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The Wind PTC Must be Ended, NOT Expanded

The production of electricity via wind power is a heavily subsidized industry in the United States. Given the inconsistencies and inefficiencies of producing power with wind in conjunction with the heavy government subsidies, American consumers and businesses are having their sweater unraveled at both ends, through higher taxes and higher energy rates.

It’s a perfect example of a vicious cycle involving you, the government, and the wind industry. The government taxes the individual to account for the loss of revenue and the market distortions from the PTC. The government then subsidizes the wind industry. The wind subsidies increase the amount of wind on the grid; but since wind is more expensive and the subsidy distorts the market, all energy becomes more expensive, resulting in higher rates for the consumer. Higher energy rates and higher taxes are not what an already struggling economy needs.

Now the wind lobby is asking not just for an extension of the subsidies for wind power, but an expansion. The expansion comes in the form of a grant to potential wind producers.

There are some key significances of switching between a grant and tax credit. With a grant, the recipient corporation can receive a significant amount, if not all of the funding, up front. With a tax credit, the benefit is felt over time and is, in a perfect world, results based.

Grants can be particularly lenient. Solyndra, Ener1, and Chevy Volt are just a few perfect examples of how government tinkering in the market with grant money, particularly the energy market, can go wrong fast and on a large scale. The proposed PTC expansion grant is nothing short of a handout. It lacks serious qualifications and the oversight is pitiful. The language, contained within the Family and Business Tax Cut Certainty Act of 2012, which has come out of the Senate Finance Committee details a program that allows firms to collect 10 years’ worth of subsidies up front, so long as they can prove that the project has at least broken ground within a year. No mention of completion requirements or construction oversight is mentioned in the summary language issued by the committee.

This new expansion is already on top of a year-long PTC extension contained within the bill. Make no mistake, in the era of deficit awareness this isn’t an attempt at a cut. It’s an expansion of federal liabilities and an increase of the distortionary effect that these programs have on the energy market.

Conservative estimates place a $12.1 billion price tag on this particular provision of the act. This will only add to, not replace, the several billion dollars annually allocated for the current PTC. Take this estimation with a grain of salt, because the government is notorious for low-balling estimates; take the fact that the cost of Medicare was off by 700%.

This is a lose-lose situation for the American consumer/taxpayer. If the production of energy from wind somehow miraculously increases, despite the lack of oversight, then the market distortion will have more dramatic effects and customers will pay more for their energy, wind or otherwise. Regardless of the energy bottom-line, this expansion of government misallocation of resources will only add volume to the war cry for higher taxes.

There is no real benefit here. The PTC as it currently exists should be abandoned, not expanded. If wind energy is so great, then it should be able to compete on the free energy market; devoid of subsidies and empowered politicians and bureaucrats playing favorites. The same goes for the rest of the economy, but that’s another long story.