Is the wind industry entering panic mode?

posted at 4:51 pm on December 14, 2012 by Erika Johnsen

The wind lobby is working like their livelihoods depend on it — which is mainly because, they do — to convince Congress to extend the production tax credit, set to expire at the start of the new year, that has diverted taxpayer money their way for decades now. Without the guarantee of continued federal assistance, the wind industry is already starting to bleed jobs, and in their desperation to convince their detractors to continue the credit in at least some capacity, they’re proposing a compromise of sorts in the form of an eventual six-year phaseout.

Wind energy companies have urged Congress for months to extend the so-called production tax credit, which is set to expire this month. The break shaves as much as a third of the costs to generate wind power, and industry advocates contend its loss could cost thousands of jobs. Under the proposal, the credit’s value would fall gradually over the six years.

The credit’s “continued availability for a reasonable period of time will allow the industry to invest in the cost- saving technologies required to finish the job,” the Washington, D.C.-based trade group said in the letter.

The association’s plan would keep 100 percent of the current credit of 2.2 cents a kilowatt-hour for projects started in 2013. The credit would fall to 90 percent for projects completed in 2014, 80 percent in 2015, 70 percent in 2016 and 60 percent in 2017 and 2018, the credit’s final year

As the absolute necessity of the PTC to wind’s ‘competitiveness’ showcases just how thoroughly the industry is still operating based on rent-seeking rather than its own free-market merits after 20 years of government special treatment, many in Congress maintain that this is one big heap of federal largesse that we just cannot afford to continue (read: $16 trillion in debt and counting). There are just too many readily available reasons for why wind needs to finally be pushed out of the nest:

Since first adopted in 1992, the “temporary” production tax credit for wind energy has ballooned from $5 million per year in 1998, to over $1 billion annually today. And even if ended, taxpayers are still obligated to cover nearly $10 billion in tax credits for projects built during the last decade. That’s in addition to an almost $20 billion debt for wind projects eligible under the Section 1603 extension, the renewable energy bailout of 2011. In many parts of the country the PTC actually exceeds the wholesale price of power. …

On another front, how much has wind contributed to meeting America’s electricity energy needs?   A major point of public confusion often advanced by promoters fails to differentiate between maximum total capacities, typically presented in megawatts (MW), and actual predicted kilowatt hours (kWh) that are determined by annual average wind conditions at a particular site. Since wind is intermittent, and velocities constantly change, it often isn’t available when needed most—such as during hot summer days when demands for air-conditioning are highest.

We can expect to hear more and more scary stories from the American Wind Energy Association which, according to Bloomberg, spent $1.1 million in lobbying this year warning of a crushing blow to American energy security and jobs if Congress lets the wind Production Tax Credit lapse. But don’t expect them to mention the high cost of that energy and those jobs, or that most are temporary construction positions, with less than 20,000 involved in the manufacture of parts used in turbines.

For advocates of widespread use of renewable energy, continued government subsidization should not be the goal. Continued federal privilege is hardly a way to encourage price efficiency and market viability, which is the only route through which more and more people will be able to voluntarily and affordably purchase these renewable energies.

Whatever the fate of the wind industry-wide production tax credit, plenty of individual projects and other programs will undoubtedly keep clamoring for money, and I’d wager that the Obama administration will be more than willing to give. The beatings will continue until morale improves:

The wind industry receives subsidies in a variety of ways, the latest example being the Department of Energy’s (DOE) Advanced Technology Demonstration projects. This program is on top of the wind production tax credit, which is worth about 40 percent or more of the wholesale value of electricity—so generous, in fact, that wind producers can actually sell their energy to the grid for negative prices and still collect a profit from the taxpayers. …

Higher costs for a technology should not be a signal for the government to step in and try to lower those costs to make the politically preferred technology competitive. By attempting to force government-developed technologies into the market, the government diminishes the role of the entrepreneur and crowds out private-sector investment. This practice of the government picking winners and losers denies energy technologies the opportunity to compete in the marketplace, which is the only proven way to develop market-viable products.

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