The wind production tax credit still hangs in the fiscal-cliff balance

posted at 12:11 pm on December 21, 2012 by Erika Johnsen

With Congress and the White House currently concentrating their laser-like focus on averting (or not averting, as the case may be) the fiscal cliff, the fate of various tax extenders is still very much up in the air, including the wind industry’s precious production tax credit (which covers about 30 percent of wind power’s costs — no wonder they’re so keen on keeping it around). The wind lobby is working overtime to convince Congress to pass an extension before the clock runs out on December 31st, but most lawmakers’ concerns are about the bigger fish we still need to fry before the end of the year.

House Speaker John Boehner (R-Ohio) on Tuesday unveiled a “Plan B” approach to avoid most of the looming tax hikes, but it did not address the PTC or other so-called tax extenders. President Obama and Senate Democrats were quick to dismiss the offer.

Rep. Pat Tiberi (R-Ohio), who has been a leading negotiator over the fate of the PTC, acknowledged that it and other temporary tax provisions “take a back seat” to the broader debate over the cliff and that it would take “a deal on everything else” to see movement on extending the temporary credits.

Boehner’s proposal was seen as largely a messaging exercise, with the extenders still expected to be along for the ride if Congress and the White House can reach a broader deal on taxes and spending, lawmakers and lobbyists said.

“I suspect this is all for show,” one wind lobbyist said of Boehner’s proposal.

Sen. Mark Udall (D-Colo.), who has been leading a public push for a PTC extension with near-daily floor speeches, said yesterday that there have been “a lot of quiet conversations” among senators over how to insert the credit into a broader fiscal cliff deal but that he was not at liberty to say more.

President Obama was much more vocal on the production tax credit and his other renewable-subsidizin’ ventures while on the campaign trail before the election (especially when hitting up states like Iowa), but I haven’t heard him throw much of his weight behind it lately — although of course, his administration is still very much actively for it:

During the informational session, which also included a Q&A segment, Chu officially endorsed the extension of the PTC and re-emphasized his unwavering support for wind power and other forms of renewable energy.

“I’m bullish on the prospects for wind,” Chu told reporters and webcast viewers. “We have to maintain the production tax credit. That’s my plug.”

After highlighting many of the wind industry’s achievements over the past two decades, Chu warned that if the PTC is not extended, many manufacturers established in the U.S. will likely move overseas.

All of these “quiet conversations” undoubtedly concern the usual arguments in favor of such government-sponsored favoritism, including the thousands of jobs that will be lost should the wind credit expire (nevermind that these jobs are all more subsidy-powered than anything else), that oil and gas receive bigger subsidies (although they are relatively infinitesimal compared to the scope of the wind industry, and I must add that I unequivocally support the repeal of all subsidies across the energy spectrum), and that the wind industry only needs a little more “strategic nurturing” before it can finally compete on its own merits (forget that the production tax credit has been around for two decades already).

“With the threat of the PTC’s expiration, wind project developers are not making plans in the U.S. and American manufacturers are not receiving orders,” David Ward of the American Wind Energy Association (AWEA) told ReWire. “Job layoffs have started already, which could total up to 37,000 jobs lost. Without an immediate extension of the Production Tax Credit, the wind industry is facing the recurrence of the boom-bust cycle it has seen in previous years when the PTC was allowed to expire.”

Hint: The fact that the wind industry is so very tax-credit dependent with a longstanding boom-and-bust cycle, probably is not the best advertisement in its favor. If individual states want to continue to coddle what they have deemed to be renewable energies with their own subsidies (like renewable portfolio standards), then so be it, but the federal government’s longtime special treatment of the wind industry needs to stop.

Claim: “The federal Production Tax Credit (PTC) is an effective tool to keep electricity rates low and encourage development of proven renewable energy projects.”

Reality: When the wind lobby worked to create the tax credit, they were ingenious. Instead of structuring it to increase electricity rates, they structured it to create greater liabilities for taxpayers. By structuring it as a lavish tax credit, the costs are effectively hidden from electricity ratepayers. This allows the wind lobby to claim that it “is an effective tool to keep electricity rates low.” And remember, these are not “deductions” that most Americans are familiar with; they’re “credits,” a dollar for dollar reduction in tax obligations of some huge corporations.

This does not mean that the tax credit is inexpensive. A one-year extension will cost $12 billion because it is guaranteed for 10 years of payout. But, most importantly, those costs are hidden from electricity ratepayers and get lumped together with trillions of dollars in the federal budget.


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Let it die, as all energy subsidies should.

UltimateBob on December 21, 2012 at 12:17 PM

Oh crap! What will we do without windmills?! There’ll be too many birds!!!

Akzed on December 21, 2012 at 12:19 PM

All energy subsidies need to be eliminated, especially those for woefully inefficient sources like wind, solar and ethanol. They are a corrupt waste of money and a drag on the economy.

RadClown on December 21, 2012 at 12:25 PM

All energy subsidies need to be eliminated, especially those for woefully inefficient sources like wind, solar and ethanol. They are a corrupt waste of money and a drag on the economy.

RadClown on December 21, 2012 at 12:25 PM

But wind farms are so pretty!

DarkCurrent on December 21, 2012 at 12:32 PM

Let it die and bury the windmill industry, which with solar, provide less than 1% of power on our electric grid……this is since their introduction in the early 70′s! Two dinosaurs who should be denied continued taxpayer subsidies that will never be repaid. The real energy industry is a serious provider of energy and JOBS!

tomshup on December 21, 2012 at 12:33 PM

oil and gas receive bigger subsidies (although they are relatively infinitesimal compared to the scope of the wind industry, and I must add that I unequivocally support the repeal of all subsidies across the energy spectrum),

I would have thought you would know better. O&G industry does not receive subsidies. At all. Period.

What O&G industries DO get are the same tax deductions for business expenses that every other industry gets. A subsidy is very different than a tax deduction.

subsidy
Definition
sub·si·dy[ súbssədee ]sub·si·dies Plural

NOUN
1. money given by government: a grant or gift of money from a government to a private company, organization, or charity to help it to function
2. help with expenses: a monetary gift or contribution to somebody or something, especially to pay expenses
[ 14th century. Via Anglo-Norman < Latin subsidium "reserve troops" < sedere "sit" ]

iurockhead on December 21, 2012 at 12:37 PM

Put the windmills where they belong. Sell them to preppers who want to live off the grid but can afford an unreliable but considerable independent source of electricity. But hey, that would make too much sense…

Archivarix on December 21, 2012 at 12:39 PM

Supporting windmills is not high on my priority list at the moment.
That it is even considered as a “talking point” at the moment is absurd.

Jabberwock on December 21, 2012 at 12:39 PM

just post this link to this blog on a lefty web site its like sun light on vampiers,,,, lots of screems and melt downs.

http://www.wattsupwiththat.com

hits them “deceased center”

APACHEWHOKNOWS on December 21, 2012 at 12:50 PM

Where are all the ornithologists in all this?

gaius on December 21, 2012 at 1:03 PM

We really need to clear the air on this issue before we blow it.

SparkPlug on December 21, 2012 at 1:15 PM

Btw, seems my VPN’s still working Erika.

DarkCurrent on December 21, 2012 at 1:38 PM

many manufacturers established in the U.S. will likely move overseas.

Unlikely! They are likely to be bankrupt.

burt on December 21, 2012 at 2:30 PM

Windmills killing over 500 ENDANGERED Bald Eagle, no problem.

Oil industry gets a few thousand seagulls covered in oil BIG PROBLEM.

Getting huge tax credits is just one of the problems.

jukin3 on December 21, 2012 at 2:50 PM

How am I ever going to drive my windmill to work without these subsidies?

JeremiahJohnson on December 21, 2012 at 3:34 PM

All the energy companies should have the same taxes, and incentives if there are any.

Fleuries on December 21, 2012 at 5:37 PM

WE need stupid energy like a hole in the head – it only works when the wind blows at the right speed not when you need the power!

It is loaded with payola called subsidies to pay off campaign donors.

If wind can’t stand on its own DUUMP IT. PG&E is buying wind power and forcing its customers to pay exorbitant prices for energy!

Let’s get rid of PG&E as well

Obamatrix on December 22, 2012 at 10:33 PM