The Wind Industry: After 30 Years, It’s Time to Remove the Training Wheels
At an economic level, subsidising the production of a good or the provision of a service makes sense where there is complete market failure, such that the good or service will never be supplied (or only at a price which is practically un-affordable to the majority of consumers); and where the total benefit to the welfare of consumers equals the cost of the subsidy.
As to the supply of electricity, there is NO market failure; affordable power is available around-the-clock in all developed economies; and has been so for half-a-century or more. So that point of ‘justification’ for endless wind-welfare goes nowhere.
Short of true ‘market failure’, another potential justification for subsidies paid to producers is where an ‘infant industry’ needs a ‘kickstart’ to get going. The argument is that the ‘new’ industry will ‘create’ new jobs; and, therefore, justify the subsidy, which can be withdrawn after a period sufficient to allow the industry to develop to a point where the subsidy is no longer needed, at all.
That’s where wind power scores two strikes: the wind industry has been telling us it can ween itself off subsidies (but just not now) for over 30 years.
The third – and final – strike is that wind power (despite being able to slosh in a massive subsidy trough) simply cannot provide meaningful power (ie, power available on-demand) – as they’re learning to their horror in Britain:
And in South Australia:
Never to be accused of consistency, the wind industry in the US is – under that old adage about ‘being careful about what you wish for’ – about to face up to its own internal inconsistency.
You see, on the one hand its parasites and spruikers keep trumpeting about how their marvellous product is ‘free’ – and getting cheaper all the time; but the minute there’s the merest hint that the subsidy gravy-train might be derailed, they start wailing like demonic banshees.
Americans can prepare from some panicked, high-pitched screaming, as its Congress gets set to finally remove the longest-serving set of ‘training wheels’ that ever rolled into action.
Maine Voices: It’s time for Congress to end the wind production tax credit (again)
11 November 2015
SOUTH FREEPORT — As winter approaches, Congress is being overrun by wind industry lobbyists (again). Their annual year-end money dance has become routine as we have seen the 1992 energy production tax credit die more deaths than the proverbial nine-lived cat.
Just as routinely, we have become accustomed to picking up the newspaper on New Year’s Day to read that in the cold, dark holiday night, Congress has revived the production tax credit (again).
Over time, most of Maine’s congressional delegation has supported throwing additional taxpayer money at the expired or expiring production tax credit, often at the eleventh hour. It stands to reason that aggressive wind developers in Maine have influenced the Maine delegation’s decision to support the production tax credit.
“Subsidy” is a lightning rod word. But subsidies can be justified when they contribute to the public good. In the general public, wind energy’s positive benefits are regularly overstated, while conversely, wind’s negative impacts are understated. Because of this flawed value equation, wind energy has enjoyed the public’s favor and gratuitous federal subsidy dollars (in addition to state mandates).
For the sake of Maine’s environment and economy, it is time for Congress to finally let the production tax credit subsidy die. The Maine delegation can help make this happen by ending its historic support.
Maine’s wind energy buildup in the last decade has been dominated by one developer: First Wind (now SunEdison). In a 2012 Recharge News article, “First Wind chief executive says life without PTC is possible,” First Wind CEO Paul Gaynor discussed the production tax credit:
“I know the industry has needed it. I think the question for all of us is, ‘Do we need it any more or forever?’ I believe the answer is no.”
In a Bloomberg News article, “U.S. tax breaks that clean power doesn’t seem to mind losing,” Ahmad Chatila, CEO of SunEdison (which is now in financial difficulty), discussed the production tax credit just a few weeks ago:
“If the (production tax credit) expires we will be fine, we can get by.”
The wind production tax credit expired (again) in December 2014. Because the wind lobby inserted a “begin construction/safe harbor” provision into the law, and thanks to loose Internal Revenue Service rules that allow it, wind projects we don’t even know about yet can still sneak in as production tax credit-eligible even if they have not turned a shovelful of dirt.
The wind industry is losing its window for starting projects, so the wind lobby is back in holiday mode, applying pressure in Congress (again).
Last summer, the Senate Finance Committee voted out a $95 billion tax extender bill that included a two-year extension of the wind production tax credit (2015-2016). The production tax credit was the third most expensive provision in the bill at $10.5 billion.
In October, U.S. Sen. James Lankford, R-Okla., submitted a bill to end the wind production tax credit. In the House, the Production Tax Credit Elimination Act offered by U.S. Reps. Kenny Marchant, R-Texas, and Mike Pompeo, R-Kan., is still pending, and new co-sponsors have signed on every month since the bill was introduced.
We might see action on the production tax credit by year’s end, and it won’t be a surprise if votes finally occur while the rest of the country is sipping eggnog at holiday parties (again).
The wasteful production tax credit has become politically toxic, gaining the nickname “wind welfare.” We cannot afford more billions to spur the growth of a mature industry that does little good.
With the Department of Energy and the American Wind Energy Association regularly crowing that wind is cost-competitive with (or more competitive than) conventional generation sources, there is no justification for further subsidies. The wind training wheels have been on the bike since 1992. They have done their job and it is now time to remove them.
The production tax credit has rarely been considered in the House or Senate as a stand-alone vote. The last time was 2012, in New Jersey Democratic Sen. Bob Menendez’s amendment to the transportation bill. It failed.
If the Senate and House consider the wind production tax credit in the eleventh hour (again) this year, it must be as a stand-alone vote in each chamber. That way, the wind lobby cannot gain a free ride by attaching to the more beneficial tax credits seen as “must pass.”
If Maine’s wind development leaders are telling us they don’t need all that production tax credit money, then why would the Maine delegation throw it at them (again)?
The Maine delegation should not endorse spending billions more to spur the growth of a mature industry that does little good for the U.S.