-Making at Its Most Intense’." Web. 15 Mar. 2016.

"Congress Extends the Renewable Investment Tax Credit: What Now." GreenBiz. Web. 15 Mar. 2016.

"Energy Subsidies." Downsizing the Federal Government. Web. 22 Mar. 2016.