- - Thursday, April 10, 2014

ANALYSIS/OPINION:

In Washington’s world of special interests, the wind industry stands out among the most persistent.

Over the past 20 years, its lobbyists have secured billions of dollars in taxpayer subsidies for multinational wind companies that claim to represent a nascent industry on the cusp of economic competitiveness.

The Senate Finance Committee now wants to keep the spigot of federal money flowing. On April 3, the committee voted to include an extension to the Production Tax Credit (PTC) in its tax extenders package. The PTC, which expired on Dec. 31, is a lucrative subsidy that provides wind developers a 2.3-cent tax credit per kilowatt hour of electricity produced over a 10-year period. This adds up quickly, with the wind industry receiving $1.3 billion in 2012 alone.

The PTC is a solution in search of a problem. Originally included in the Energy Policy Act of 1992, the PTC was intended by Congress to kick-start renewable-energy development. Since then, Congress has renewed the PTC multiple times and increased its value on multiple occasions.

The PTC has outlived any purpose it may have once had. Wind generation has grown by nearly 5,000 percent since the PTC’s inception. In 1992, wind installations produced 2,887,523 megawatt hours of electricity. In 2013, the wind industry produced 167,665,000 megawatt hours of electricity.

In other words, Big Wind is doing just fine.

The wind industry is not even an infant industry. Wind developers were advertising in Harper’s New Monthly Magazine in 1897. Despite the wind industry’s longevity, its backers would like people to think that they are almost ready to stand on their own without subsidies — after more than 115 years of trying.

Yet some, such as Sen. Ron Wyden, Oregon Democrat, prefer to keep the subsidies flowing. In 2010, wind produced only 2.3 percent of the country’s electricity production, but wind producers received 42 percent of the federal government’s monetary support for electricity producers. Moreover, the Government Accountability Office counts more than 82 separate, duplicative and overlapping federal programs that offer financial support to wind power.

As The Wall Street Journal has explained, in 2010 the wind industry received federal subsidies amounting to $56.29 per megawatt hour. Nuclear power, by comparison, only received $3.14 per megawatt hour. Coal and natural gas producers received 64 cents.

Wind-industry subsidies can be so extravagant that one project even raised some red flags at the White House, Big Wind’s biggest champion. The Shepherds Flat wind facility in Oregon, a $1.9 billion project, received $1.2 billion from the taxpayer.

Such generous subsidies encourage wind producers to generate electricity even when there’s no demand for their product. In fact, the PTC allows wind producers to sell electricity at a loss and still make money. This phenomenon is called “negative pricing.”

American consumers are thus paying for wind power twice — first in their taxes and again in their utility bills.

Taxpayers’ losses are further exacerbated by the PTC’s redistributive nature, leading to massive imbalances between wind producers in some states and taxpayers everywhere.

To examine the redistributive nature of wind subsidies, the Institute for Energy Research recently calculated how much money the PTC would transfer between states if all wind developers had elected to take the PTC in lieu of other lucrative grants or credits from the federal government.

They found that the top five “net payers” of the PTC would be California, New York, Florida, New Jersey and Ohio, with taxpayers in each of those states shouldering losses in excess of $100 million in 2012.

Taxpayers in 12 states, primarily in the South, would pay their share of the PTC, but received no tax benefits in return because their states did not generate any wind power. They still fork over hundreds of millions of dollars to wind producers in other states. Regionally, taxpayers in the Northeast and the Southeast would pay the most, handing over $591.8 million and $559.3 million in subsidies to wind producers in other states.

The PTC thus enriches wind developers in certain states at the expense of taxpayers everywhere, while giving multinational wind companies an artificial advantage over domestic energy producers. None of this comports with the PTC’s original goals — and it’s time for Washington to stop throwing taxpayers’ money into the wind.

Thomas Pyle is the president of the American Energy Alliance.

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