2015: the Wind Industry’s ‘Annus Horribilis’; or Time to Sink the Boots In
Any ‘business’ model or industry that is built around endless streams of government mandated subsidies – like Australia’s REC Tax/Subsidy or the US’s Production Tax Credit – pins its hopes of long-term survival on the whims of our political betters, which tend to ebb and flow with the economics that dictate the fortunes of those they pretend to govern. Or, more crudely, if your business can only survive when firmly nuzzled to the public tit, then at some point, with the stroke of a parliamentary pen, you can expect to see your firm’s future grind to a shuddering halt.
In Australia, successive governments threw $billions in subsidies at (and/or erected impregnable tariff barriers – a tax on consumers – to protect) manufacturers of agricultural machinery, like HV McKay; textile, clothing and footwear manufacturers; and car manufacturers.
But, eventually, the cost of propping up uncompetitive industries wears thin; governments grow tired of endless excuses as to why the recipients aren’t ready to ‘compete’, just yet; and/or pleading for the gravy train to roll for that little bit longer, at everyone elses’ expense.
Sometimes, when the flabby firms concerned are threatened by a government out to axe mandated corporate welfare schemes, they pipe up with claims of being ‘competitive’ SOON – like the naughty boy caught for the umpteenth time stealing mum’s Tim Tams, promising to be better in future.
One such example is from Christopher Flavin, the President emeritus of the Worldwatch Institute, when he pitched the yarn that, in a few years’ time, wind energy will not need to be subsidised at all.
But, hang on, that was 1984 – and the very same line gets reloaded and fired off ad infinitum – without a hint of irony, or shame, at begging for more, over and over and over again.
But, sensible governments are catching on: the fiction that the wind industry will SOON be competitive with conventional power generators, is being treated with the contempt it rightly deserves; and, as a consequence, wind power outfits are being threatened with that which spells their immediate demise: the chance to compete NOW!
Here’s a take from the US on what the wind industry fears most.
It is a Bad Time to be in the Renewable Energy Industry
27 April 2015
2015 may go down in the books as the year support for renewable energy died – and we are only a few months in. Policy adjustments – whether for electricity generation or transportation fuels – are in the works on both the state and federal levels.
While the public is generally positive about the idea of renewable energy, the reality of years-long policy implementation that offers it special favors has changed public opinions. An October 2014 report in Oklahoma’s Enid News titled: “Wind worries?: A decade after welcoming wind farms, states reconsider,” offers this insightful summary:
“A decade ago, states offered wind-energy developers an open-armed embrace, envisioning a bright future for an industry that would offer cheap electricity, new jobs and steady income for large landowners, especially in rural areas with few other economic prospects. To ensure the opportunity didn’t slip away, lawmakers promised little or no regulation and generous tax breaks. But now that wind turbines stand tall across many parts of the nation’s windy heartland, some leaders in Oklahoma and other states fear their efforts succeeded too well, attracting an industry that gobbles up huge subsidies, draws frequent complaints and uses its powerful lobby to resist any reforms.”
But, it isn’t just wind energy that has fallen from favor. 2015 state and federal legislation reflects the “reconsider” prediction. Likewise “powerful” lobbyists are resisting the proposed reforms.
Oklahoma is just one state in what has become a new trend.
About a decade ago, when more than half of the states enacted strict Renewable Portfolio Standards (RPS), Oklahoma, and a few other states, agreed to voluntary targets. Now, nearly one-third of those states are reconsidering the legislation that sounded so good in a different energy era. Back then, it was widely believed that there was an energy shortage and “dealing with global warming” was a higher public priority.
“Roughly 30 bills relating to the Oklahoma wind industry have been filed in the state legislature in the 2015 session, including at least one targeting the tax breaks and others attempting to alter regulatory policies,” reports Fox News. On April 16, the Oklahoma House voted, 78-3, to eliminate the wind energy tax credit. The measure now moves to the Senate, which will review a companion bill introduced by Senator Mike Mazzei – it is expected to pass and will likely be headed to Governor Mary Fallin soon.
Oklahoma isn’t the first state to reconsider its renewable energy policies. That distinction goes to Ohio, which in May 2014, passed legislation that paused the state’s RPS for two years. Governor Kasich signed it in June. Meanwhile, according to Eli Miller, the Ohio State Director for Americans for Prosperity: “the economic well-being of our working families and businesses can be factored in before moving forward.” The International Business Times projects that the two years a commission has to study will lead to a “permanent reduction.”
Earlier this year, West Virginia became the first state to repeal its RPS. With unanimous support in the Senate and a 95-4 vote in the House, renewable energy supporters are dismayed. Calling it “pure political theater and probably a flop,” Nick Lawton, Staff Attorney at the Green Energy Institute dismisses the move: “West Virginia’s withdrawal of its weak renewable energy policy is unlikely to significantly change that state’s energy markets.” Nancy Guthrie, one of the four Democrats who voted “No,” did so because she believes “we are running out of coal, it’s that simple” – which is, of course, totally incorrect.
Last month the Texas Senate voted to end its RPS and another program that, according to the Star Telegram, “helped fuel the state’s years-long surge in wind energy production.” The bill now moves to the House State Affairs Committee. It is expected to pass the House and be signed by Governor Greg Abbott. While Texas is known for its leadership in wind energy, the termination of the RPS will impact the solar industry as well. Charlie Hemmeline, executive director of the Texas Solar Power Association, states: “Increasing uncertainty for our industry raises the cost of doing business in the state.”
While Louisiana doesn’t have an RPS, it does have generous tax credits for solar panel installations that have exploded the cost to the state’s taxpayers.
The credits were originally expected to cost the state $500,000 a year. In 2014 the payouts ballooned to $63.5 million according to the Baton Rouge Advocate. Repealing or revising the policy is a key priority in the current legislative session.
“Taxpayer support for wind energy is also losing momentum in Congress,” says Fox News. It points out: “Capitol Hill lawmakers at the end of last year did not extend the Federal Production Tax Credit (PTC). And in March, Sen. Heidi Heitkamp (D-ND), failed to rally support behind an amendment that would have put a five-year extension on the PTC.”
It is not just wind energy that has lost favor in Congress. The Ethanol mandates – known as the Renewable Fuel Standard (RFS) – are being re-examined, too.
On January 16, 2015, Senators Dianne Feinstein (D-CA) and Pat Toomey (R-PA) introduced the “Corn Ethanol Mandate Elimination Act of 2015.”
More recently, a “former Obama economic adviser” issued a report that calls for changes to the 10-year-old RFS. Harvard University Professor Jim Stock served on the Council of Economic Advisers in 2013 and 2014.
The Hill states: “His report comes at a time of growing angst among lawmakers, regulators and the industry over the future of the RFS, which mandates fuel refiners blend a certain volume of ethanol and biodiesel into their traditional gasoline and diesel supplies.” The Wall Street Journal(WSJ) supports the sentiment calling Stock’s report: “a key voice to a growing chorus of people who say the policy isn’t working.” It continues: “The report adds to a growing body of politicians and experts who are questioning the law’s effectiveness amid regulatory uncertainty and lower prices.”
Hawaii, uniquely, has its own ethanol mandate, but it, too, is coming under attack. KHON states: “Nine years after a major change at the gas pump was forced on Hawaii drivers, many are now calling it a failed experiment and want it gone.”
In both the case of Hawaii and the federal government, lawmakers are looking toward advanced biofuels that don’t raise food costs. However, the Environmental Protection Agency – tasked with implementing the RFS – has repeatedly waived or reduced the cellulosic biofuel requirements because, despite more than $126 billion invested since 2003, the industry has yet to produce commercially viable quantities of fuel.
Addressing dwindling investment in biofuels and growing skepticism, The Economist, on April 18, says: “Campaigners generally find it easier to fulminate against those which damage the environment or food security than to explain exactly how they ought to be grown.” It concludes: “Whether such bright ideas can be commercialised at scale is a different question. Some companies, indeed, are starting to give up. Several algae-to-fuel ventures in America are switching to the manufacture of high-value chemicals instead. Sunlight is a great source of energy. Biology may not be the best way of storing it.”
And this doesn’t include the public’s failure to embrace higher-priced electric cars – even with tens of thousands of dollars of subsidies and tax credits.
Looking at all the policy reviews, the trend is clear. As Watchdog.org, in areport titled: “Why repealing the renewable energy mandates is good for the economy,” concludes: “The best policy for the states is to leave energy consumption decisions to consumers in the market rather than legislate them.”