Thursday, August 09, 2012

Guest Post on the US Wind Tax Credit

The following commentary on the US Wind Tax Credit comes via Daniel Simmons, via the National Journal

Wind is old electricity generating technology and after more than 30 years of subsidies, it is time for wind to grow up and compete on its own, instead of expecting to get paid by taxpayers to do its job.

Congress has been supporting wind production since at least 1978 on the premise that wind is an infant industry requiring a brief leg-up to become cost-competitive with coal, natural gas and other sources of reliable, affordable energy. But if wind is an infant industry, it has to be one of the oldest infant industries on the planet.

In 1882, Thomas Edison built the Pearl Street Station in New York City—a coal fired power plant. A mere 5 years later, a Scottish academic named James Blyth built a wind turbine to make electricity and run the lights on his cabin. After 125 years of generating electricity, wind should be ready to leave its government crib and stand on its own.

Wind lobbyists argue that the PTC is necessary to continue building wind installations, while also lobbying for mandates requiring utilities to buy wind electricity. This shows that wind is not ready for primetime, but is subsidy- and government edict-dependent. If wind can’t compete after 125 years without consumers being forced to both subsidize and purchase it, when will it be?

The PTC is so helpful to wind developers because the size of the tax credit is very large compared to the wholesale price of electricity. The production tax credit is 2.2 cents per kilowatt-hour of electricity produced from wind (and other specified sources). The wholesale price of electricity is less than 3 cents per kilowatt-hour in some markets and about 4.5 cents per kilowatt-hour in other markets. This makes the production tax credit worth 50 to 70 percent of the wholesale price of electricity. If Chevy Volts got the same treatment, the feds would be subsidizing each one to the tune of $19, 572 to $27,401 per car and people would be forced to buy them. ( 50-70% of listed price)

Another problem with the PTC is that the electricity market is built to match electricity demand with electricity production, but the PTC gives wind producers no incentives for electricity production when electricity demand is high. When electricity demand is high, electricity generation is very, very valuable, but to wind producers electricity demand matters little; they make money when the wind blows, which often happens to be when electricity is least needed. The wind industry gets paid to make energy when it isn’t needed but doesn’t make it when it is needed, and still wants more subsidies and government to force consumers to buy its product. If that doesn’t sound like a government boondoggle, I don’t know what does.

The PTC doesn’t help Americans or America. The latest proposal would cost taxpayers $12.1 billion over ten years but it doesn’t help make the electricity grid more robust or economical. Now is the time for government to tell a 125-year-old infant to grow up. _Daniel Simmons
Al Fin: The first and last paragraphs contain the essence of the argument. First, wind is an old industry and should not be coddled as if it were an infant. Two, wind is unable to generate power to meet the crucial time-linked demands of utility loads. Wind cannot survive without government special preferences -- a ruinously exorbitant affirmative action for wind.

It is time for American energy consumers and voters to grow up and force their government to grow up as well. The US economy is being hamstrung by foolish energy policies that are based upon ideology rather than practical realities. That foolishness must end.



Blogger warpmine said...

Let the halls of Congress be powered by wind only. When the wind dies, the lights go out and won't kick back on until thus time the wind blows. With this stipulation, members of Congress can finally be useful by exhaling wind.

What you think?

7:12 AM  
Blogger al fin said...

Right! The hot air from the bloviations and eructations emanating from Congress might just generate its own wind, much as a wildfire can do.

You may have invented a perpetual motion machine.

1:58 AM  

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