Wind-Power Subsidy in Congressional Crosshairs

  • Windmill in crosshairs

Growing disillusionment over lavishing taxpayer dollars on dubious renewable-energy subsidies has prompted dozens of House members to ask Speaker John Boehner to allow the Production Tax Credit (PTC) for the wind industry to expire at the end of the year.

In a September 21 letter to the Speaker, 47 Republican House members asked Boehner “not to include an extension of the PTC in a package of tax extenders should the House consider one later this year.” The words “later this year” refer to the lame-duck session of Congress which is scheduled to meet Nov. 13, one week after the presidential election.

“The Obama administration has poured billions of dollars into subsidizing its favored ‘green energy’ sources,” the letter says. “The Solyndra scandal and the administration’s squandering of $535 million taxpayer dollars is a clear example of this agenda. Under this administration, federal subsidies for wind have grown from $476 million per year when the president took office to $4.98 billion per year today. However, wind remains an intermittent resource; the wind does not blow all the time, and wind farms do not produce power constantly the way traditional power plants do.”

The PTC was established by the Energy Policy Act of 1992 and currently provides wind-energy producers a 2.2 cents subsidy for every kilowatt of electricity produced. The subsidy attaches to a wind farm when it is built and continues for its first ten years of operation. “A one-year extension of the PTC would cost the American taxpayers over $12 billion,” the letter points out.

“Even if the PTC expires, a wind farm built in 2012 will continue to receive subsidies until 2022, and, as a consequence, the bipartisan Joint Committee on Taxation estimates that will add $6.8 billion to the deficit between 2011 and 2015,” the letter notes. “Today, when the U.S. is more than $15 trillion in debt and borrowing $0.40 of every dollar it spends, we cannot afford to borrow money to subsidize the operation of a politically favored technology.”

“In the case of wind, doing so would not only be costly to taxpayers but ultimately would hurt consumers by distorting energy markets,” the letter goes on. “Since the PTC provides tax benefits for new projects, it often drives wind developers to build projects with little regard to consumer demand, as long as they can be placed on line and their power brought to market to collect the subsidy. In fact, because the tax subsidy is tied to the amount of electricity generated, wind producers will sometimes sell their electricity for nothing or even pay wholesale electricity markets to take their power in order to collect the subsidy. This subsidized and intermittent power distorts markets and threatens around-the-clock baseload power producers, forcing them to pay as well or shut down for long periods of the day when their power is needed most. This will ultimately harm consumers who need power that is affordable and available around the clock.”

Spearheaded by its trade group, the American Wind Energy Association (AWEA), the wind industry is paying lobbyists huge retainers to scurry around Capitol Hill to convince Members of Congress to extend the subsidy. Speaker Boehner and Majority Leader Eric Cantor are on record as opposing the subsidy’s extension. But members from windy states – mostly west of the Mississippi – want the PTC to continue to prop up an otherwise artificial industry.

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About the Author: Bonner Cohen, Ph. D.

Bonner Cohen, Ph. D.

Bonner R. Cohen, Ph. D., is a senior policy analyst with CFACT.