Hummer, Merritt-senior thesis final April 2010.pdf - CASTLE Lab ...

Introduction to the Energy Problem
season, and location, sometimes unpredictably, making a secondary energy source
all but necessary. Finally, geothermal energy, which is simply heat from the earth, is
captured beneath the earth’s surface. The drilling and exploration associated with
geothermal energy makes for a very expensive, and sometimes unfruitful,
enterprise.
Together, wind, solar, and geothermal energy supplied 13% of renewable
energy in 2008, or, equivalently, roughly 1% of the total U.S. energy supply. Yet
there is reason to believe that contributions from these three sources, backed by
technological advances and support from the federal government, will grow rapidly
in the coming years. In theory, wind, solar, and geothermal sources offer enormous
potential for meeting future energy demands; the obstacle will be to harness and
distribute the energy in a cost-­‐effective manner.
1.2 Tax Subsidies for Renewable Energy
If the government is so inclined, it may offer attractive subsidies to
encourage consumer behavior that it deems favorable. Subsidies are a powerful
means to ease financial burdens on consumers or to encourage spending in a certain
area. Tax subsidies and incentives take a great many forms, the most attractive of
which is the tax credit. Unlike tax deductibles, which only reduce taxable income,
tax credits reduce the amount of taxes owed dollar for dollar. Currently, the federal
government offers child and dependent care credits, education credits, and first-­‐
time homebuyer credits, to name just a few [49]. In 2005, Congress enacted a
personal tax credit for investment in renewable energy.
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