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    Wind Power: Surviving off Subsidies

    07/24/2012

    Since 1992, the federal government has been providing corporations with billions and billions of tax-payer funded credits in the form of the Production Tax Credit (PTC). 

    In the first 10 years of its program the federal government gave the wind industry a tax credit of 1.5 cents per kilowatt-hour. Federal tax credits totaled $5 million for 1998 alone. Fast forward to today and the tax credit is at 2.2 cents per kilowatt-hour while over $1.5 billion is annually given to the wind-industry via the PTC. The newest wind turbine installations in the most favorable places still cost 5 cents per kilowatt-hour to run, making taxpayers swallow 44% of the cost. According to the American Energy Alliance, in 2010, combined subsidies for the wind industry totaled over $5 billion

    Needless to say the American people have forked out a lot of money to the wind industry over the past 20 years and that’s putting it lightly. What do the federal government and the wind industry have to show for themselves? 

    Well, despite over half of all wind power capacity in the USA being installed since 2000, wind still generates less than 2 percent of the energy consumed in the US. 

    Net Electricity Generation By Energy Source, as % of U.S. Total, 1998 – 2011 

    Net Electricity Generation By Energy Source, as % of U.S. Total, 1998 – 2011

    http://www.instituteforenergyresearch.org/2012/04/24/assessing-the-production-tax-credit/

    How can benefits of funding the wind industry be justified when looking at the cost? According to the Institute for Energy Research, the entire wind energy industry has only been able to enter the market artificially backed by the powers of the federal government.  

    “The only reason wind has gained the (small) market share it has, is that Congress simultaneously taxes competing forms of energy while off setting this onerous burden through the PTC. If the government extended the PTC for wind and other renewables, and applied it to coal- and natural gas-fired power plants as well, then there would be an expansion of total capacity and electricity prices would tumble for consumers. At the lower prices, even with the PTC, once again wind and other renewables would not be able to compete, and they would shrink back to their efficient niche.”

    Lisa Linowes from masterresource.org continues to shed light on the economic problems with wind energy. 

    “But wind is an unpredictable, non-dispatchable resource that’s built long distances from load and largely delivers energy at a time of day and year when least needed. With high upfront costs and fewer hours to spread the cost over, wind cannot compete with reliable, lower-priced fossil and nuclear generation. It’s inherently a low-value resource, that demands above market prices.”

    This has not been the first time the government has tried to artificially create a market where there simply is not one. Failed alternative energy companies like Solyranda and Solar Trust are two other good examples of this. 

    The benefit of free markets is that when consumer demand is present, wise entrepreneurs will provide for that demand with a marketable good. Conversely, when demand for a certain product is not present, wise entrepreneurs will stay away preventing economic loss.  

    Daniel Shreve, director and partner of MAKE Consulting, a wind energy consultancy from Chicago said it best: “We simply have not seen that strong demand for new power generation." 

    Consumers demand cheap energy – natural gas, coal, and petroleum are providing that to them. Wind is not…despite the well-intentioned but extremely wasteful and irresponsible efforts by the federal government. 

    3 comments
    Charles Wilson
    08/03/2012

    Okay I understand the government is spending bucks n alternative power development.
    I don’t get some of the comparisons Is there not a fundamental subsidy of fossil fuels when they take the material from the planet and sell it as if they had created the molecules through hard work and capital investment? The land might belong to taxpayers in many cases. We exploit it and then very often the taxpayers get to clean up the mess before the water supplies and other resources are damaged. So if the sun creates photons or wind forces or water forces or tidal forces and there is no chemical residue oozing into our bodies or our children, maybe exploiting this might be good? Maybe some of the power is uneven by changes to weather or season or time of day but it can still reduce consumption of the fossil alternatives that everyone knows are being used up (unless you believe in the magician god).
    Subsidies aren’t all that evil. Air Travel, Oil & Gas development, Nuclear Power, Semiconductor industry, Interstate Highways, and Medicine and Pharmaceuticals have all suckled from the public bosom at birth and not all are yet weaned. Maybe a fair comparison needs to consider potential payback. I hate to raise the ire of “exceptional-ism faith holders, but I reliable information indicates some fairly advanced countries get 15% of their power from wind -- shouldn’t this be considered? I didn’t see it in the graph. As an engineer I have to consider all costs on my projects, too. Subsidies exists in repairing miners lungs and comforting their expensive deaths, same with gasoline residues and I understand the roads don’t last very long in the coal areas. Are these factored in fairly. Who pays for habitat restoration or should we just let the fish go?

    PR
    07/24/2012

    If you add in the over 200 billion in health care costs that come directly from using coal, wind beats it.

    So If the market doesn't have all the information, how can it be worth listening too? (those are real costs by the way)

    My question is why do people actively hide information from the market, and then go out and say how great it is?

    Thanks
    PR

    Wesley Coopersmith
    07/24/2012

    The free market, as well as democratic government, is reliant on wise consumers.