Congress allowed longstanding taxpayer subsidies to wind power companies to expire at the end of 2013, putting into doubt the long-term future of the lucrative subsidies. Wind power lobbyists hope to persuade Congress to restore the subsidies in early 2014, but for the first time in over 20 years, Congress appears willing to put an end to the payouts.
Designed to promote wind power as part of an overall strategy to boost renewable energy, the production tax credit (PTC) gives wind power producers a payment of 2.2 cents per kilowatt-hour for electricity generated. The taxpayer subsidies can be more than a third of the retail price of electricity.
Longstanding ‘Temporary’ Subsidies
During the late 1980s and early 1990s, wind power lobbyists promoted the idea of a production tax credit as a temporary means of boosting a wind power industry that claimed it would soon be cost-competitive with conventional power. More than 20 years after Congress enacted the PTC, wind power is still substantially more expensive than coal, natural gas, and nuclear power.
The PTC faced expiration seven times since its enactment in 1992, only to be “temporarily” extended by Congress—often retroactively—under pressure from the wind power industry and renewable-energy advocates.
Changing Winds in Congress
When Congress in January 2013 “temporarily” extended the PTC for one year, Congressional leaders said it was doing so with the understanding the future of the subsidy would be resolved in a larger tax-reform package to be negotiated in 2013-14. But with the Senate’s chief advocate for comprehensive tax reform, Sen. Max Baucus (D-MT) having been named ambassador to China, and with partisan divisions intensifying in recent months, the outlook is dim for an overhaul of the tax code in the current Congressional session. In addition, a growing number of Congressmen are expressing opposition to the wind power subsidies.
Propping Up Faltering Projects
Thanks largely to the PTC and mandates in 29 states and the District of Columbia requiring a certain percentage of electricity be generated by renewable sources, wind projects have proliferated across the country. Yet despite this growth, the wind industry remains heavily dependent on the PTC if it is to compete with traditional sources such as coal, natural gas, and nuclear power.
“The concept of supporting wind energy—or any renewables—is archaic,” said Marita Noon, executive director of the Citizens’ Alliance for Responsible Energy. “Since the subsidies began in the 1970s, the energy landscape has changed dramatically.
“In the 1970s, we thought we were facing an energy shortage, which motivated efforts to subsidize wind power. Somewhat later the justification became that fossil fuels caused global warming,” Noon explained. “Now, with the abundance of natural gas as the solution to both concerns, and with the U.S. economy still sputtering, it is time to end the outdated PTC.”
Bonner R. Cohen, Ph. D., ([email protected]) is a senior fellow at the National Center for Public Policy Research.