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Direct Federal Financial Interventions and Subsidies in Energy in Fiscal Year 2010
- Sources & Uses
- Topics
- Geography
Analysis & Projections
full report in PDF (1.2 mb)
Direct Federal Financial Interventions and Subsidies in Energy in Fiscal Year 2010
Release date: August 1, 2011
Executive Summary
Background
This report responds to a November 2010 request to the U.S. Energy Information Administration (EIA) from U.S. Representatives Roscoe G. Bartlett, Marsha Blackburn, and Jason Chaffetz for an update to a 2008 report prepared by EIA that provided a snapshot of direct federal financial interventions and subsidies in energy markets in fiscal year (FY) 2007, focusing on subsidies to electricity production (Appendix A). As requested, this report updates the previous report using FY 2010 data and is limited to subsidies that are provided by the federal government, provide a financial benefit with an identifiable federal budget impact, and are specifically targeted at energy markets. Subsidies to federal electric utilities, in the way of financial support, are also included, as requested. These criteria do exclude some subsidies beneficial to energy sector activities (see “Not All Subsidies Impacting the Energy Sector Are Included in this Report”) and this should be kept in mind when comparing this report to other studies that may use narrower or more expansive inclusion criteria.Energy subsidies and interventions discussed in this report are divided into five separate program categories:
Direct Expenditures to Producers or Consumers. These are federal programs that involve direct cash outlays which provide a financial benefit to producers or consumers of energy.
Tax Expenditures. These are provisions in the federal tax code that reduce the tax liability of firms or individuals who take specified actions that affect energy production, consumption, or conservation.
Research and Development (R&D). These are federal expenditures aimed at a variety of goals, such as increasing U.S. energy supplies or improving the efficiency of various energy consumption, production, transformation, and end-use technologies. R&D expenditures generally do not directly affect current energy consumption, production, and prices, but, if successful, they could affect future consumption, production, and prices.
Loans and Loan Guarantees. These involve federal financial support for certain energy technologies. The U.S. Department of Energy (DOE) is authorized to provide financial support for “innovative clean energy technologies that are typically unable to obtain conventional private financing due to their ‘high technology risks.’ In addition, eligible technologies must avoid, reduce, or sequester air pollutants or anthropogenic emissions of greenhouse gases."1
Electricity programs serving targeted categories of electricity consumers in several geographic regions of the country. Through the Tennessee Valley Authority (TVA) and the Power Marketing Administrations (PMAs), which include the Bonneville Power Administration (BPA) and three smaller PMAs, the federal government brings to market large amounts of electricity, stipulating that “preference in the sale of such power and energy shall be given to public bodies and cooperatives.”2 The federal government also indirectly supports portions of the electricity industry through loans and loan guarantees made by the U.S. Department of Agriculture’s Rural Utilities Service (RUS) at interest rates generally below those available to investor-owned utilities.
With the exception of the federal electricity programs and loan guarantee programs, this report measures subsidies and support on the basis of the cost of the programs to the federal budget as provided in budget documents.3 This report measures support provided by federal electricity programs by comparing the actual cost of funds made available to these entities to the cost of funds that they might otherwise have incurred. Similarly, the value of the support provided by DOE's loan guarantee program is estimated by analyzing what the costs of financing eligible projects might be without the guarantees and the cost of the credit subsidy required for the guarantee. Uncertainties in the estimation of subsidy and support costs for federally-guaranteed loans, federal utilities, and participants in Rural Utilities Service loan programs are reflected by providing a range of subsidy estimates for selected programs in the body of the report. To facilitate exposition, the Executive Summary presents only midpoint value estimates for these programs.
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