The Controversial History Of Renewable Energy Subsidies

From forgotten origins to modern relevance — the full, unfiltered story of the controversial history of renewable energy subsidies.

The Forgotten Origins of Renewable Subsidies

While the modern renewable energy revolution often seems like a recent phenomenon, the origins of renewable energy subsidies can actually be traced back over a century. In the late 1800s, a handful of pioneering inventors and entrepreneurs began experimenting with early wind and solar technologies, but struggled to make them commercially viable without government support. In 1896, the U.S. Congress passed the Newlands Act, which provided the first federal tax credits for the development of geothermal power. This was followed by the Water Power Act of 1920, which offered incentives for hydroelectric projects.

However, it wasn't until the 1970s energy crisis that renewable subsidies truly gained momentum. Facing skyrocketing oil prices and supply disruptions, policymakers scrambled to reduce the country's dependence on fossil fuels. The 1978 Public Utility Regulatory Policies Act (PURPA) required utilities to purchase electricity from small-scale renewable generators, while the 1978 Energy Tax Act offered tax credits for solar, wind, and geothermal installations. These early subsidies helped drive the first wave of renewable energy growth in the United States.

The Renewable Energy Lobby Takes Shape

As renewable energy technologies continued to evolve and improve in the 1980s and 1990s, a powerful renewable energy industry lobby emerged to advocate for more generous and widespread subsidies. Organizations like the American Wind Energy Association (AWEA) and the Solar Energy Industries Association (SEIA) worked tirelessly to influence policymakers, arguing that subsidies were crucial to making renewable energy cost-competitive with entrenched fossil fuels.

These lobbying efforts paid off in 1992 with the passage of the Energy Policy Act, which introduced the Production Tax Credit (PTC) – a key federal incentive for wind, geothermal, and other renewable electricity generators. The PTC provided a tax credit of 1.5 cents per kilowatt-hour of renewable electricity produced, significantly boosting the economics of wind and other projects.

"The Production Tax Credit was a game-changer for the wind industry. It allowed us to scale up, drive down costs, and become a real player in the energy market." - Sarah Slusser, former CEO of Cypress Creek Renewables

The Rise of State-Level Renewable Mandates

While federal subsidies were essential, a wave of state-level renewable energy mandates in the 1990s and 2000s also played a pivotal role in accelerating the growth of the industry. Beginning with Iowa in 1983, states across the country began passing Renewable Portfolio Standards (RPS) – policies that required utilities to generate a certain percentage of their electricity from renewable sources.

These state-level mandates, combined with generous federal tax credits and other incentives, created a powerful one-two punch that turbocharged renewable energy deployment. Between 2000 and 2019, U.S. wind power capacity grew from just 2.5 gigawatts to over 105 gigawatts, while solar power skyrocketed from less than 0.5 gigawatts to nearly 76 gigawatts.

The Controversial Backlash

However, the rapid rise of renewable energy subsidies has not been without controversy. Critics have long argued that these incentives amount to little more than corporate welfare, distorting free market competition and saddling taxpayers with the bill. In 2011, the high-profile bankruptcy of solar panel manufacturer Solyndra – after receiving a $535 million federal loan guarantee – provided ammunition for these critics, fueling accusations of government waste and cronyism.

More recently, as renewable energy has become increasingly cost-competitive with fossil fuels, a new round of criticism has emerged. Some argue that subsidies are no longer necessary, and that the industry should instead compete on a level playing field. Others contend that renewable subsidies unfairly disadvantage traditional energy sources, hindering the transition to a more diverse and resilient energy mix.

The Enduring Importance of Renewable Subsidies

Despite the ongoing debate, most experts agree that renewable energy subsidies will continue to play a critical role in driving the clean energy transition. Even as costs decline, subsidies remain essential for overcoming the entrenched advantages of fossil fuels, which have benefited from over a century of government support.

Moreover, renewable energy subsidies don't just benefit the industry – they also deliver broader societal benefits by reducing carbon emissions, improving public health, and enhancing energy security. As the world races to address the mounting threats of climate change, many policymakers view renewable subsidies as a key tool in the arsenal.

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"Love them or hate them, renewable energy subsidies have been absolutely vital for helping this industry get off the ground and reach the point where it can now compete head-to-head with fossil fuels. As we tackle the challenge of climate change, these incentives will only become more important in the years ahead." - Dr. Emily Grubert, Assistant Professor of Environmental Engineering, Georgia Tech