The Wind Production Tax Credit Doesn’t Belong In The Tax Extenders Package

Don Nickles Chairman and CEO, Nickles Group
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Last week, a tax extenders package gusted through the Senate Finance Committee that included a two-year extension of the wind Production Tax Credit (PTC), an egregious subsidy that comes in at a whopping $10 billion price tag for taxpayers. In fact, the PTC amounts to over 10 percent of the entire extenders package. This would be the tenth extension of the PTC since this “temporary” provision became law in 1992. To save American families from pouring millions more into the multi-billion dollar, sophisticated wind industry, the tax extenders package should not include the PTC.

The good news is that opposition to the PTC is strong, and I am confident that this momentum will only grow. Once Congress actually recognizes how outdated and expensive the PTC is, as was pointed out by Senators Toomey and Coats during the markup, I believe it’s safe to say that the wind will be taken out of the PTC’s sails.

In addition, in the House, a bill sponsored by Congressmen Kenny Marchant (R-TX) and Mike Pompeo (R-KS), the PTC Elimination Act, has quickly picked up support from over 40 co-sponsors, representing a strong consensus that the PTC must go. Of course, the decision to sign onto the bill is an easy one; similar proposals have been estimated to save taxpayers nearly $10 billion, and it would also help lower the corporate tax rate. Saving Americans money and streamlining our tax code are two things that all members of Congress, regardless of their political affiliations, should get behind.

The list of reasons to let the PTC expire is long. Take, for example, the fact that the industry simply doesn’t need it to succeed, and has admitted as much. In fact, in response to a report issued by the Department of Energy this year that outlined the goal of having wind meet 30 percent of U.S. electricity demand by 2030, the head of the American Wind Energy Association (AWEA) said that even if the PTC languishes this year, the wind industry is prepared to keep advancing along the growth path outlined by the report.  AWEA has also admitted that wind is “mainstream,” among a host of other comments from them indicating that the industry is here to stay.  What’s more, since the PTC has been in effect, capacity has increased 5,000 percent and production of energy by wind has surged from 2.8 million megawatt-hours to 167.6 million megawatt-hours.

In addition to the industry not needing the PTC, the cost to taxpayers alone should be enough to put an end to it. Last year, the PTC was renewed through the end of 2014 at a cost of $6.4 billion a year to taxpayers. To put that into context: a two-year extension of the PTC would equal the total taxes paid by 5.48 million median-income families of four (or more people than the total population of Florida, which has just over 19 million people.)

Finally, the distortionary effects of the PTC on electricity markets are worth noting. In effect, the PTC pays wind producers to give their power away. Since the PTC provides a tax benefit for new projects, it often drives wind developers to site and build projects with little regard to demand, as long as they can be placed on-line and bring their power to market. So even when there is not much market demand for power (usually at night when the wind blows and demand is low) they will pay up to $35 to the market to take their power to collect the subsidy. For example, they might pay the market $10/megawatt hour (a bid of -$10/megawatt hour) and still be able to net $25/megawatt hour by collecting the tax credit.

Decades of handouts and billions of taxpayers’ dollars later, enough is enough. Congress should stay the course and continue to fight against the PTC to ensure it gets blown away for good.

Senator Don Nickles (R-Okla.) served in the Senate from 1981 to 2005. He is the chairman and CEO of The Nickles Group, LLC.