FreedomWorks Foundation Content

Wind Subsidies: Spinning Out of Control

Since the early 1990s, the federal government has buttressed the wind energy industry through a series of programs and subsidies. The flagship program has been the Wind Production Tax Credit (PTC). This program provided a subsidy of 2.2 cents for every kilowatt-hour produced by wind utilities.

This figure may not trigger any sticker shock, but over time the price tag has steadily added up. Roughly $20 billion has already been spent via the PTC and another $10 billion in future spending is already committed. The skyrocketing price is the result of multiple extensions of the program. The original PTC had a built-in expiration date that lapsed in 1999, however it has managed to survive through eight separate extensions by Congress. The latest extension, snuck into the ‘Fiscal Cliff’ deal struck in early January, has raised significant concern as budget scoring projects it pledges another $12 billion in addition to the $30 billion that has already been committed or spent.

Now, with the taxpayer already committed for $42 billion, the IRS has just announced it will boost the 2.2 cent subsidy to 2.3 cents. This rate increase is estimated to cost the taxpayer an additional $545 million.

To make matters worse, the Government Accountability Office issued a report last month revealing that the federal government operates a total of 82 separate wind industry related programs across over a half-dozen agencies that collectively cost taxpayers $2.9 billion each year. The report also found that a majority of the programs are redundant. Sixty-eight of the 82 programs overlapped with each other in some form in one of the more recent and striking examples of the sheer extent of government waste.

The fact of the matter is that spending on the wind industry is spinning out of control. Further exacerbating the situation is the fact that all this investment has produced negligible, if not negative, results.

Currently, subsidization of renewable energy dominates government energy investment, accounting for 68 percent of all federal energy-related tax subsidies.

Without doubt, decades of heavy investment like this have resulted in exponential growth in the generation capacity of domestic wind power.

However, when examining wind’s impact on the electric grid as a whole, the growth in this individual sector doesn’t translate to increased grid capacity overall. Billions of dollars have been spent and wind power creates next-to-none of the energy demanded by the U.S. grid. In 2011, wind accounted for less than 2 percent of all energy produced in the U.S.

Adding insult to injury, it’s important to remember that since wind energy is dependent on weather patterns, there are significant issues with wind power supply versus demand on the energy grid. The little amount of wind power that is created happens to be primarily produced during times and weather conditions almost exactly inverse to peak power demand.

2009-12, Summer and Annual Load and Wind Availability -ERCOT Source: Dr. Jonathan A. Lesser, Wind Intermittency and the Production Tax Credit, A High Subsidy for Low Value Power, Continental Economics, Oct. 2012.

This phenomenon is inconvenient to proponents of the wind industry, but the explanation is simple and should have been anticipated. On cool, breezy nights, people turn their lights and A/C units off. But it is during these conditions when the combination of dense air and windy conditions produce the greatest amount of lift on wind turbine blades, and hence produce the most power. It’s essentially the opposite in the summer days, when people have their A/C units on full-blast to combat the hot and stagnant air conditions outside.

All these factors thus beg the question: Why does the government continue to give away billions of dollars to corporations to produce a diminutive amount of power and, further, produce it at precisely the times we demand power the least?

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