Why should Congress let the Wind Production Tax Credit die?

Letter: Wind energy plummets from the sky without tax credits | Opinion | The Advocate — Baton Rouge, Louisiana

1.  Wind is a mature industry – it’s time for it to stand on its own.  The Joint Committee on Taxation reports that between 1992 and 2015, the cumulative cost of the PTC, without the prior 2012 extension, would be approximately $17 billion with the bulk of this claimed by wind resources constructed since 2006.  These costs are in addition to the anticipated $22.6 billion in direct cash outlays under the Section 1603 grant program now expired. Yet, after decades of government support of multiple kinds, the wind industry remains economically unviable.

2.  The wind-sector slow-down is not tied to the end of the PTC.  The wind industry insists it’s at risk of a slow-down without the PTC and jobs will be lost.  But this view ignores crucial factors driving development in the United States.  Demand for wind has eroded, in part, due to states meeting their renewable mandates and flat growth in electricity demand.  Lower natural gas prices have further reduced wind’s attractiveness as a ‘fuel saver’.  Faced with these market conditions, wind developers are tabling projects.  The Energy Information Administration forecasts an initial spike in new wind development in 2015 as the market responds to the 2012 extension of the wind PTC. Flat growth in the wind sector is expected after that. 

3.  Government efforts to offset the cost distort the markets.   Wholesale power contract prices for onshore wind are roughly two- to three- times the price of more reliable generation, making wind one of the most expensive power sources in the U.S. even after the PTC is factored in.  The PTC offsets the high price of wind energy, giving the false impression that wind is competitive with other resources, but at 2.3¢/kWh, the subsidy’s pre-tax value (3.5¢/kWh) equals, or exceeds the wholesale price of power in much of the country.  The size of the subsidy relative to wholesale prices is distorting competitive wholesale energy markets and harming the financial integrity of other, more reliable generation.  

4.  The industry’s job-creation claim is based on one-sided, simplistic modeling.  The wind industry insists the PTC enables American jobs but ignores potential jobs that would be created given alternative spending of federal funds.  Further, industry job forecasts fail to report on the more important net job creation.  

5. Low capacity factors and high project costs. Proponents insist wind energy is a few short years away from thriving without government assistance, but the trends do not support the claim. For the wind industry to grow without subsidies, average capacity factors would need to increase dramatically and/or project construction costs must drop dramatically. But that’s not happening according to the U.S. Department of Energy’s (DOE) Wind Technologies Market Report 2013. Average capacity factors for projects built after 2005 have been stagnant despite advances in turbine technology. The interior region of the country covering Texas and the plains states continues to show the best capacity factors (36-38%) and lowest project costs ($/kw) but it’s also the most remote which means miles of expensive new transmission needed to transport the energy.

6. Relaxed eligibility equals PTC phase-out. When the wind PTC was last extended, a critical change was introduced that relaxed the eligibility requirements for the credit. Renewable energy projects now need only show they began construction by January 1, 2014 to qualify for the credit, instead of projects being ‘placed-in-service’ by that date. Since the law did not define the term ‘begin construction’, the Internal Revenue Service (IRS) was at liberty to determine the intent of Congress without any Federal Register notice that would have afforded the public an opportunity to be heard. The rules for PTC eligibility are so relaxed that projects can qualify long after the PTC is expired. This, in essence, allows for the phase-out asked for by the industry. No additional extensions are needed….

…The PTC, which was first created in 1992, subsidizes renewable energy producers — especially wind companies — for the electricity they generate….

The foundation of the president’s climate agenda is the Environmental Protection Agency’s greenhouse gas emissions rule for existing power plants — a declaration of war against fossil fuels. A recent analysis found it will increase electricity prices by double-digits in 43 states. For all that pain, it would reduce global carbon dioxide emissions only by 1.5 percent by 2050.

One of the central “building blocks” of the EPA’s power plant regulation is increased wind and solar electricity generation. But wind and solar are simply not competitive without massive taxpayer subsidies — for wind, that’s the PTC.

Thus, a vote for the PTC is a vote for the president’s climate agenda.

The wind industry’s top lobbyist put it best: “Wind energy is one of the biggest, fastest, cheapest ways states can comply with the forthcoming EPA rule.”

But wind energy isn’t “cheap” — far from it. It’s is more than 125 percent more expensive than electricity generated from natural gas and over 90 percent more expensive than that from coal. The only way wind producers stay in business is with the taxpayers’ help — a la the PTC.

Wind’s recent history bears this out. When the credit is active, new wind installations soar. When it temporarily expires, new installations plummet.

That was the case in 2013 when the PTC expired. New wind installations plunged from an all-time high of 13,000 megawatts in 2012 to merely 1,100 megawatts in 2013 — a 92 percent drop in a single year. Similar declines occurred following other temporary expirations in 2000, 2002 and 2004, when new installations dropped by 92, 76 and 76 percent, respectively.

The lesson is clear: Without government handouts, wind energy doesn’t fly….

Letter: Wind energy plummets from the sky without tax credits | Opinion | The Advocate — Baton Rouge, Louisiana.