Showdown Looms over Federal Wind Subsidy

Published September 30, 2014

With Congress returning from its August recess, proponents of extending a federal subsidy to the wind-energy industry—the production tax credit (PTC)—say they plan to leave no stone unturned in their efforts to continue receiving favorable treatment under the tax code.

Navigating an abbreviated congressional calendar, including a midterm election in early November and a “lame-duck” session sometime thereafter, will be challenging for both friends and foes of the PTC. Together with other tax breaks for an assortment of industries, the wind PTC expired at the end of 2013. In the past, these tax breaks have been retroactively extended in legislative packages known as “tax extenders,” but growing opposition to the PTC has clouded the future of the wind industry’s subsidy.

Opposition to extending the PTC is stronger in the Republican-controlled House than in the Democrat-controlled Senate. With this in mind, and fearing the Senate may change hands as a result of the midterm elections, the American Wind Energy Association (AWEA) prefers congressional action on the subsidy during this session of Congress. In contrast, opponents of the subsidy have every incentive to put off a vote until 2015 when their hand may be stronger.

AWEA Backs Wyden Bill

Party affiliation is not necessarily an indication of how a member will vote. Democrats overwhelmingly support the PTC and other green-energy program, and so do some Republicans. Sen. Charles Grassley (R-IA) is an ardent supporter of the wind industry, vowing to fight all efforts to let the subsidy expiration remain in force. And in both the House and Senate, some Republicans from “high-wind” areas of the Great Plains and Inter-Mountain West back the PTC. Some have received campaign contributions from AWEA.

AWEA President Tom Kierman has called for immediate passage of a bill introduced earlier in the year by Senate Finance Committee Chairman Ron Wyden (D-OR). The bill includes the wind PTC in a package of other tax extenders.

Kiernan stated in a press release, “We can double American wind power by 2020, and double again by 2030, if Congress gets the rules straight by extending these crucial tax policies as soon as possible and continues to work on long-term policies that continue to provide a more predictable business environment.”

A taste of the forthcoming battle was supplied in an Aug. 13 letter from Rep. Mike Pompeo (R-KS) and 54 of his GOP colleagues to House Speaker John Boehner (R-OH) and Majority Leader Kevin McCarthy (R-CA). The letter called for letting the PTC expire, describing it as a “crony” subsidy.

“We offer our full support of the current process undertaken by the House Committee on Ways and Means that will allow the most anti-competitive and economically harmful tax provisions, specifically the wind energy production tax credit (PTC) to expire,” the letter stated. “Ensuring that our nation’s patchwork tax code undergoes significant reform is a noble goal and, as part of the process, we believe Congress should stop picking winners and losers and end the wind PTC.”

‘Significant Price Distortions’

“Extending the wind PTC is a key priority for the Obama administration and its efforts to prop up wind and other favored ‘green energy’ technologies,” the GOP lawmakers wrote. “Proponents of the wind PTC continue to call for an extension despite growing evidence that this subsidy has not only cost taxpayers billions, but has caused significant price distortions in wholesale electricity markets.”

Enacted in 1992, the wind PTC give producers a 2.2 cent tax credit per kilowatt hour of electricity generated. What began as a temporary helping hand to enable wind power to compete with traditional sources of energy has become a permanent fixture of the wind industry’s business model.

“The fact is that AWEA has not been able to show that industrial wind energy is a net societal benefit,” said John Droz, a North Carolina-based energy expert.

“The evidence from independent energy experts is that wind energy is an unreliable, expensive, and environmentally destructive option,” Droz explained. “Subsidizing such a niche product makes no sense.”

Bonner R. Cohen, Ph. D., ([email protected]) is a senior fellow at the National Center for Public Policy Research.