‘Tax credits have been essential to the economic viability of wind farms so far, but will not be needed within a few years.” So said Christopher Flavin, now president emeritus of the Worldwatch Institute—in 1984.
Thirty years and billions of dollars later, the wind industry is still saying it needs taxpayer support. Congress is currently hearing this argument as it debates whether to extend the 22-year-old “production tax credit” in the lame-duck session. The PTC, which gives wind producers a 2.3-cent tax credit for each kilowatt-hour of electricity produced over 10 years, expired at the end of 2013. Now wind-industry lobbyists are roaming the halls of Congress, asking legislators to renew it as part of a tax-extenders package before adjourning on Dec. 15.
Over the past seven years, the PTC has cost taxpayers $7.3 billion, and it is expected to pay out $2.4 billion more in 2015. Combined with other subsidies and programs, wind generators received $56.29 in government subsidies per megawatt-hour in 2010, according to a 2012 report from the Institute for Energy Research. That’s compared with 64 cents in subsidies for natural gas and $3.14 for nuclear power.
The credit also encourages abuse—both of the electricity grid and the taxpayer. Instead of paying wind producers based on how much of their electricity is used, the PTC pays them based on how much electricity they generate. Companies that invest in wind power thus receive tax credits to produce something that consumers may not actually want. In fact, producers often pay electricity-grid operators to take their product. This phenomenon is known as “negative pricing.”
Wall Street has figured out that it can use this system to its advantage. The PTC offers major corporations a chance to lower their tax rates by investing in wind energy. But investors also realize that wind farms make little financial sense if the taxpayer isn’t picking up the tab.
Wind power’s fluctuating growth patterns bear this out. In 1992 wind installations produced about 2.8 million megawatt hours of electricity; in 2013 wind installations produced 167.6 million megawatt hours. Yet when the PTC expired temporarily in 2000, wind installations plummeted 92% the next year. The same thing happened in 2002 and 2004, when new installations fell 76% after two temporary expirations.
But the past few years deserve special mention. For most of 2012, wind producers weren’t sure if the PTC would be renewed at the end of the year. As a result, producers didn’t break ground on new projects, with only 1,100 new megawatts brought online the following year—a more than 90% drop.
Yet Congress caved and gave the PTC a one-year extension in January 2013, throwing in a bonus: Wind projects under construction by the end of the year would still be eligible for the PTC, even if they wouldn’t come online until after the credit expired.
Yet Congress caved and gave the PTC a one-year extension in January 2013, throwing in a bonus: Wind projects under construction by the end of the year would still be eligible for the PTC, even if they wouldn’t come online until after the credit expired.
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