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EDITORIAL

Subsidies for wind power: Waste of money continues

Monday, January 7, 2013 - 8:54 am

Make the industry compete in the open marketplace.

Congress is obviously incapable of passing anything without including generous portions of pork that have nothing to do with the purpose of the legislation. Thus it is no surprise that our senators and representatives took the time to stuff that desperately needed “emergency” legislation aimed at avoiding the fiscal cliff with $76 billion in special-interest tax credits for corporate giants such as General Electric and Citigroup, not to mention “green” energy companies.

Included in the package, unfortunately, was a one-year extension of the PTC – “production tax credit” – for wind energy, which amounts to 2.2. cents per kilowatt-hour for the first 10 years of electricity production from large-scale wind turbines. First enacted in 1992 with strong Republican support (hey, this is a bipartisan mess), the credit also expired in 1999, 2001 and 2003 but was always renewed. Renewing the credit will result in loss of an estimated $12 billion in tax revenue.

And the federal government has already spent almost $24 billion in the last 20 years to encourage investment in wind power, which makes it one of the most subsidized sources of energy there is. According to the U.S. Energy Information Association, wind subsidies amount to $52.48 per one million watt hours generated. Compare that to the subsidies for generating the same amount of electricity from nuclear power ($3.10), hydropower (84 cents) coal (64 cents) and natural gas (63 cents).

Shouldn’t an industry that can’t sustain itself after 20 years of being propped up be cut loose? As former Sen. Phil Gramm points out in a Wall Street Journal essay, the subsidies “waste taxpayer money, subvert the allocation of capital, and generate a social cost many times the price tag of the subsides themselves.” And there is more than the direct costs of the subsidies to consider. The subsidies for this and other forms of green energy, such as solar power and ethanol – are triggering “an inefficient and costly transformation of grid resources from low-cost megawatts to high-cost ‘maybe’ watts.”

An Indiana group that promotes renewable energy said the extension of the production tax credit for one year was critical, but a long-term step is needed for the industry to expand. “This yo-yo, sort of start-stop, start-stop, isn’t good for the long-term stability,” said Laura Ann Arnold, president of Indiana Distributed Energy Advocate.

No, the answer is to let the subsidies drop so wind can compete with other forms of energy in the marketplace. Yes, jobs will be lost, but our energy needs will never go down, so there will be plenty of employment elsewhere.