Wind and solar receive direct subsidies from the taxpayer and indirect subsidies from tax loopholes and special treatment. There is a direct subsidy from the federal government of approximately 30% of the construction cost. This is granted in the form of a tax credit in the case of solar and usually in the form of a 2.4-cent per kilowatt hour (inflation adjusted) payment for electricity produced from wind for the first 10-years of operation. The wind production tax credit effectively amounts to about 30% of the construction cost.
Wind and solar installations enjoy a special 5-year depreciation. Gas plants have to be depreciated over 20 years. As a consequence wind or solar energy projects use a money partner – a corporation with a large income tax bill. The deal is structured so that for the first years of the project's life the depreciation and interest expense is directed to the money partner reducing its income tax. Because the deal is leveraged with debt, the money partner can save more money on its income tax than it invested in the project, making a substantial profit for investing money in the project. Once the money partner has recovered his investment and profit the project ownership is flipped to the real developer. The net result is another large subsidy financed by reducing tax revenue to the federal and state governments.
Many states of have passed renewable portfolio laws that require the acquisition of renewable energy – usually wind and solar. As a result utilities are mandated to sign long term power purchase agreements with wind or solar developers at premium prices. Not only the price of the energy high, but the utility is required to buy all the energy offered, creating a guaranteed market.