The True Cost of Fossil Fuels

Skeptics of clean energy often cite high costs and “the need for subsidies” as a reason we shouldn’t or can’t afford to transition away from fossil fuels. But dirty energy has many costs attached to it which are not always readily apparent. Fossil fuel prices can be volatile, and we don’t always use domestically sourced products. Aside from the actual cost to consumers, the fossil fuel industry also receives subsidies, and we pay indirectly for using polluting energy sources in healthcare and pollution cleanup costs. It’s well past time to reframe the conversation around energy costs, and to even the playing field for cleaner energy sources.

While it’s true that most renewable energy sources can have high startup costs, once they’re running they’re inexpensive to keep up – after all, you don’t have to pay for wind or sunshine. In comparison, using fossil fuels for energy means we have to constantly buy oil, gas, and coal at the market rate. And this money doesn’t always stay in the US economy: “In 2007, America spent more than $360 billion importing fossil fuels, with the vast majority of that money spent on crude oil. That money is a direct transfer of wealth from American consumers to oil companies and foreign governments.” Even when we are buying within the country, volatile fuel prices can negatively impact consumers.  In comparison, prices for electricity generated from renewable sources has been shown to be more predictable.  In 2016, we spent $5.6 billion on renewable energy incentives, most of which went to biofuels.  Studies attempting to put a number on subsidies supporting fossil fuels, not including subsidies for things like fuel assistance programs, pegged them at around $20 billion dollars a year including the federal and state levels. The US has been slow to get rid of these subsidies and tax breaks compared to other developed countries, and that’s no coincidence. “In the 2015-2016 election cycle, oil, gas, and coal companies spent $354 million in campaign contributions and lobbying and received $29.4 billion in federal subsidies in total over those same years.” We are already spending a lot to prop up fossil fuels, but it’s taken for granted and doesn’t get much coverage, while any changes to incentives for clean energy are often hotly debated.

While the concrete costs to buy and subsidize fossil fuels are important to look at, arguably more important are the added costs of things like health care for asthma and cancer, cleaning up pollution, and fallout from a changing climate. These are difficult to put a price on, but we do know some of the costs. For example, the BP Deepwater oil spill costed tax payers fifteen point three billion dollars. There has also been impact on agriculture: “A 2007 study by researchers at the Lawrence Livermore National Laboratory and the Carnegie Institution at Stanford University found that global production of three of the six largest global crops experienced significant losses due to global warming between 1981 and 2002. The study concluded that global wheat growers, for example, lost $2.6 billion and global corn growers lost $1.2 billion in 2002 alone.” Projections are that these costs will sky rocket if climate change is not mitigated.

The price we pay for healthcare on pollution-related illness is difficult to pinpoint, but we do have some studies that have attempted to put a number on it. Sarah Rizk* and Ben Machol of the Clean Energy and Climate Change Office, U.S. EPA Region 9, in San Francisco published a peer reviewed article attempting to put a concrete price per kilowatt hour that we pay in healthcare. They found costs of “…19 to 45 cents per kilowatt-hour for coal, 8 to 19 cents per kilowatt-hour for oil, and 1 to 2 cents per kilowatt-hour for natural gas. “For coal and oil,” Rizk and Machol write, “these costs are larger than the typical retail price of electricity, demonstrating the magnitude of the externality.” This cost isn’t distributed evenly, either – places that are the site of extraction and energy generation pay a higher price in their health.

Clean energy is often dismissed as being too expensive, but really the cost of energy from fossil fuel is artificially low and much of what we pay is hidden or part of the status quo. When you really dig into the numbers, it’s clear that the playing field is uneven. There are many reasons to transition to clean energy, and now we can add the comparative cost of it to the list.

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The Benefits of a Green Power Grid

Skeptics of clean energy argue that more technology like solar and wind on the grid would mean instability, higher prices, and economic harm. But moving to a more sustainable power grid hasn’t caused the destabilization or issues critics predicted. In fact, the transition has come with many benefits beyond mitigating climate change. These include lower and more stable energy prices, as well as resilience to natural disasters and other interruptions.

California, Massachusetts, New York, and Colorado are a few of the states that have seen a lot of success with community solar programs. They have overcome some of the obstacles in accessibility like pricing and siting that rooftop solar faces, and community solar distributes the financial benefits of solar more equitably than rooftop solar does.

But it’s not just traditionally “blue” states that have had success integrating clean energy. Texas, Alabama, Iowa, and Idaho have also been leaders in installed capacity. Texas is a great example, it hit a milestone with 18% of its energy coming from wind and solar. “The 18 percent number matters because for years critics of renewable energy have argued that grid costs and reliability will spiral out of control before we hit 20 percent wind and solar. But in Texas, retail electricity prices have actually decreased, coming in well below the U.S. average.” If a conservative state like Texas can make wind work to their benefit, it seems like we should be able to follow suite in other states too.

And all signs seem positive that we can move beyond the twenty percent mark with no ill effects. “…a succession of rigorous studies — including a widely cited two-year study conducted by the DOE itself in 2012 — has found that renewables can provide as much as 80 percent of the nation’s energy supply without disrupting a properly managed grid. And that doesn’t mean that 80 percent is the upper limit of renewables — it indicates only that levels beyond 80 percent weren’t thoroughly investigated.” In fact, there are some aspects of solar and wind generated power that make things more stable. Once a solar or wind farm is built, operating costs are low and predictable, helping to even out electricity prices. They are also less vulnerable to major outages as they are more spread out and “modular,” meaning a natural disaster taking out some plants won’t stop overall production.

As we see more success stories, the reasons are piling up to transition to clean energy. Adding lower prices and more stable service to the benefits of renewable power makes it more broadly appealing; climate change isn’t the only motivator anymore.

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Fossil Fuel Giants Acknowledge Climate Change and Begin to Adjust

Traditional fossil-fuel-centric entities are acknowledging climate change and investing in clean energy. This marks an important turning point, and if they believe the future is in clean energy, we should take notice and build on the existing successes, for example the recent boom in community solar in multiple states.

Community solar has seen wide success. Forty-two states have at least one active farm, and there were “…1,226 cumulative megawatts installed through Q2 2018.” Nineteen states have policies and programs to encourage the growth of community solar, and while community solar benefits everyone with lowered pollution and cost savings, increasingly, there are projects that target benefits specifically to low income communities.

Exxon keeps tabs on the outlook for different energy types, and the future is bright for renewable energy. Between 2016-2040, they expect solar and wind to lead the way in global growth. The oil giant has also been in the news recently as shareholders pushed the company to report the risks climate change poses to its business model. And Exxon isn’t the only company; Chevron invested in five solar projects and has announced a commitment to renewable energy. BP has also made some moves: “…much of the company’s strategy update focused on clean energy, which BP said would amount to around $0.5bn of its $15bn-$16bn capital expenditure programme… BP recently bought a $200m stake in Europe’s biggest solar developer.” Shell, another major player in the industry, took things further, pledging to “reduce its net carbon emissions 20% by 2035, and 50% by 2050.”

Although critics correctly point out that these numbers are not large compared to these companies’ overall revenue and we need more action to get where we need to be, there’s a lot of value in what these traditionally conservative and fossil-fuel-focussed organizations are doing. The underlying lesson is that they have acknowledged climate change and the shift in our energy industry and are beginning to adjust. If even the companies that sell fossil fuels are making these changes, it seems like we should pay attention and make changes too. We have the technology and the models we can use for success.

Find out how you can be part of the solution.

Join a Community Solar Farm. Fight Climate Change.
Help Make the Electric Grid More Resilient.

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