LIEBERMAN: Is wind the next ethanol?

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By Ben Lieberman

COMMENTARY:

Repeating past mistakes has long been a part of Washington's energy policy, but Congress used to wait a while before making the same blunder again. Not anymore. New legislation requiring wind energy closely resembles the ethanol mandate that sparked a backlash just last year.

For many years, wind has benefited from generous tax credits and subsidies, but it still provides less than 2 percent of the nation's electricity. By comparison, coal supplies around 50 percent (and with considerably fewer federal incentives). Natural gas and nuclear, meanwhile, account for about 20 percent each.

No wonder wind supporters want a federal mandate atop all the handouts. The targets in various bills range from 15 percent to 25 percent electricity from wind and other renewable sources, to be ramped up from current levels over a decade or longer.

Let's see: a heavily subsidized energy source that needs a mandate to get it over the top. Sound familiar? It should. It's the same situation we were in with corn ethanol a few years ago. Through 2005, ethanol's high cost, among other problems, were such that even a 51 cent per gallon tax credit and other giveaways couldn't enable it to capture much more than 2 percent of the motor-fuel market.

However, the minuscule market share worked to ethanol's advantage in that its shortcomings weren't noticed by the public. This made it possible for the corn lobby and other proponents to get away with calling it a success and prevailing upon the feds to mandate that more of it be mixed into the gasoline supply.

By 2008, it was required that 9 billion gallons of ethanol be used, nearly triple the 2005 levels. But at these volumes, the problems were no longer so easily hidden.

Last year was one of record oil and gasoline prices. Yet ethanol still added to the overall burden on the driving public. In addition, the diversion of corn from food to fuel use raised the price not only of corn itself but of related items such as corn-fed meat and dairy. The Congressional Budget Office estimates that up to 15 percent of food price increases from April 2007 to April 2008 were because of the ethanol mandate.

That costly double whammy - higher costs to drive to the supermarket and higher prices once you're there - really soured consumers on the ethanol mandate. It also contributed to global food-price inflation and hardships in the developing world, eroding the already shaky moral high ground that ethanol had held. Surprisingly, many environmental activists piled on, arguing that the "green" benefits of ethanol were overstated and that this once-favored alternative actually contributes to global warming.

Congress has yet to correct its ethanol mistake. The mandated levels rise to 10.5 billion gallons this year and 12 billion in 2010, so the difficulties will only intensify.

Are lawmakers about to make the same mistake with wind energy? As with ethanol, wind is too expensive to expand without a lot of help. Right now, its added cost is an unnoticeable speck on people's electric bills. A hefty mandate would change that.

One often overlooked factor is wind's unreliability. Wind can stop blowing at any time, and it often does during hot summer days when electricity demand peaks. Because people expect electricity 24 hours a day, seven days a week, additional wind power would need to be backed up with additional conventional sources ready to carry the full load at any time - further raising costs and undercutting the rationale for this alternative.

The new transmission lines necessary to bring more wind from where it is produced to where it is needed is another substantial cost. Like all the other costs, it would filter down to ratepayers.

There's also reason to expect that wind's green status will evaporate. For one thing, the pending proposals would require tens of millions of acres of new wind farms, much of it on land now in its natural state. Environmentalists already object to certain wind-farm sites and transmission-line routes, and their complaints would multiply greatly if wind power expanded. Its claimed global-warming benefits also could come under attack.

As with ethanol, familiarity is likely to breed contempt for wind - and contempt for a government that foisted this predictable mistake on the American public.

Ben Lieberman is a senior policy analyst in the Thomas A. Roe Institute for Economic Policy Studies at the Heritage Foundation (heritage.org).