The multiple distortions of wind subsidies

Yet wind power is less economically viable today than it was when the current subsidies started in 1992. After the expected gains in moving from one-off production to assembly-line production, no major technological breakthrough has occurred that would substantially lower the cost of wind-power electricity generation. The Department of Energy’s “2009 Wind Technology Market Report” finds average wind-power costs were higher in 2009 than they were in 1994, two years after the subsidies began. As Energy Secretary Steven Chu has observed on more than one occasion, wind energy is a “mature technology.”

Meanwhile, as the production of natural gas has surged in the past few years, the price paid for this energy source has declined dramatically, to $3.29 per million BTUs at last report. This is less than one-fourth the July 2008 price, according to Energy Information Administration data.

Declining costs for electricity will give America a comparative advantage in industrial jobs that entail high levels of energy use, such as aluminum, glass, iron and steel, cement and petrochemical production. It also means, however, that wind-power subsidies will become even more costly and disruptive. As Dieter Helm notes in his important new book, “The Carbon Crunch,” wind subsidies make “new gas investment much more risky and . . . gas contracting difficult, since how much gas the power station buys as its fuel depends on factors outside its control: the wind speed.”

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