It’s time for tough love on tax credits for the mature wind industry

Wind energy subsidies

A pending vote on a tax-extenders package—that would have a slim chance of passage in the new Congress—will reveal whether or not Congress learned anything from the 2014 midterms.

Throughout 2014, since the Production Tax Credit (PTC) for the wind energy industry expired on December 31, 2013, lobbyists from the American Wind Energy Association (AWEA) have pushed Congress to vote to retroactively revive the PTC. The lame duck session provides their last opportunity.

The PTC provides one of the best examples of the worst kind of taxpayer waste being considered in a tax-extenders deal. The largest benefactors of the credit (underwritten by U.S. taxpayers) are wind energy turbine manufacturers like General Electric (which purchased Enron’s wind turbine business in 2002), and investors like Warren Buffet, who, without apology, recently admitted: “We get a tax credit if we build a lot of wind farms. That’s the only reason to build them. They don’t make sense without the tax credit.”

The U.S. wind energy business started as a gleam in Enron’s eye, enjoyed an entitled childhood at taxpayer expense, and, by now, should have blossomed into an adult. Instead, now, at the tail end of this Congressional session, the industry—by way of AWEA lobbyists—has its hand out for a ninth round of “free” taxpayer money.

For this lame duck Congress, AWEA’s panhandling seems like a grown child returning home for financial support—“just one more time.” Congress must now realize the inevitable: sometimes seeing our dependents grow up to be independent requires tough love and a line in the sand.

When the PTC was conceived in 1992, America’s energy paradigm differed totally from today. At that time Americans had a constant concern: growing imports of foreign oil from the Middle East left us vulnerable to global market forces that were driving prices. We inherently knew then, as now, low-cost abundant energy is essential to America’s leadership on the global stage. Wind was touted as one of the answers. Despite the fact that wind produces electricity (albeit inefficiently, ineffectively, uneconomically), and electricity has nothing to do with foreign oil, Washington, throwing caution to the wind, embraced it.

The Energy Policy Act (H.R.775.ENR, or “EPACT92”) was signed into law in 1992 and quickly created the wind industry. Unfortunately, EPACT92 was long on hope, but short on encouraging the habits necessary for self-sufficiency. No one should be surprised that the industry’s immaturity has persisted for more than twenty years.

The wind PTC has been the industry’s biggest single source—though unearned—of support. Each new wind energy complex earns the tax credits for a full ten years. The machines only last an estimated twenty years—though the White House has authorized thirty-year bird-kill permits that allow, without punishment, protected bald and golden eagles to be chopped up mid-flight. The two-point-three-cent-per kWh bonus has a pre-tax value as high as three-and-a-half cents—which creates a big benefit to billionaires like Buffett.

Wholesale market revenues and the wind PTC make up only about 2/3 of total proceeds flowing to wind development owners. The other third comes from the value of additional federal subsidies combined with the financial incentives inherent in state-level tax breaks and mandates. In the end, wind investor proceeds depend on roughly 1/3 sales revenue and 2/3 handouts.

AWEA continues to claim its costs are falling and “almost competitive,” but fails to answer the most important question: competitive with what? Last week a New York Times (NYT) headline proclaimed: “Solar and Wind Energy Start to Win on Price vs. Conventional Fuels,” yet, within the text, the article states: “Those prices were made possible by generous subsidies that could soon diminish or expire.” Just days before the NYT piece was published, two of America’s brightest minds admitted, that after four years of trying to prove that it was possible “to produce a gigawatt of renewable power more cheaply than a coal-fired plant,” renewable energy simply “won’t work.”

The wind PR machine never brings up dependability and responsiveness to demand—attributes its fuel cannot, by definition, ever deliver. Without the ability to convert wind currents into electricity at all the right times, wind energy facilities cannot replace the existing dependable power plants that keep our lights on. Wind’s fuel may be free, but having to build and maintain two sets of power plants instead of one costs far more than wind’s fuel-cost advantage can save.

Hopefully, with twenty-plus years of history, our leaders recognize their poor parenting practices that best prepared their “offspring” to persuasively argue for perpetual access to money they didn’t earn. Voters should ask: can this lame duck Congress find the courage to finally stop enabling the wind industry and force it to grow up? Congress must say to them: “We’ve been supporting you for 22 years. Enough is enough!”

In the face of intense, last-ditch lobbying by AWEA, Congress needs help breaking its bad habits. But tough love is hard. To do the right thing, Congress needs encouragement from voters. Pick up the phone today and tell your representatives : “Our nation’s affordable electricity should not be used by Congress as a bargaining chip in a tax-extenders package for special interests. After 22 years of government support, it is time for the wind industry to grow up. The now-expired wind PTC needs to be buried once and for all.”

 

Author’s note: Thanks to Tom Stacy for research assistance.

 

(A version of this content was originally published at Breitbart.com)