A Lame Duck, A Gift Horse, A Cash Cow And A Sacrificial Lamb

One of the important agenda items for the lame duck session of the 112th Congress is the extension of the Production Tax Credit (PTC) for wind energy. The PTC is set to expire December 31 and Congress estimates that extending it for one year will cost about $12 billion. I’ve written on it repeatedly.

It has been expected that during the lame duck session, PTC supporters will try to tuck an extension of at least one year into a bigger tax-extender package filled with provisions the fiscally-conservative, small-government Republicans support, therefore pushing them to acquiesce and let the PTC extension go through. Extending the PTC would have required some shenanigans, as it has been defeated at each of five previous extension attempts in the past 12 months. According to a report in The Hill, “fiscal conservatives say the deficit situation means things like the wind credit must be sacrificed.”

However, in a post November 6 America, several things have changed that prompted me to pen one more post on the PTC.

Because of their fiscal conservative inclination, Republicans have repeatedly blocked the PTC extension.

Pre-election, Republicans held 47 Senate seats out of 100. Corralling all 47 Republicans and 4 Democrats and/or Independents to stand together in opposition to the extension was difficult—but not impossible. Post-November 6, there are now only 45 Republican members. Every out-of-party vote needed decreases the odds that the PTC will be allowed to expire—probably doubling the difficulty. The difference between 6 and 4 Senate Democrat votes doesn’t sound like a big difference to the casual observer, but it greatly shifts the odds in favor of the PTC extension in the Senate.

House Republicans held a hard line stance on matters such as the PTC, expecting to be in a stronger majority position after the 2012 election. As November 6 proved, they actually lost seats. With fear of losing their majority a looming concern in 2014, they will be loath to be portrayed as the ones holding up progress. Now, they are more amenable to political compromises—such as going along with an unfortunate PTC extension.

A concession has already come from Senate Committee on Energy and Natural Resources ranking member, Lisa Murkowski (R-AK). On Thursday she “suggested Congress should extend the 2.2 cent per kilowatt-hour credit for wind power production.” As The Hill points out, her committee doesn’t have jurisdiction over the credit, however, as the GOP’s top energy senator, her comments “could prove instructive if the credit comes up for a vote.”

Additionally, according to the American Wind Energy Association (AWEA), on November 13, 23 governors signed a letter calling on Congress to extend the PTC. The letter has signatories such as Iowa’s Terry Branstad and Kansas’ Sam Brownback—both Republicans, and Oregon’s John Kitzhaber and Colorado’s John Hickenlooper—both Democrats.

Interestingly, the number of governors calling for the PTC extension closely parallels the number of states with a mandate for a specific percentage of renewable energy by a set date. The percentage mandated, frequently called a Renewable Portfolio Standard (RPS), varies state-to-state—with California’s being the most extreme.

Back in the mid-2000s—when renewable energy was thought to be “free” and therefore was more popular than it is today (since we now know the true costs)—more than half of the state legislatures voted for an RPS or goal. If you have to add expensive renewable energy into the mix, why wouldn’t you want federal dollars to help you do it? To the governors it is a gift horse. They don’t want to look the gift horse in the mouth to see that the PTC actually adds to the federal deficit while saddling their states with more expensive energy. They just want the federal funds.

Instead of calling on Congress to extend the PTC, governors should direct state lawmakers to repeal the RPS.

Instead of trying to repeal the RPS, well-funded environmental groups have been working to make renewable energy mandates part of a state’s constitution—where it can’t be repealed (or at least not easily). Michigan’s Proposition 3 is the case in point.

Marketed as the Michigan Energy Michigan Jobs Proposal, Prop 3 sought to amend the constitution to require Michigan utilities to derive at least 25 percent of their electricity from renewable sources by 2025. Not surprisingly, groups like the Sierra Club supported Prop 3 with millions of dollars in advertising. They saw the Michigan case as a test, believing that a win in Michigan would tell the world that the public wants renewable energy.

The Sierra Club claimed: “If successful, the [Michigan] 25×25 initiative will send an important signal to the nation that public desire to move toward green energy remains strong.” Prop 3 wasn’t “successful.” In fact, on November 6, it was soundly defeated by a 64 to 36 percent margin. Using the Sierra Club’s own standard, clearly, there is no “public desire” for more expensive renewable energy schemes—yet they’re pushing hard in Washington.

In Michigan, as Kevon Martis, Senior Policy Analyst for the grassroots Interstate Informed Citizen’s Coalition, points out: “wind projects have lost at the ballot box virtually every time they have been put to the vote in a fair manner—and by similar margins.”

Prop 3’s story should embolden state and national lawmakers with the knowledge that renewable mandates are of no benefit to ratepayers, employers or employees. The people don’t want them. They understand that renewable energy costs more, disproportionately hurts the poor and middle class, strangles the struggling manufacturing sector—putting the US in a less competitive position, and sends more jobs overseas.

Prop 3 also exposed renewable energy as the cash cow that is for the well-connected few. Financial backers of Prop 3, include many of the same names that have come up over and over in the green-energy, crony-corruption scandal I’ve reported on with Christine Lakatos and, according to Martis, include the Green Tech Action Fund of San Francisco; Natural Defense Fund of New York, whose president is multi-millionaire Frances Beinecke; and San Francisco hedge fund billionaire Tom Seyer. The rich get richer at the expense of the average citizen’s higher electricity costs.

Those benefitting from this corporate welfare don’t want the cash cow to die. In their letter to Congressional leadership, the greedy governors wrote: “We urge you to take swift action to extend the PTC before the end of this congressional [lame duck] session.”

The AWEA has inundated legislators with propaganda and the Sierra Club is blanketing the DC metro area with pro-PTC signs. After 20-years of unmet goals, this is their last chance to save the cash cow. Post November 6, the political winds seem to be blowing in their favor.

But all is not lost; there is the Michigan story. There are fiscally conservative lawmakers like Senator Lamar Alexander (R-TN), who on Wednesday said the nation’s fiscal situation has become so dire that the government can no longer afford to maintain a wind power production credit that has been in place since 1992: “I think there is certainly the largest realization that we’ve ever had that it’s time for it to end.” Alexander is not alone. According to the Hill: “The impending fiscal cliff of deep automatic spending cuts and income tax increases has brought other lawmakers to his side.”

With a push and a prod from their constituency, other lawmakers should be persuadable. Governors need to be encouraged to look the gift horse in the mouth and end renewable energy mandates. Senators and Representatives need to be contacted right now, during the lame duck session, and reminded that “the deficit situation means things like the wind credit must be sacrificed.”

Going forward, we don’t need a gift horse and we don’t need to give well-connected cronies any more steak off the cash cow. We don’t need energy that is inefficient, ineffective, and uneconomical. We do need energy that is abundant, available, and affordable. We do need an energy policy that is based on sound science and free-market principles that will unleash an economic recovery.

We don’t need “all of the above,” we do need “all of the sensible”—and taxpayer-supported wind energy doesn’t make sense. It is time for the wind energy PTC to become the sacrificial lamb.

If we do not take action now, we have no chance of getting the American economic recovery we need.


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