Texas is known for fiercely promoting its oil and gas industries, but it’s also theNo. 2 renewable energy producerin the country after California. In fact, more than a quarter of all the wind power produced in the United States in 2021 was generated in Texas.
These projects benefit from a lucrative state tax incentive program calledChapter 313. That incentive program expires on Dec. 31, 2022, and the rush of applications for wind and solar energy projects to secure incentives before the deadline is providing a rare window into a notoriously opaque industry.
By reviewing the applications and ownership documents, we were able to track who actually builds and owns a large portion of the nation’s renewable energy, when and how those assets change hands, and who ultimately benefits from the tax incentives.
The results might surprise you. The majority of utility-scale solar and wind energy projects in Texas aren’t owned by companies focused on renewable energy—they’re owned by energy companies or utilities that are better known for fossil fuels, including some that haveaggressively opposed renewable energyand climate policies in other states and nationally.
The policy implications of these findings are complex. While these subsidies might lead some energy companies to reduce their greenhouse-gas emissions, they also can allow energy companies to continue polluting from existing fossil-fuel assets while collecting the subsidy benefits.
A subsidy program that saves companies billions
Chapter 313 limits how much companies have to pay in property taxes for schools if those companies build infrastructure and agree to create jobs. The Texas Legislature passed it in 2001 when a number of large companies, including Intel INTC, +3.04% and Boeing BA, +3.53%, were considering Texas for an investment location.
Companies using this program cansave billions of dollarsin local property taxes. However,investigations have revealedhigh costs per job and minimal requirements for companies. Thestate’s school funding systemalso suffered.
The program wasn’t renewed, but companies that applied for the incentive by Aug. 1, 2022, could grandfather in their investments for 10 years of tax benefits. That led to therush of applications, including for wind and solar projects.
Who’s proposing renewable energy projects?
It is notoriously difficult to track the owners of renewable energy projects in the U.S., because most are structured aslimited liability companies, or LLCs. However, the application for Texas incentives requires not only information on the owner, but also a signature of an individual representative of the owners. That provides a glimpse into the impact that subsidies can have and who benefits.
We found that just over a third—69 out of 191 proposed projects—are owned by renewable energy companies, such as Danish company Ørsted ORSTED, +3.00% and Recurrent Energy, owned by Canadian Solar CSIQ, -0.38%.
Over half the proposals—101—were submitted by energy companies known more for oil and gas, or utilities with fossil-fuel assets. This includes the renewable energy subsidiaries of oil supermajors such as Total TTE, +0.75% and BP BP, +1.44%, and utility owners including EDF EDF, +0.13%, AES AES, +2.74% and Engie ENGI, -0.26%, all of which are major global players.
Some project applications came from investment groups such as DeShaw Group, Cardinal Investment Group and Horus Capital. Apex Clean Energy, a renewable energy subsidiary of the major investment manager Ares Management, ARES, +3.16% frequently showed up in applications.
New owners take over
The proposed projects provide a snapshot of the renewable-energy projects’ developers—but what happens after these projects are built?
To figure that out, we also looked at all renewable-energy projects completed in 2020 and 2021 that participated in the Chapter 313 incentive program.
To our surprise, almost half of the projects built in 2020 or 2021 had changed hands by 2022. Some were due to company acquisitions. Many other projects were sold.
This changed the composition of owners. While renewable energy companies owned roughly half the projects at the application stage, by 2022, two-thirds of the projects were owned by utilities and energy companies with fossil-fuel assets.
The original developers may have benefited from the first year or so of the tax break, but the new owners are poised to reap the majority of the remaining years of the 10-year property-tax incentive.
The most common pattern of sales was a renewable-energy developer selling a project to an energy company or utility. For example, Duke Energy DUK, -0.21% purchased a solar project originally owned by Recurrent Energy, and Alpin Sun sold a solar project to BP.
We found that ownership by self-described “venture capitalists” and other investors was rare before 2022. The lucrative and expiring incentive program likely led to a gold rush of applications, including by some companies with limited experience in renewable energy.
When renewable incentives become subsidies to fossil fuel companies
For example, the company with the most renewable energy projects subsidized under Chapter 313 from 2020 to 2022 is NextEra NEE, +0.77%. NextEra is also the parent company ofFlorida Power and Light, a utility that has campaigned againstrooftop solar in Floridaandsuedto block hydropower imports in Massachusetts. In Texas, however, NextEra lobbied for a continuation of Chapter 313 incentives.
Other major energy companies in the owner list include France’s Total Energy, BP, Duke Energy and Savion, which is owned by Shell SHELL, +1.23%.
The data suggests some possible tensions within green-energy policy.
Environmentalists have long argued for federal and state subsidies for renewable energy as a means of combating climate change, including in theclimate- and inflation-focused bill currently in Congress.
However, as our data analysis shows, the owners who benefit from renewable-energy incentives can in some cases be the same fossil-fuel companies that actively oppose a green-energy transition.The results of a 2021 study, using data released by energy companies on earnings calls, also suggest that energy company investments in renewable-energy projects are often simply diversification strategies—they aren’t replacing fossil fuels.
Our analysis is based on one program in Texas, but with the size of the Texas renewable-energy sector, and the companies involved, it can offer insights for broader renewable-energy policies.
Key to any subsidy program is clearly articulating the goals and tracking success in meeting them. If the goal is to reduce greenhouse as emissions, that means examining who is benefiting and determining if the subsidies are actually leading to a transition away from fossil fuels.
Our data begins to shine a light on the answer.
This commentary was originally published by The Conversation—Who benefits from renewable energy subsidies? In Texas, it’s often fossil fuel companies that are fighting clean energyelsewhere
Nathan Jensen is professor of government at The University of Texas at Austin College of Liberal Arts. Isabella Steinhauer is a master’s candidate and graduate research assistant at The University of Texas at Austin College of Liberal Arts.
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Overview of energy subsidies
The International Renewable Energy Agency tracked some $634 billion in energy-sector subsidies in 2020, and found that around 70% were fossil fuel subsidies. About 20% went to renewable power generation, 6% to biofuels and just over 3% to nuclear.
Production subsidies are tax breaks or direct payments that reduce the cost of producing coal, oil or gas.Are there fossil fuel subsidies? ›
Globally, fossil fuel subsidies are were $5.9 trillion or 6.8 percent of GDP in 2020 and are expected to increase to 7.4 percent of GDP in 2025 as the share of fuel consumption in emerging markets (where price gaps are generally larger) continues to climb.Which industry receives the most energy subsidies? ›
Fossil fuels still receive massive government subsidies
However while renewables do now receive the most in terms of subsidies, the fossil fuel industry still claims a huge amount of taxpayer money to help keep their prices low.
Energy subsidies are measures that keep prices for customers below market levels, or for suppliers above market levels, or reduce costs for customers and suppliers.How do energy subsidies violate the full cost pricing factor of sustainability? ›
Subsidies violate full-cost pricing because the consumers (people buying the product) don't know how much this energy source really costs so those consumers don't know how bad it is for the environment.Should petroleum subsidy go away essay? ›
If petroleum subsidies are removed it can result in an uptick in fuel prices which, in turn, will have an impact on the budgets of all households. It has an indirect impact on the goods and services. Any kind of subsidies withdrawal will have a negative impact on inflation rate.How much does the US government subsidize fossil fuels? ›
The high price of subsidies
A conservative estimate from Oil Change International puts the U.S. total at around $20.5 billion annually, including $14.7 billion in federal subsidies and $5.8 billion in state-level incentives.
Production subsidies increase the profitability of extracting and transporting fuels, usually by offering tax breaks, production credits, or accelerated depreciation for capital investment.What are inefficient fossil fuel subsidies? ›
All countries in the G7 - representing the world's largest advanced economies - have previously committed to phase out "inefficient" fossil fuel subsidies by 2025. The IEA defines an "inefficient" subsidy as something that encourages wasteful consumption.
The government should place a tax on fossil fuels so that consumers and producers pay the full social cost. This will make renewables relatively more competitive and increase the incentive for energy companies to switch. The higher price of fossil fuel energy will also reduce consumer demand.What is a subsidy example? ›
Examples of Subsidies. Subsidies are a payment from government to private entities, usually to ensure firms stay in business and protect jobs. Examples include agriculture, electric cars, green energy, oil and gas, green energy, transport, and welfare payments.Does the US government subsidize renewable energy? ›
Government financial incentives
The federal tax incentives, or credits, for qualifying renewable energy projects or equipment include the Renewable Electricity Production Tax Credit (PTC), the Investment Tax Credit (ITC), the Residential Energy Credit, and the Modified Accelerated Cost-Recovery System (MACRS).
|Rank||Major Industry||Number of Awards|
|1||utilities and power generation||3,710|
|2||aerospace and military contracting||8,007|
|4||electrical and electronic equipment||2,901|
Coal, oil, and natural gas received $5.9 trillion in subsidies in 2020 — or roughly $11 million every minute — according to a new analysis from the International Monetary Fund. Explicit subsidies accounted for only 8 percent of the total.What are the factors affecting renewable energy? ›
Among those factors, lack of good governance, renewable energy adaptation, and governmental energy policies are revealed to be the crucial barriers to REG development, whereas endowed resources, power production approach, renewable energy demand, investment environment for renewable energy projects, economic returns of ...When all factors are considered including environmental impact which form of renewable energy is considered to be the most efficient way to produce electricity? ›
Terms in this set (31) When all factors are considered, including environmental impact, wind turbines are considered to be the most efficient way to produce electricity.Why do some energy sources with low net energy require subsidies to operate? ›
Why do some energy sources need subsidies? Any energy resource with a low net energy will need government subsidies to compete in the marketplace with high net energy resources. Some examples of subsidy needing energy sources include conventional oil and natural gas, coal, synthetic fuels, and nuclear power.What are the pros and cons of subsidies? ›
Some advantages of subsidies include inflation control and moderation of supply and demand, while disadvantages include a potential increase in taxes on citizens in subsidizing countries.Why are subsidies bad for the economy? ›
By aiding particular businesses and industries, subsidies put other businesses and industries at a disadvantage. This market distortion generates losses to the economy that are not easily seen and thus generally aren't considered by policymakers.
A subsidy is a direct or indirect payment to individuals or firms, usually in the form of a cash payment from the government or a targeted tax cut. In economic theory, subsidies can be used to offset market failures and externalities to achieve greater economic efficiency.How much does the US government spend on subsidies? ›
- Call on your representatives to stop approving new fossil fuel infrastructure. ...
- Protest fossil fuel infrastructure. ...
- Call on your representatives to end fossil fuel subsidies. ...
- Call on your representatives to invest in climate action. ...
- Switch your energy supplier and/or make your home energy efficient.
Without subsidies we would all be paying roughly $12.75 per gallon for gasoline. The subject area of interest is how budget cuts might actually get rid of dirty fuel subsidies.Why can't we stop using fossil fuels? ›
This is why they're called “greenhouse” gases — they act like a greenhouse over the Earth. The more greenhouse gases there are in the atmosphere, the hotter the planet gets. Unlike renewable sources of energy, like wind or solar power, fossil fuels are in limited supply. Once burned, they're gone forever.What countries subsidize renewable energy? ›
The European Union accounted for around 54 % (USD 90 billion) of total estimated renewable subsidies in 2017, followed by the United States, with 14 % (USD 23 billion), Japan with 11% (USD 19 billion), the United States with 9 % (USD 16 billion), India with 2 % (USD 4 billion) and the rest of the world with slightly ...What is the main problem in using fossil fuels? ›
When fossil fuels are burned, they release large amounts of carbon dioxide, a greenhouse gas, into the air. Greenhouse gases trap heat in our atmosphere, causing global warming.What are the 4 main types of subsidies? ›
- Export subsidies. An export subsidy is when the government provides financial support to companies for the purpose of exporting goods to sell internationally. ...
- Agriculture subsidies. ...
- Oil subsidies. ...
- Housing subsidies. ...
- Healthcare subsidies.
The effect of a subsidy is to shift the supply or demand curve to the right (i.e. increases the supply or demand) by the amount of the subsidy. If a consumer is receiving the subsidy, a lower price of a good resulting from the marginal subsidy on consumption increases demand, shifting the demand curve to the right.What are the benefits of subsidies? ›
When government subsidies are implemented to the supplier, an industry is able to allow its producers to produce more goods and services. This increases the overall supply of that good or service, which increases the quantity demanded of that good or service and lowers the overall price of the good or service.
The National Academies study found that energy subsidies can be counterproductive: By lowering the price of energy, or increasing efficiency, they may actually encourage more energy use and increase emissions.Should renewable energy be Subsidised? ›
By increasing the deployment of renewables, subsidies have played a role in reducing reliance on fossil fuels. This is very important for reducing greenhouse gas emissions and restricting global temperature rise.How much does the government spend on renewable energy subsidies? ›
Approved government spending on clean energy reached USD 480 billion. The USD 45 billion allocated to renewables – including electricity, heat and fuels (biofuels, advanced biofuels and biogas) – accounted for about 9% of announced public spending on clean energy.Are fossil fuels cheaper than renewable energy? ›
Renewables Can Cost Less than Fossil Fuels
These days, the energy produced by renewables is just as affordable as energy produced by fossil fuels, if not cheaper in some cases. Some solar panel projects can even generate power at roughly half the cost of fossil fuels like coal.
How much of U.S. energy consumption and electricity generation comes from renewable energy sources? In 2021, renewable energy sources accounted for about 12.2% of total U.S. energy consumption and about 20.1% of electricity generation.Why is renewable energy more expensive than fossil fuels? ›
That's because fossil power plants have to buy mined fuels to operate. In coal plants, supplying the coal accounts for about 40 percent of total expenses. Sunshine and wind are free, which allows the costs of tapping into their power to decline sharply as technology improves and the industry grows.How much of the United States electric generation comes from coal? ›
Coal was the second-largest energy source for U.S. electricity generation in 2021—about 22%.