Report: Wind industry can stand on its own, end its wind tax credit
Twenty years of federal government subsidies for wind power is enough as the wind industry is sufficiently mature to stand on its own, according to a report.
The industry is no longer in its infancy and the justification for keeping the Wind Production Tax Credit represents classic “rent-seeking,” whereby companies seek to profit off of continued taxpayer support, an energy group claims.
“Although wind advocates proffer several internally inconsistent rationales for continuing the federal wind PTC,” says the study by the American Energy Alliance, “a closer examination of compelling facts and data indicates these purported justifications are not about wind’s continued viability without the PTC.”
“Rather, the wind industry’s arguments supporting a continuation of the federal wind PTC simply represent a classic case of ‘rent seeking’ by an established industry seeking to maintain profits through a generous tax subsidy,” the study continues.
Since 2006, the wind power generation capacity increased fivefold as states began to pass renewable energy mandates, and there were 50,000 megawatts of installed wind capacity in August 2012. Most of the development — 75 percent — has occurred in only 11 states.
According to the AEA report, state renewable energy mandates has driven the massive expansion of wind power capacity in the last five years and have also guaranteed future markets for wind power which is estimated to triple in size by 2030 — even if the federal tax credit expires.
“Renewable portfolio standard mandates in 30 states and D.C., not the federal PTC, have primarily driven explosive wind development over the past five to eight years,” says the report, “and most significantly, have established a substantial guaranteed longterm market for renewables including wind that is expected to triple by 2030, even without the PTC.”
The Energy Information Administration estimates that even without government subsidies, wind generation will still increase 50 percent from 2011 to 2035.
Standard & Poor’s estimated there will be up to $150 billion in renewable energy investment opportunities — largely in wind power development — in the next 10 years, even without the wind PTC is not renewed development.
“Thus, offering billions of dollars in federal tax subsidies to wind generation, in addition to mandated state renewable subsidies, allows wind generators to ‘double dip,’ and reflects a gross waste of limited fiscal resources,” says the report.
“This is a guaranteed increase in market share, even without the federal wind PTC, that is not offered to any other type of traditional power generation technology such as natural gas, coal, or nuclear,” says the report.
The report also highlights the negative effects the subsidy has on the reliability of the electrical grid, the hidden costs to consumers, and the shifting of costs to taxpayers nationwide to pay for wind development concentrated in only a few states.
“The ‘one-size-fits-all’ federal wind PTC is an exceptionally inefficient and expensive means of supporting wind generation that fails to recognize the industry’s heterogeneity and operational differences, and grossly wastes limited fiscal resources by over-subsidizing many projects and driving over-development,” says the report.
The federal wind Production Tax Credit was put into place in 1992 to get the wind industry on its feet, and has since been renewed seven times, and is now scheduled to expire at the end of this year if it’s not extended. Extending the wind PTC for just one year would cost $12.1 billion according to the Joint Committee on Taxation.
Extension has become a contentious political topic and pitted members of the same party against one another.
A group of freshman House members sent a letter in June to the Republican leadership to work to extend the wind PTC. The letter was signed by a bipartisan group including Republican Rep. Kristi Noem of South Dakota, Republican Rep. Rick Berg of North Dakota and Democrat John Carney of Delaware.
In contrast, 47 Republicans in the House, including Rep. Mike Pompeo of Kansas, wrote a letter in September to House Speaker John Boehner asking him to allow the wind PTC to expire.
“We believe that the Solyndra scandal has demonstrated that it is time for the federal government to stop picking winners and losers in the energy marketplace,” according to the letter. “Twenty years of subsidizing wind is more than enough.”
Senate Republicans are split on the issue as well, as Sens. Jerry Moran of Kansas and John Boozman of Arkansas were among the Republicans who joined Democrats in a letter to Senate leadership urging them to take up the extension.
The Romney campaign has previously called for the federal wind PTC to expire at the end of this year, but recent comments in Iowa — a major wind power state — has muddled his position somewhat.
“Mitt Romney believes it is a time for a new approach to ensure our nation’s energy independence. He will allow the wind credit to expire, end the stimulus boondoggles, and create a level playing field on which all sources of energy can compete on their merits,” Romney spokesman Shawn McCoy said in July.
Gov. Romney said that subsidies in general should be phased out as industries mature, and that includes allowing the wind PTC to expire,” Romney spokeswoman Amanda Henneberg told The Daily Caller News Foundation in an email.
Sixty-four free-market organizations, organized by the group Americans for Prosperity, have also come out against the wind PTC extension, including National Taxpayers Union, FreedomWorks, the Club for Growth, the Competitive Enterprise Institute and the American Energy Alliance.
“It is time to end special tax provisions that distort the energy market and increase energy prices. We urge you to let the wasteful wind PTC expire as planned at the end of the year,” says a letter sent by the groups to Congress.
“[I]t is clear the federal PTC should expire since it has morphed from an ill-designed temporary subsidy for a purportedly ‘infant industry,’ into an inequitable tax hand-out for what is clearly a well-established industry that distorts markets and allows wind to compete unfairly with both conventional generation resources and even other types of renewables,” the AEA report concludes.
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