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