Policy Documents

Research & Commentary: Wind Power Subsidies

November 6, 2012

Wind power generation has been generously subsidized since the Public Utility Regulatory Policies Act of 1978. After 35 years of increasingly lucrative subsidies, wind power generation has become the most preferentially treated industry in the energy sector. Yet wind power produces only 2.9 percent of the United States’ total electricity.

According to a study by the Manhattan Institute, wind power receives three forms of direct and indirect subsidies. The first and most direct of these is the production tax credit; the second is renewable portfolio standards; and the third is the exemptions wind producers receive from federal wildlife protection laws.

The most lucrative of these subsidies is the federal production tax credit, which amounts to 2.2 cents per kilowatt-hour of electricity. Because of its intermittency and low power-density, wind energy receives a subsidy per unit of energy at least 12 times greater than subsidies given to the oil and gas sector and 6.5 times greater than is provided for nuclear energy. Proponents claim the wind energy subsidy is required to “level the playing field” with traditional forms of energy such as fossil fuels.

Supporters of wind energy subsidies argue that doing away with them would cost jobs in the industry. The Manhattan Institute calculates a one-year extension of the production tax credit will cost about $329,000 per job and add $12.2 billion to the federal deficit, all for just 2.9 percent of the nation’s electricity and only 1.2 percent of our total energy.

The physical limitations of wind power, not the lack of subsidies, are what make it uncompetitive with other energy sources. The production tax credit and other wind power subsidies are a bad deal for taxpayers. Government should instead look to eliminate all energy subsidies rather than increasing them for any particular energy type. 

The following documents provide additional information about wind generation power and subsidies.

 

Ten Principles of Energy Policy
http://heartland.org/policy-documents/ten-principles-energy-policy
Heartland Institute President Joseph Bast outlines the ten most important principles for policymakers confronting energy issues, providing guidance to help withstand ongoing changes in markets, technology, and policies adopted in other states, supported by a thorough bibliography. 

Energy 101: Wind Turbines
http://www.youtube.com/watch?v=tsZITSeQFR0
A short video produced by the U.S. Department of Energy depicting how wind turbines generate electricity, showing various components and mechanisms. 

Subsidizing Big Wind
http://heartland.org/policy-documents/subsidizing-big-wind
Manhattan Institute Senior Fellow Robert Bryce analyzes both direct and indirect subsidies for wind energy production, calculates their true costs to taxpayers, and compares them with the subsidy figures for other energy industries. 

How Less Became More: Wind, Power and Unintended Consequences in the Colorado Energy Market
http://heartland.org/policy-documents/how-less-became-more-wind-power-and-unintended-consequences-colorado-energy-marke-0
Bentek Energy, LLC, a leading energy markets information company, evaluates the “must take” provisions of Colorado’s Renewable Portfolio Standard, which forces coal plants to accommodate the intermittency of wind power by “cycling” generating units. The report finds the requirement causes inefficiency and produces significantly greater emissions. 

Wind Spin: Misdirection and Fluff by a Taxpayer-enabled Industry
http://www.masterresource.org/2012/02/wind-spin/
Physicist John Droz Jr. evaluates the common arguments used by wind energy lobbyists to argue for subsidies. Droz notes wind energy proponents are not forced to independently prove the merits of their claims and are not penalized when their projections fall short. 

Wind Turbine Manufacturers Closing With or Without PTC Extension
http://www.instituteforenergyresearch.org/2012/10/05/wind-turbine-manufacturers-closing/
The Institute for Energy Research assesses several factors affecting wind-power markets and finds the over-supply of turbines has manufacturers laying off workers regardless of the PTC’s future. 

Wind Intermittency and the Production Tax Credit: A High Cost Subsidy for Low Value Power
http://heartland.org/policy-documents/wind-ptc-high-cost-subsidy-low-value-power
Columnist and economic consultant Dr. Jonathan Lesser analyzes the history and economic consequences of the production tax credit; he finds no justification for continuing wind power subsidization through the production tax credit.

 

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit the Environment & Climate News Web site at http://news.heartland.org/energy-and-environment, The Heartland Institute’s Web site at http://www.heartland.org, and PolicyBot, Heartland’s free online research database, at www.policybot.org.

If you have any questions about this issue or The Heartland Institute, contact Heartland Institute Policy Analyst Taylor Smith at tsmith@heartland.org or 312/377-4000.