IRS extends subsidy to wind power producers

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Michael Bastasch DCNF Managing Editor
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The federal Wind Production Tax Credit is set to expire at the end of this year, but the IRS has determined that renewable energy projects can get taxpayer dollars if they begin generating power before January 1, 2016.

“The IRS’s decision is wrong and it reflects a sad truth: Renewable energy projects that rely on the production tax credit are not profitable on their own,” Kansas Republican Rep. Mike Pompeo told The Daily Caller News Foundation. “A company should have customers, not political patrons. These projects, which lack efficiency and market demand, can only work if taxpayers pay for them. It’s an unfair, crony model of doing business, and it needs to stop. The wind PTC is scheduled to expire, again, at the end of this year and I am working hard to see that it does.”

“The IRS’s ‘clarification’ of the vague ‘one-year’ extension of the PTC is really just another expansion of the program,” said Chris Warren, spokesman for the Institute for Energy Research, which opposes wind subsidies. “The federal government continues to make it easier and easier for the wind industry to plunder the American people and waste billions in taxpayer dollars.”

“Wind energy is a good deal for American taxpayers and electric ratepayers,” Peter Kelley, spokesman for the American Wind Energy Association, told TheDCNF. “Extension of the Production Tax Credit allows our businesses to plan and invest more private capital in improved wind technology, which keeps bringing consumer costs down.”

The Wind Production Tax Credit was extended as part of a deal cut by Republicans and Democrats to avoid spending cuts and steep tax increases on the middle class.

“Now, as long as a wind facility is up and running by 2015, wind developers will receive the credit for the next 10 years,” Warren added. “What’s more, the IRS has left the door open for projects that come online after the 2015 deadline to possibly qualify for the credit. The government has been holding the hand of the wind industry long enough, it’s time that it stands on its own.”

The wind subsidy has been heavily opposed by conservative and libertarian groups who see it as wasteful and potentially harmful to the electric grid.

On Tuesday, a coalition of 24 free-market groups, led by Americans for Prosperity, petitioned Congress to end the federal wind subsidy.

“The problems with bestowing government favors on wind energy are myriad—it doesn’t produce cheaper energy, it threatens electrical grid reliability, it’s inefficient, it’s unprincipled tax policy, to name a few—and it’s time to end this misguided handout,” reads the letter signed by 24 free-market groups.

Last year, Republicans were torn on the issue of federally subsidized wind energy. Iowa Republican Sen. Chuck Grassley, supported extending the tax credit for one year, but also advocated for the subsidy to be phased out over time.

“Proposals to phase out the credit over time are a red herring,” the coalition wrote. “A phaseout is still an extension, and it does not address any of the problems that arise from government backing for wind energy. Besides, the PTC in its current form already has a phaseout built in: Wind farm projects may claim the tax credit for 10 years following receiving an investment letter.”

Wind producers can earn $23 for each megawatt hour of power they generate and is estimated to cost taxpayers $12 billion for just one year of extension, according to the Joint Committee on Taxation.

“Predictable, stable, pro-growth tax policy is vital if the U.S. wind energy industry is to keep developing more efficient technology, creating new U.S. manufacturing jobs, and attracting up to $25 billion a year of private investment into the U.S. economy,” Kelley added.

Critics argue that the wind tax can harm the reliability of the electrical grid by reducing long-term investments in conventional power generation.

“This taxpayer-funded subsidy artificially depresses wholesale power prices, and in hours of the year when demand for electricity is low it can result in negative pricing,” according to a report by the NorthBridge Group.

“The failure of wind generators to curtail output when wholesale prices approach zero has both short term and long term negative consequences,” the study notes. “In the short term, the failure of wind producers to curtail output makes it more difficult for system operators to maintain reliability, and also makes it more costly for them to operate the regional electric grid.”

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