The energy transition is a challenge that, at least in the West, is being successfully addressed (ambition is another matter). However, the European Union is leading most projects… except one. This is the renewable train with which United States have surpassed them, even though we have had to invest up to $400 billion to do it at once.
United States and the European Union, in a race with this renewable trend
The renewable energy race between the United States and European Union has intensified in recent years as both attempt to transition away from fossil fuels. With climate change accelerating, clean energy solutions like wind and solar have become critical to reducing greenhouse gas emissions.
However, the pace and methods of this clean energy transition have started to diverge between the US and EU. While both remain committed to boosting renewables, the US has pulled ahead in growth mainly due to more generous government subsidies.
This has allowed the US to attract substantial private investment in domestic energy projects and supply chains. The EU, with its more fragmented incentives across member states, has lagged behind. But with the US inflation Reduction Act providing $400 billion in new subsidies, the EU is now scrambling to keep pace.
The United States is beating the European Union, albeit only in these renewable subsidies
The United States has seen rapid growth in renewable energy over the past decade, driven in large part by generous subsidies and tax credits. Major federal policies supporting renewables include the production tax credit (PTC) for wind energy and the investment tax credit (ITC) for solar energy.
These tax credits have lowered the cost of renewable energy and incentivized massive private sector investments in wind and solar projects. According to the US Energy Information Administration, renewable energy generation has doubled over the past decade, with much of that growth coming from wind and solar.
The PTC and ITC helped the US install over 100 gigawatts of wind and solar capacity from just 2010 to 2020. The declining costs of renewables, aided by the subsidies, have made wind and solar cost-competitive with fossil fuels in many parts of the country.
State-level policies have also accelerated the transition to renewables in leading states like California, Texas, and Iowa. Overall, renewables now account for over 20% of US electricity generation, up from around 10% just ten years ago. The renewable energy expansion in the US is projected to continue outpacing.
A victory that cost us $400 billion: more efficient, distributed and agile than Europeans
The United States has been more generous with renewable energy subsidies compared to the European Union. The Inflation Reduction Act passed in 2022 contains over $400 billion in subsidies and tax credits for renewable energy and climate-related industries.
In contrast, subsidies in the EU have been more modest. Renewable power auctions in Europe provide guaranteed pricing but the subsidy levels are lower. Analysis shows that US wind and solar subsidies will be 2-4 times more generous than the EU through 2030.
In any case, most of the European financial resources earmarked for public aid for energy efficiency are still not being deployed or are being deployed in tranches.
The scale of US subsidies has caught the attention of European energy executives and policymakers. The CEO of Italian utility Enel recently stated that the US subsidies are “unmatched” and enable renewable energy investments that are 30-40% cheaper than the EU.
As you can see, the manufacturing and implementation of subsidies is much more efficient in our country than in the European Union. It is clear that energy in the United States has a promising future ahead of it, with a firm commitment by our institutions and companies (although it is still not enough, remember the words of the UN).
