This week, the US Department of Energy announced it was revisiting the conclusions of its 2008 report, 20% Wind Energy by 2030 .
The study, produced in cooperation with the American Wind Energy Association (AWEA) and other stakeholders, explored a modeled energy scenario in which wind could supply 20% of the nation's electricity by 2030. DOE made clear in the report that the 20% scenario was neither a prediction nor a goal, but for wind proponents, the study served as the foundation for ongoing advocacy.
20% wind power by 2030 became a call to action and more. Absent a national renewables standard, AWEA heralded the 20% as a de facto mandate for wind.
The industry insists it's on track to reach 20% wind (up from 4% today), but such claims are neither realistic nor wise. Despite explosive growth in new wind installations in the last five years alone, challenges to further development have become more evident and will ultimately limit wind's expansion.
An Unpopular Wind
Since 2008, thousands of turbines have been sited in communities across the U.S. As more towers were erected, public acceptance of the massive facilities started to drop.
Earlier this year, both New Hampshire and Vermont sought statewide moratoria on wind farm development until the impacts could be better understood. Law suits are now pending against proposed and operating wind facilities in at least six state courts as well as at the federal level. Ohio , North Carolina and others are revisiting their renewables mandates after wind has failed to deliver lower energy prices and jobs.
And this week, the reality of big wind splashed across media screens worldwide when AP reported that in Wyoming "a soaring golden eagle slams into a wind farm's spinning turbine [about once a month] and falls, mangled and lifeless, to the ground."
The public is increasingly wary of the wind industry's tactics and so is Congress. The 1-year, $12 billion extension of the wind production tax credit (PTC) secretly added to the Fiscal Cliff bill passed in January underscores how unpopular wind energy is on Capitol Hill. The PTC would likely not survive a standalone floor vote.
Wind's Lack of Capacity
According to DOE's 2008 report, U.S. demand for electricity would reach 5.8 billion megawatt-hours (MWh) by 2030. In order for wind to satisfy 20% (or 1.16-billion MWh) of this demand, 305,000 MW of installed wind operating at an annual average capacity factor of 43.4% would be needed. Yet, few existing wind plants in the U.S. come close to producing at this level.
The 2011 Wind Technologies Market Report "found that average capacity factors have been largely stagnant among projects built from 2006 through 2010" at around 30%. In 2011, wind speeds improved raising the average capacity factor to 33%.
We examined 2012 monthly wind production data for 450+ operating wind plants in 34 states representing more than 40,000 MWs of installed capacity. All projects we looked at were in service for the entire year of 2012. The below map offers key insight into the effectiveness of wind at meeting demand by state.
Only three states, Nebraska, South Dakota, and Oklahoma, achieved average capacity factors over 40%. Most states, including California produced at under 30%.
Regional variations in production were also pronounced with the lowest average capacity factors found on both the east and west coasts and the highest capacity factors, by state, found in the mountain and plain regions, correlating closely with NREL wind maps.
The claim that wind projects in the U.S. are achieving 30% average capacity factors nationally may be accurate but not meaningful when considering that state RPS mandates are based on local resources. For states like New York and Pennsylvania, where average capacity factors are in the low- to mid- 20% range, many more wind turbines and related infrastructure (transmission) will be needed to meet RPS mandates than originally forecasted resulting in increased costs and impacts. Couple this with the fact that wind production in most states is seasonal with summer months producing at half that of winter months and also concentrated during periods of low demand (night time) -- much of the energy arrives in excess of demand making it less useful and subject to curtailment.
The Role of Government Subsidies
More than half of the installed wind in the U.S. when measured in megawatts was built under the Section 1603 grant program which imposed no performance criteria on projects. Instead, the program substituted government largess for private investment, but with no accountability. Developers were rewarded for building turbines even in areas with marginal winds. The race to place projects in service before the end of 2012 was more about collecting 1603 grant money than producing quality wind facilities. Wind performance data for 2013 and 2014, when available, will reveal how much this will be a factor in lowering capacity factors.
The DOE is now stating that its revised report on wind energy will study U.S. energy policy as opposed to promoting it. "We want to deal in the realities [of the technology] and we also want to be sensitive to the concerns of the DOE's sister agencies," said Jose Zayas, the DOE's director of the wind and water power technologies office. This would be a departure from DOE's aggressive promotion of wind energy. It's essential the Department of Energy provide independent and comprehensive analysis that acknowledges the limitations and risks of relying on largely unpredictable and non-dispatchable energy sources. The public deserves answers and not unrealistic advocacy.
 At the end of 2007, installed wind in the U.S was about 16,500 MW. At the end of 2012, wind installations were at 60,000 MW.
 New York , Nevada , Washington, Michigan , Maine, California .
 Given the precipitous decline in electricity demand since 2008, these figures will likely be throttled back in any revised study by DOE.
 Some of the reduced performance could be tied to transmission curtailment but this information is not publicly available.
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After 20 years of tax credits, the production tax credit (PTC) was scheduled to expire at the end of 2012.
Neither the House nor the Senate saw fit to extend this overly generous corporate benefit when it was considered on its own merits and the PTC did, in fact, expire. Yet in the final hours of the fiscal cliff negotiations, a package of energy tax extenders was surreptitiously added to the bill which assured the PTC a $12 billion, 1-year extension.
This move was done behind closed doors, without debate or opportunity for amendment and no obligation of the Congress to find a way to pay for it.
The abuse of the Public Trust did not end there.
With this extension, a critical change to the PTC was introduced that relaxed the eligibility requirements for the credit. Renewable energy projects now need only 'commence construction' by January 1, 2014 to qualify for the credit, instead of projects being 'placed-in-service' by that date.
Since the law did not define what it means to 'commence construction', the Internal Revenue Service (IRS) must determine the intent of the Congress and develop clarifying guidance.
Not surprisingly, this is leading potential PTC beneficiaries and wind energy proponents to pressure the IRS to accelerate its rulemaking process. In February, 30 members of the House Sustainable Energy and Environment Coalition (SEEC) sent a letter to the Internal Revenue Service (IRS) and Department of the Treasury encouraging them to act swiftly in issuing guidance on the eligibility qualifications for the credit. The American Wind Energy Association supports the IRS moving quickly to provide guidance that generally adheres to relaxed criteria adopted under the Section 1603 cash grant program.
Since the law is silent on when a qualifying project must go into service, the incentives for gaming the 'commence construction' requirement are substantial -- especially given the potential value of the tax credits in scale and duration, and the anticipated expiry of the program itself at the end of this year. David Burton, partner at Akin Gump Strauss Hauer & Feld, has stated that developers who plan well and bank enough 2013 PTC-eligible component parts , "may be able to continue to construct PTC-eligible wind farms indefinitely." This particular form of regulatory 'gaming' would encumber taxpayers with subsidy obligations for projects that may not go into production for many years after the PTC provision has expired.
With the Treasury and the Department of Energy already under fire for their mishandling of the Section 1603 cash grants and Section 1705 loan guarantees, it is essential that Congress exercise its oversight responsibilities in this matter. Representative James Lankford, chair of the newly formed House Oversight Subcommittee on Energy Policy, Health Care and Entitlements has already stated that his Subcommittee will be watching the PTC and not leave the rule making in the hands of Government regulators.
Based on past actions by the wind industry, there are several criteria for defining "commence construction" that deserve consideration:
1. Institute an in-service date for projects.
- Current law only designates a start construction date.
2. Require project financing and permitting to be secured.
- Projects must demonstrate evidence that all local, state and federal permits are in place and project financing is secured.
3. Prohibit the safe harbor when determining start construction as used under the 1603 cash grant program.
- Prohibit the counting of monies expended for project components by the developer or by contacted vendors when determining start construction.
4. Require available transmission.
- Projects must demonstrate available transmission before starting construction.
5. Proof of meaningful construction.
- Require a minimum percentage of project completion to be achieved by January 1, 2014 which includes a physical metric that is measurable. Project construction applies to the entire proposed site; individual wind turbines within a larger project will not be treated as projects independent of development plans. Site preparation including land clearing is insufficient proof of 'commencing' project construction.
Time to Act
At the end of 2012, lobbyists for the wind industry teamed with the Senate and the Administration to push through this latest extension of the PTC with no debate or opportunity for amendment. They turned pressure to avoid the putative fiscal cliff to their advantage, while leaving American taxpayers to pay the price. Unless Congress intervenes, it appears likely that the problems associated with the extension of this subsidy may be compounded – not alleviated – in the IRS rulemaking process.
This week, over two thousand American Taxpayers sent letters from nine different states with members on Chairman Lankford's Subcommittee asking that they follow through on the Chairman's public statements to oversee the IRS rulemaking process for the PTC.
 American Taxpayer Relief Act (P.L. 112-240)
 Energy tax extenders were part of the Senate Finance Committee mark-up of S. 3521 (112th): Family and Business Tax Cut Certainty Act of 2012 which was reported by the Committee but died with no vote or debate by the full Senate.
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Maryland Governor Martin O'Malley is convinced he's found the right formula for ensuring that his state becomes the first to site a wind facility off its coastline. Last week Maryland's House quietly approved HB 226. The Senate version (SB 275), although still in Committee, is also expected to pass despite much controversy over cost and risks to captive ratepayers–and back-door cronyism for developers and other special interests.
But don’t be fooled by the political victory. Despite the Governor’s grand claim that his bill will deliver offshore wind at an affordable price, the numbers tell a different story. O’Malley’s folly will deliver a paltry 80 megawatts of offshore wind at most, while draining billions of dollars from the State’s economy.
Offshore Wind: Too Expensive to MeterTechnological, environmental and visual impacts have slowed offshore wind development in the United States, but the primary, universal issue is cost. Offshore wind is not economically viable without significant public support, as O’Malley knows.
O'Malley's bill extends Maryland's 2007 Renewable Portfolio Standard (RPS) by requiring up to 2.5% of the State's electricity load come from offshore wind.
Unlike other proposals, private wind developers needn't negotiate power purchase agreements with electricity suppliers to sell their energy. Instead, the bill establishes a ratepayer funded subsidy known as an OREC ('Offshore Wind Renewable Energy Credit') which pays a bundled price up to $190 per megawatt hour (MWh). Project owners, in turn, sell their energy and capacity to the power pool and refund the revenue back to ratepayers while retaining the environmental benefit.
This looks like a bureaucratic nightmare for the State but a sweet deal for developers who can waltz into Maryland waters knowing they have a guaranteed market for their power and certainty of price. The $190/MWh ORECs are more than three times the price of conventional generation -- including onshore wind! (Nonsolar Tier 1 RECs in Maryland are trading for only $4/MWh).
Getting to Yes
Two prior attempts at an offshore wind bill failed in large part due to added costs imposed on ratepayers, particularly those least able to subsidize a rich man's vision. And no pixie dust magically appeared since the last legislative session that made the price of offshore wind easier to swallow.
The Governor fostered support for his bill the old fashion way -- through handouts and hand-waving.
Earning the nod of those representing poorer districts meant packing the bill with millions in grants to boost small and minority-owned businesses that might involve themselves in the offshore sector.
The hand-waving came in the form of price caps on electricity bills - $1.50 per month for average residential customers and 1.5% total annual electric bills for nonresidential customers. By pitching the cost on a 'per-ratepayer' basis, there was no need to advertise the billions that $190/MWh energy adds up to.
But the caps meant limiting the project size. The largest project that could be built offshore without exceeding the caps is 211 MW (about 1% of load). At a 39.3% capacity factor, this equates to roughly 80 MW of output. Even at this reduced size, ratepayers will still incur nearly $2 billion in above-market energy prices over 20 years.
Questioning the Benefits
O'Malley boasts that wind energy carries a "fixed, stable, affordable rate that can be locked-in" over the next 20-30 years, but locking in prices at rates significantly above EIA's forecasts for average wholesale electricity prices makes no sense. Not to mention that the turbines will reach the end of their useful life before 20 years.
The Governor's larger vision banks on a hope that by being first with an operating project, Maryland would reap the benefits of becoming a regional manufacturing hub for offshore wind. He sees Maryland as jump-starting a new industry and insists the higher costs will return dividends in the form of private investment and more jobs.
His claims appear more hubris than real. Other states are vying for the same prize with Massachusetts already in the lead. And it's not clear whether the high price for offshore wind can be mitigated to the point where we will need more than one hub on the east coast.
There is also the question of future tax credits in an era of fiscal reform. The price caps built into O’Malley’s bill highlight the State’s concerns over cost. Without federal incentives, including the PTC and ITC, no wind will be built off Maryland’s shoreline. Both credits were extended for one-year as part of the fiscal cliff debate, but as federal legislators work to rein in costs, renewable subsidies are expected to be cut.
On the promise of job creation, it's likely O'Malley relied on NREL's JEDI modeling which reports only gross impacts and does not considered job losses or transfers associated with higher energy prices. Two-billion drained from an economy will have a negative impact.
In reading the bill's fiscal policy note, it appears the administration had two numbers it needed to make work -- the $190/MWh OREC price and the cap on individual ratepayers.
But even at $190/MWh it's not clear there's adequate revenue to build in deep waters at a scale that justifies private investment. It's time Maryland legislators recognize that other, more realistic alternatives exist that will deliver clean generation and not suck billions from ratepayers and taxpayers.
O'Malley's vision is bold but uncertain and he knows it. When asked whether it was possible for Maryland to see an offshore wind project by 2017, he responded this way: "There's a saying in the Koran that everything is possible in God's time, but nothing is for sure."
Not much there to hang your hat on.
 Bundled pricing includes energy, capacity and RECs or environmental attribute.
 Cape Wind is racing to start construction this year.
 When Rhode Island's Public Utilities Commission (PUC) initially denied approval of the contract over cost, the legislature amended the law to constrain the PUC's ability to say no. Deepwater reapplied and the contract was approved, but the project is still not built. The high cost does not include transmission to deliver the energy.
 This cost only applies to the energy price increases per household or business. State government budgets are projected to increase by $2.1 million annually to cover added energy costs for state agencies and the University System of Maryland. In addition, Maryland consumers can expect commercial and industrial businesses to pass the higher costs on to their customers.
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It took a last minute change to a highly controversial bill and the last vote of the 112th Congress for Big Wind to eke out one more extension to the Production Tax Credit (PTC). With the dust now settling, it's worth examining what happened.
Following the November 6 presidential election, the wind industry anticipated a quick vote on the PTC that would provide a multi-year extension and remove the issue from the larger fiscal cliff negotiations. That did not happened and with 60+ tax provisions due to expire at the end of 2012 many parties are vying for the same dollars. With December 31 fast approaching, the likelihood of an extension was becoming more uncertain by the day.
On Thursday, December 21, just prior to Christmas and a full six weeks after the election, Speaker Boehner and House Republicans gave up trying to negotiate a fiscal cliff package with the White House and passed a bill that addressed spending cuts sufficient to avoid the sequester. Nothing in the House bill hinted at a PTC extension.
Harry Reid now had two bills on his desk -- the bill passed by the House on December 21 and the Senate finance committee tax-extender bill from August that was never scheduled for a floor vote. Reid knew he did not have the votes to pass either bill. He needed to come up with a compromise proposal that would also raise revenue and still pass both Chambers.
By this time, wind lobbyists had parked themselves in the Senate for one last push. And why not? The time and money spent to sway the outcome in the industry's favor would pay off in billions.
Crafting a New Bill
The White House and Harry Reid slow-walked the negotiations to the very end leading many to speculate that the Administration might prefer going over the cliff rather than concede ground to conservatives. Frustrated with Reid's inaction, Senate Minority leader Mitch McConnell reached out to Joe Biden and the closed-door negotiations began. No information was leaked but two things were clear: there were bigger issues facing the country -- bigger that the wind PTC, and no spending would be supported without a pay-for. Chances of a PTC extension were slim.
Since 'revenue acts' must originate in the House, McConnell and Biden gutted an existing tax bill previously passed by the House in August 8 (H.R. 8), and introduced the language that supported their agreement. At the White House's insistence, McConnell and Biden included the energy tax extenders found in the Senate Finance Committee bill, with no pay-fors.
It wasn't until late Monday, New Year's Eve, that we could even confirm the PTC was in the bill. By then, the vote was cooked in the Senate. Just before 2 A.M. New Year's Day, the Senate overwhelming voted aye (89-8).
The House was the best opportunity to make amendments but ultimately, other issues made garnering Republican support for an amended bill impossible. A crucial sticking point was the threshold on tax cuts being dropped to $450k from $1m. In a straight up-down vote, the bill passed the House with most Republican's voting no.
The 20-year old production tax credit received a $12 billion extension with no debate and no opportunity for amendment.
What we can expect from the wind industry
PTC is TOXIC: In the months leading up to the vote, the wind industry lost its shine and the wind PTC became a symbol of corporate cronyism and government waste. The public debate outside of Congress tagged the PTC as toxic. Discussion surrounding wind and the subsidy was not positive. By the end of 2012, investors were increasingly wary of the industry which rises and falls on votes by Congress.
Slower wind growth: We have long known that Section 1603 enacted under ARRA triggered a wind bubble in the years 2009-2012. As much as 90% of the wind installed in 2012 can be attributed to Section 1603, not the PTC. The PTC has never been able to drive wind development in the same way Section 1603 has -- especially with low natural gas prices. Also, the delays in getting the PTC extended will slow growth in 2013 and into 2014.
Reduced need for wind: As long as natural gas prices remain low, the wind industry will have a difficult time competing without costly above-market energy contracts. Since State RPS compliance is being met in many states, contracts will be harder to come by. Also, State RPS policies are under pressure in many parts of the country as legislators and utilities recognize that costly renewables are raising rates. Expect this to be a story in 2013. EIA's 2013 Annual Energy Outlook forecasts flat wind growth after 2012.
The PTC and Tax Reform
In this new Congress, the members will be taking a stab at Tax Reform. We anticipate an effort to see the PTC amended. For example, any project that's eligible for a State RPS should not receive the federal PTC. If a kwh of generation arrives at night during low-load conditions, it gets no PTC. There will also be debate over the change in eligibility where projects need only begin construction by the end of 2013 with no in-service date in the law. These changes in eligibility can be made as part of tax reform.
The wind industry received a 1-year reprieve by a hamstrung Congress but their subsidy is in the cross-fire. What Congress gives, it can easily take away.
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“The sheer ridiculousness of the [six-year, front loaded PTC extension] outraged Congressional members and may well have changed the debate. It’s NO coincidence that within 24-hours of AWEA’s poorly received proposal, Denise Bode bailed. A move that sudden suggests the industry thinks it’s better off without her and probably without AWEA’s inflexible, out-of-touch campaign.”
The American Wind Energy Association's relentless, year-long lobbying campaign to secure extension of the wind production tax credit ("PTC") hit major headwinds last week which precipitated the abrupt resignation of its CEO, Denise Bode.
Branded the “Save USA Wind Jobs,” AWEA’s plan tried to stigmatize Congressional members from Red and windy states with the argument: oppose the PTC, and you oppose American jobs.
But rather than gaining support, resistance intensified to extending the PTC. With only two weeks remaining in 2012, it’s not certain what will happen with the subsidy, but one thing is clear: AWEA’s robotic jobs jab has chilled its effectiveness. Big Bucks cronyism does have its limits.
Changing Market; Inflexible Messaging
Prior to 2008, wind was still a niche resource. Under 15,000 megawatts of installed wind was eligible for the PTC and the price tag for the subsidy, in total for its first 15 years (1992-2007), was under $6 billion and less than $1 billion in any one year. Each time the PTC was up for renewal, Congress complied.
Since then, wind installations in the U.S. ballooned to over 50,000 megawatts and the carrying cost for a 1-year extension is now projected to be $12 billion .
In today's economic climate, AWEA's campaign messaging is withering under challenge.
The promise of wind jobs never materialized at the scale touted by AWEA calling into question the veracity of their models.
Claims that losing the PTC equated to a job-killing tax hike on the industry disregards the fact that the PTC, itself, is a tax borne by all Americans in an attempt to defray the high price of wind power where such capacity exists.
Assertions that the PTC "more than pays for itself in local, state and federal taxes over the life of the credits" ignores the fact that even after factoring in the PTC, localized economic benefits derived from operating wind projects are dwarfed by the significant above-market energy prices contracted for wind energy - particularly in this extended period of low natural gas prices.
The size of the subsidy relative to wholesale prices is also distorting competitive wholesale energy markets and harming the financial integrity of other, more reliable generation.
The Wind Industry Leaves AWEA
As the year wore on, AWEA and its surrogates added urgency to their message but never deviated from it. The public was hammered with warnings that the multi-billion dollar wind industry would face collapse if the production tax credit expired, leading some to question whether wind could ever stand on its own.
And where did that leave shareholders of Vestas, GE or any of the high-profiled turbine manufacturers? An industry built on government handouts exists at the political whim of those in office.
The market needed assurances, and in June, eight of the largest turbine manufacturers admitted they will adapt and grow, without the PTC. Even Vestas, which threatened to close shop in Colorado if the PTC expired, joined the other turbine makers in stating "they would not pull out even if Congress abandoned all renewable energy subsidies."
This story is much closer to the truth than AWEA's messages and is consistent with we are hearing in the market.
Unlike AWEA, companies in the wind industry have bottom-lines to worry about. Many, including Vestas and GE, are already preparing for a non-PTC business model. Layoffs have been scheduled, new markets in South American, Africa and elsewhere have been identified, and cash flow issues are being addressed through asset shedding and the possible partnering with other corporations.
Low natural gas prices and shrinking load demand will keep the industry focused on its bottom line for a while longer -- and that's a good thing.
We will also likely see the industry shift their business plans away from those based on tax avoidance to plans based on energy production - as they should be.
When Representative Pat Tiberi (R-OH), chairman of the House Select Revenue Measures Subcommittee asked AWEA in April to present a proposal for phasing-out the PTC, the trade group ignored the question. The idea of a phase-out fell outside the limits of their campaign messaging and thus, outside their ability to respond. Last week, the pressure for a proposal reached a peak and AWEA threw together a six-year, front-loaded extension with a price tag in the tens of billions.
The sheer ridiculousness of the proposal outraged Congressional members and may well have changed the debate on the topic. It's NO coincidence that within 24-hours of AWEA's poorly received proposal, Denise Bode bailed. A move that sudden suggests the industry thinks it's better off without her and probably without AWEA's inflexible, out-of-touch campaign.
As evidence of the changed game, the Washington Post two days ago gave AWEA’s signature proposal a big thumbs down:
"Some of those who sympathize with the wind subsidy, known as the production tax credit (PTC), say that it represents a second-best approach to supporting green energy. In fact it is not even a third- or fourth-best alternative to a carbon tax. At a cost of $1 billion a year, it offers wind operators a flat tax credit for every kilowatt-hour of electricity they produce. No matter if the grid doesn’t need the electricity at any given moment or if the policy blunts the incentive to reduce costs."
Let the PTC Expire!
The letters, resolutions, and advocacy statements by Congressional members who are on record supporting an extension of the PTC all sound like they were written by AWEA. If congressional members like Senator Grassley and Representative Kevin McCarthy based their comments and support on AWEA's lobbying campaign, this would be a good time to rethink their position. AWEA's unyielding messages are dated, and clearly 'stuck on stupid'.
It's time for the 20-year old subsidy to end. American taxpayers and ratepayers, and the wind industry itself, will be best served by letting the PTC expire.
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Since 2009, the State of New Hampshire has reviewed three large-scale wind energy facilities totaling 177 megawatts. In each case, the project proponents engaged University of New Hampshire Professor and economist Ross Gittell and his research assistant, Matt Magnusson, to conduct economic impact studies to show the long-term (20-year) benefits the projects would deliver to the local area.
Figure 1 summarizes the findings of each report.
The UNH researchers relied on NREL's Jobs and Economic Development Impacts (JEDI) or similar linear spreadsheet models to assess job creation and economic impacts for the three projects: Granite Reliable Wind Park, Groton Wind and Antrim Wind. The methodologies and assumptions for the three studies appear nearly identical.
In all cases, their reports showed minor direct job opportunities (15 full-time equivalent positions for operations at the three sites) but substantially inflated indirect and induced job benefits relative to the local area.
The problem with the models
The JEDI models purport to enable calculating the state or local economic impacts resulting from building a potential wind energy facility. However, JEDI only looks at the positive impacts of a project and assumes that money spent is always beneficial. But that is not a safe assumption.
According to economist, Dr. Robert Michaels:
"Authors of studies using JEDI acknowledge that it 'offers a gross analysis rather than a net analysis; that is, the model does not account for the net impacts associated with alternate spending of project funds.' ...JEDI treats the renewable like a proverbial "free lunch," a gain to the economy for which nothing need be sacrificed. Many other effects might reduce job creation or possibly turn it into destruction."
He goes on to say:
"JEDI's creators recognize that the net effect of increased renewable investments on employment is ambiguous. On occasion they have cited the works of others who use more complex models ...NREL's researchers are thus aware that other models that capture important complexities are available. For unknown reasons, they instead persist in using a model that can produce only the single result of job creation from renewables."
The Navigant jobs study commissioned by the American Wind Energy Association, which uses JEDI models, suffers the same failures. It wasn't until Congressional members hammered NREL earlier this year over unsubstantiated and inflated job creation claims under the Section 1603 program that NREL finally updated its website to more publicly admit that JEDI models produce gross impacts and not net impacts.
JEDI and New Hampshire Wind
In reviewing the methodologies for each of the UNH economic impact reports, we could find no indication that the models accounted for project costs. When we asked the UNH researchers if their report for Antrim Wind, for example, considered net impacts at first they said no, but later amended their response to say they looked at the costs and found there were none.
Apparently, Gittell and Magnusson do not think it's relevant that both the Granite Reliable Wind and Groton Wind projects have, or will receive approximately $111 million in Section 1603 grant money from the federal government; Antrim Wind expects to benefit from the production tax credit. Most economists would consider the federal subsidies to be a cost borne by U.S. taxpayers, including those residing in New Hampshire.
Gittell and Magnusson also ignore another substantial cost factor in their analyses -- the fact that the Granite Reliable and Groton wind projects each have long-term power purchase agreements with in-region utilities at contract prices that are well above market rates for wholesale electricity. Antrim Wind has made it clear it is also seeking a long-term purchase agreement which is required to obtain financing.
When asked if their Antrim Wind analysis considered the impact of above-market energy prices, Gittell replied that "there has been no contract for the sale of the power from the Antrim Wind Project at any price, therefore there is no foundation for the question and it cannot be answered." A convenient but misleading and badly informed answer.
Gittell's economic model utterly neglects the fact that onshore wind in New England demands between 9-11 cents per kWh, more than twice the wholesale price of natural gas, the fuel most likely to set the market price. More wind in the fuel mix will cause upward pressure on energy prices in New England for the life of the power purchase agreements.
Since wind energy largely produces during off-peak hours, when market prices are even lower, the delta between the contract price and the market price for the energy is even more pronounced.
And it looks like low natural gas prices will be the new normal for a long while. The Energy Information Administration's Annual Energy Outlook 2013, released last week, enforces the fact that we can expect low natural gas prices, facilitated by growing shale gas production, over the next 15 years!
Gittell, Magnusson and the developers for the three projects all insist wind provides a hedge against fluctuating energy prices. This may be true in some regions of the country but not in New England, where 90+% of the generation operates in the day-ahead market. Wind could have a marginal impact on prices in the real-time market but any benefit is entirely erased by the high-priced power contracts.
Big wind - a drain on the economy
At the very least, the high cost of the New Hampshire wind power contracts will exceed the economic benefits touted by the UNH researchers and will serve as a drain on New England's regional economy. See Figure 2. Gittell's simplistic conclusion that the benefits of the operating projects will enrich the host communities and surrounding areas disregards the fact New Hampshire residents do not live in isolation. Many work, shop, and recreate in neighboring states and will be impacted by the high cost of these projects.
According to our analysis, the three projects (assuming Antrim Wind is erected) will result in significant costs to the New England region in above-market energy prices alone. Other costs related to property values, tourism, and impacts to the environment are also likely to arise.
There is no excuse for the sloppy work of Gittell and Magnusson who, in our opinion, have ceded their credibility for their wind clients. But shame on New Hampshire's energy siting board for not understanding the projects they're approving in the context of the larger regional power market.
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We wish to thank William P. Short III* for his invaluable contribution to this editorial.
No one should be fooled by the American Wind Energy Association's laughable campaign depicting the multi-billion dollar wind industry on the verge of collapse without the production tax credit ("PTC"). Yes, we've seen some belt-tightening this year as the $23-billion infusion of Section 1603 grant money winds down. Low natural gas prices and shrinking load demand will keep the industry focused on its bottom line for a while longer -- and that's a good thing. Some industry players have already accounted for the PTC expiring while others are holding out for a last-minute reprieve.
This is exactly the right time for Congress to end the PTC.
Nonetheless, we recognize the political reality of divided government where self-interests might force compromise. In August, the Senate Finance Committee voted on a $12 billion, 1-year  extension but took no action to address the very harmful effects of the PTC on competitive wholesale energy markets. If House Republicans are compelled to find middle ground, it is essential the PTC be amended to correct for its flaws. Doing so will help relieve market distortions created by the PTC and ultimately lead to more reliable, least-cost renewable choices for taxpayers.
Market signals that work
Nearly two decades ago, electric energy markets in most of the U.S. were highly regulated. Wholesale electricity prices were determined based on a generator's cost of installation plus direct production cost, and not on customer demand. Under deregulation, plant ownership shifted to independent power producers which, in turn, brought about competitive wholesale energy markets aimed at meeting consumer energy needs with the most reliable, least cost generation.
Once fully implemented, fossil‐fired generators responded to market price signals. New power plants were built to meet peak demand requirements while discouraging construction of excess capacity. Competitive energy pricing dissuaded generators from building power plants long distances from load centers, thus limiting the deployment of costly transmission. Improved management increased power plant efficiencies, operator profits and grid reliability while keeping retail prices in check. This coupled with air, water and other environmental rules led to U.S. energy resources becoming progressively cheaper, cleaner, safer, and with a smaller footprint.
The correct policy led to the best economic results for consumers.
Building the wrong generation in the wrong places
But in just a few short years, energy policies in the United States, both at the federal and state levels, shifted in favor of building renewables, mainly wind. This has led to an explosion of expensive renewable resources that are variable, operating largely off-peak, off-season and located in rural and remote areas with limited transmission capacity .
Federal PTC and State RPS programs use what is called a "single price economic system" which pays renewable generators the same price for placing a megawatt-hour of energy on the grid. There is no adjustment to the subsidies based on time of day or seasonal demand requirements nor is there a meaningful adjustment for the location of the power facility.
The signals sent by the subsidies ($34/MWh on a pre‐tax basis for the federal PTC and as much as $60/MWh  for state RPS programs) dwarf energy pricing signals, and in many cases render the market price irrelevant. Consequently, we are incenting renewable generation built not where we need it and that operates when we need it the least.
These policies have created artificial and unsustainable market pressures, compelling system planners to respond with more transmission and a fast-tracking of renewable projects that may be, not only not needed, but actually of poor quality from a grid reliability perspective.
Amend the PTC
It is well established that traditional power markets respond to energy and capacity price signals. It's time we applied the same rules to the renewables market.
If renewable subsidies discriminated in favor of those resources that produce close to load and during the time of day and year when the energy is most needed we would expect the response in the market to be almost immediate. (The media took notice when FERC Commissioner Philip Moeller floated this idea before the election.)
The need for expansive wind-related transmission would drop off and more renewables would be proposed for sites closer to population centers and that can service peak demand periods. Rather than proposals to install 125 megawatts of unpredictable wind we might get 25 megawatts of baseload biomass; rather than remotely-sited solar generation in the Mojave desert requiring 100+ miles of new transmission, we may see a greater effort to build customer-sited rooftop resources in urban areas. Reliable generation would mean less need for storage, less redundant generation and a better opportunity for replacing permanently fossil fuel with renewables rather than merely displacing some fuel.
While public policy has helped the emerging renewables market, it is time these policies were amended to better suit the public's needs.
Congress should not extend the PTC "As Is." Rather, it should work to adjust the value of the PTC to incent renewable generation that's built closer to load and able to operate on-peak and on-season while discouraging the opposite behavior. And there are many frameworks for getting this done. Adopting a consumer-centric, market-based policy will, once again, lead to the best economic results for consumers.
*Mr. Short is an independent consultant with a practice that specializes in renewable energy in the New England states. Among his clients are wind, solar, hydroelectric, co-generation and biomass generators.
 The Senate Finance Committee approved a $12 billion extension of the PTC. The provision was advertised as a 1-year extension however, the provision also modified Section 45 of the tax code to allow wind energy facilities that begin construction before the end of 2013 to claim the 10-year credit. This is a significant deviation from the PTC which requires eligible projects to be in-service before the date of expiration. In practice, this change represents a multi-year extension.
 Page 4 of this document prepared by the authors shows a slide produced by the New York ISO that demonstrates how effective price signals discouraged the remote siting of power plants. In the period between 2000-2009, New York State increased its in-state generation by 7,650 MW with 80% (6,127 MW) built in the southeast region near New York City. Of the generation built in northern and western NY and behind a congested interface, 1,275 MWs were remote-sited wind generation which was more responsive to the subsidies than to market price signals.
 REC prices vary by region depending on how the RPS program is structured and whether compliance has been met. Currently Massachusetts Class I RECs are trading above $60 per megawatt hour.
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The United States is in the midst of a fiscal crisis. If Congress and the White House are unable to reach agreement on spending by January 1, crushing tax increases and draconian budget cuts will go into effect sending the country's already weakened economy into another destructive recession.
Against this backdrop, the 23-member Governors' Wind Energy Coalition put aside their own states' $2+ trillion deficits to deliver a message to Congress - extend the wind production tax credit (PTC).
The staged media event on Capitol Hill was a modern-day equivalent of Nero fiddling while Rome burned.
In their letter, the governors acknowledge the wind industry is not yet competitive with other fuel sources but insist it will be "in the not-so-distant future."
They tout job claims, and potential losses, based on American Wind Energy Association employment models, and underscore the impact of losing the PTC by listing recent layoffs in Colorado (182 Vestas workers), Iowa (407 Siemens workers) and Pennsylvania (165 Gamesa workers).
The governors are convinced the wind subsidy should be a top priority for the country ahead of our military and other bread-and-butter issues but are unaware, or don't care, that American taxpayers are shouldering a large part of the cost.
Do they realize that by 2015, American taxpayers will have provided a cumulative $40 billion to the industrial wind energy industry in production tax credits and cash grants alone, the bulk of which will be distributed after 2010? Or that the open-ended subsidy of 2.2¢/kWh in after-tax income represents a pre-tax value (3.4¢/kWh) that's equal to, or more than the wholesale price of power in many regions of the country?
Why the SOS?
Why would the Governors demand billions more for an industry that, after over 20 years, has failed to establish itself as a self-sustaining contributor to meeting our energy needs?
It's no accident that all of the Governors who signed the letter hail from states with mandatory renewable portfolio standards (RPS) or from states adjacent to those with RPS policies.
State legislators who voted in favor of renewable mandates, did so after being convinced that adding alternative resources to the energy mix, particularly those with no fuel cost, would reduce fossil use, attract jobs and ultimately stabilize and lower energy prices. (Wind energy was seen by most as the dominant resource for meeting compliance.)
But they were wrong.
Researchers at the Lawrence Berkeley National Labs (LBNL) found that ‘Policy Impact' studies relied on by the states tended to underestimate the effect of adding high-cost renewables on retail rates and all of them failed to anticipate the persistent low natural gas prices we enjoy today.
Seventy-percent of the RPS cost studies that were examined forecasted minimal retail electricity rate increases - no more than 1% - while a number predicted electricity consumers would experience a cost savings.
In fact, the artificial no-compete power markets created by RPS policies drove up electricity prices and forced consumers to pay for energy they didn't need. In 2011 residential rates in states with mandates were 27% higher than those without mandates while industrial electricity prices were 23% higher.
The Governors know that the federal PTC disproportionately benefits States with renewable mandates by distributing the high cost of their policies to taxpayers at large. They also understand that eliminating the PTC will impose the full burden of costly renewable mandates squarely on the States who enacted them. If California, New York, and Minnesota mandate large wind development, it's appropriate they bear the full cost of their energy choices.
Iowa is an exception. Its capacity-based RPS was satisfied years ago with the installation of just 105 megawatts of wind capacity, leaving the state's two investor-owned utilities, including Warren Buffett's MidAmerican Energy, at liberty to sell most of their wind power to neighboring states -- which they do at prices significantly above market.
According to Mark Glaess, executive director of the Minnesota Rural Electric Association, which represents about 50 small utilities serving about 650,000 rural residents, its members lost more than $70 million in 2011 because of the high cost of wind power. "Right now we're paying for wind power we don't need, we can't use and can't sell," he said.
Expiration Is a Compromise
The production tax credit, which turns twenty years old this year, serves little purpose today other than to line the pockets of project owners and tax-advantaged investors and artificially mask the true price of wind power.
If the PTC were to expire, REC prices in states with RPS policies would likely go up for a while until the industry can implement necessary cost-cutting measures. States will respond by reexamining ways to rein-in RPS-related energy costs. We will also likely see the industry shift their business plans away from those based on tax avoidance to plans based on energy production - as they should be. American taxpayers and ratepayers would be best served by letting the PTC expire.
The Governors' self-serving pleas aside, there is no justification for wind projects eligible under any State RPS programs to receive the benefit of BOTH the State policies and the PTC wealth transfer from taxpayers. Congress has a responsibility to say NO.
 The 23-member Governors oversee states with a combined aggregate debt of more than $2 trillion for fiscal year 2011 including California and New York representing total debt of nearly $1 trillion.
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Last month, unity was shattered within the wind industry when energy-giant Exelon Corporation broke ranks with other renewable-energy developers and asked Congress to let the production tax credit (PTC) expire in December. Exelon rightfully argued that the subsidy was distorting competitive wholesale energy markets and causing financial harm to other, more reliable clean energy sources.
In a fit of fury, the American Wind Energy Association (AWEA) voted Exelon "off the island" for insubordination and dismissed their complaint as self-serving, aimed at protecting Exelon's fleet of Midwest nuclear power plants. AWEA insisted that wind was benefiting ratepayers by driving down consumer electricity prices in the face of "expensive, inflexible generation" like nuclear and coal.
As usual, AWEA position is easily rebutted. Yes, Exelon is concerned about (bizarre) wind pricing on the rates received by its nuclear power plants. But the impact of large quantities of wind generation on energy markets extends beyond nuclear power, and on the whole is placing upward pressure on electricity prices.
Zero, Negative Wholesale Prices
In a competitive wholesale energy market, generators ‘bid in' firm levels of production for each hour of the power day. Grid operators match available generation with hourly demand and schedule resources as needed. The most expensive generation dispatched in an hour sets the marginal price of supply. In turn, all generators receive the same price per megawatt hour of production.
During periods of low demand, particularly at night, the most efficient, least cost base load facilities are run, including nuclear power and coal. These facilities may bid in at zero- or near-zero to ensure they're dispatched regardless of market price.
Problems arise when wind, which generates largely at night, floods the system with energy well in excess of demand. When there is a surplus of electricity relative to demand and no opportunity to dump the excess energy, i.e. transmission that can channel the energy elsewhere, prices could go negative.
In instances of excess energy, negative prices are a powerful market signal for generators to voluntarily curtail operation if possible. Wind turbines are easily turned off; nuclear power plants are not. However, since wind project owners do not receive the PTC when they're not producing, they would rather produce at a loss than not produce at all. But the PTC tells only part of the story.
‘It's the Contracts, Stupid'
With natural gas selling at record lows and supplies expected to be abundant through this decade, wind developers are under pressure from investors to secure power purchase agreements (PPAs) with utilities. Most PPAs for onshore wind we've reviewed lock in purchases for 15+ years at roughly two-to-three times the wholesale price of fossil and nuclear resources within their respective regions.
In some cases the prices are fixed regardless the time of day the energy is delivered or number of years into the contract; others apply adjustments for on- and off-peak energy and may include annual escalators. In states where renewable portfolio standards have been adopted, utilities likely have no choice but to accept above market contract prices in order to ensure compliance with the mandates.
Within New England, wholesale pricing for onshore wind is between 9 and 11 cents per kilowatt hour. In the Midwest, contracts are around 6-7 cents per kilowatt hour and in regions with better wind regimes, gentler terrains and/or limited or no permit requirements the costs could run slightly lower. Wind agreements are negotiated after a project has taken full advantage of available federal incentives so the costs cited here would be even higher absent the PTC.
Adding large amounts of wind to a region can periodically reduce marginal electricity prices (even going negative) but the costs passed on to ratepayers are derived from the PPA's negotiated between utilities and wind plant owners. Regardless of when and at what price wind energy sells into the wholesale market, projects with power purchase agreements are assured a fixed price for their energy.
The wind industry insists long-term PPAs protect ratepayers from fuel price volatility. But the industry is ignoring our historical experience. The Public Utility Regulatory Policies Act (PURPA) proved decades ago that long-term fixed price contracts at above market prices do not lead to lower costs for ratepayers. In fact, with PPAs in place, it's wind developers that are shielded entirely from market price fluctuations.
Negative prices further aggravate the situation by threatening the financial viability of our lowest-cost, most reliable resources.
Purchase agreements shift all risk to the ratepayers who are on the hook to pay the delta between market price and contract price. There is no cost benefit to the ratepayer-nor will there be until the end of the PPA, which by that time the turbines will have reached the end of their useful life. Meanwhile, wind developers reap the benefit of the PTC in addition to their contract price at the expense of ratepayers and other reliable generation.
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This month, a coalition of brand name corporations sent Congressional leaders a letter urging extension of the wind production tax credit ('PTC'). It was the second such letter sent this year signed by many of the same companies and with the same message: Failure to extend the PTC will raise consumer electricity prices and harm the bottom lines of companies who purchase renewable energy.
The truth is that wind power -- with the PTC -- is already raising consumer prices and harming corporate bottom lines.
Wholesale contract prices for onshore wind are roughly two- to three times the price of more reliable generation making wind one of the most expensive power sources in the U.S. From 1992 to 2010, Americans were taxed approximately $7.9 billion to pay for the PTC. By 2015, the PTC will cost another $9.1 billion. Residential electricity rates in states with renewable mandates were 27% higher in 2011 than those without mandates, while industrial electricity prices were 23% higher. Wind energy is the primary fuel for meeting state mandates.
But it doesn't end there. In Vermont, government models show that above-market energy costs tied to renewables will increase the cost of production for Vermont businesses. Since the PTC supports poorly sited development in remote areas, ratepayers (and in some cases taxpayers) will also be saddled with costly new transmission lines needed to deliver the power.
Companies do NOT purchase renewable energy directly. They purchase low-cost renewable energy credits (REC), which are nothing more than paper 'attributes' representing renewable energy produced elsewhere. It doesn't matter where the project is located because the companies never consume the energy. Nor do they care if they buy from projects that slaughter thousands of bats and birds annually, destroy hundreds of acres of forest and important wildlife habitat, or harm those living nearby as long as their Senior VPs of Corporate Social Responsibility can claim 'green' in their product materials and annual reports.
But it matters to others.
Tens-of-thousands of people across the US are publicly objecting to an extension of the PTC because of the high cost and damaging impacts of wind energy development. Corporations who cloak themselves in the warmth of green energy through the purchase of RECs are fooling themselves if they believe consumers do not see through the silliness of their marketing tactics.
Of course, companies are free to play the green game, but it's hard to reconcile any corporate officer authorizing his company signing a letter filled with deceitful wind propaganda.
It turns out, the letters were NOT authored by any of the corporate signers, but by Ceres, an environmental group out of Boston, Massachusetts. Ceres boasts a board of directors that includes Carl Pope of the Sierra Club, Ashok Gupta of the Natural Resources Defense Council (NRDC), and Rev. William Somplatsky-Jarman, Coordinator for Social Witness Ministries of the Presbyterian Church (U.S.A.).
Knowing the real authors of the letter helps explain its content, but it doesn't explain the apparent willful ignorance on the part of its signers. Corporations should be wary of aligning with agenda-driven groups who rely on deceit and misrepresentation in order to achieve their mission. If companies can be so reckless with their endorsements, perhaps investors and consumers should think twice about the quality of their products and shop someplace else.
Letter 1 signers: Annie’s Homegrown, Anvil Knitwear, Aspen Skiing Company, Ben & Jerry’s, Campbell Soup, Clif Bar, Levi Strauss & Co., New Belgium Brewing, Nike, Seventh Generation, Staples, Starbucks, Stonyfield Farm, The North Face, Yahoo! Inc.
Letter 2 signers: Akamai Technologies, Annie’s, Inc., Aspen Skiing Company, Ben & Jerry’s, Clif Bar, Johnson & Johnson, Jones Lang LaSalle, Levi Strauss & Co, New Belgium Brewing, The North Face, Pitney Bowes, Portland Trail Blazers, Seventh Generation, Sprint, Starbucks, Stonyfield Farm, Symantec, Timberland, Yahoo!
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1. Bald Eagle killed at U.S. Wildlife Refuge. In March, a dead bald eagle was found below a small 10-kilowatt wind turbine at the Eastern Neck National Wildlife Refuge in Rock Hall, Md. Cause of death: blunt force trauma.
Windaction.org contacted Sarah Nystrom, the USF&WS Northern States Bald and Golden Eagle Coordinator to determine if any enforcement action would be taken. Ms. Nystrom replied "our Office of Law Enforcement has opted not to pursue criminal sanctions in this matter. The Office of Law Enforcement typically focuses its resources on investigating and prosecuting those who take migratory birds without identifying and implementing reasonable and effective measures to avoid the take. In this respect, the Office of Law Enforcement has treated the incident at the Service's Eastern Neck NWR as it would any similar incident at a non-federal wind energy facility." Apparently, this is the best we can expect from the U.S. Government.
2. Military readiness and turbine deployment. Over 1 year ago, Chief of Naval Operations W. R. Burke requested an assessment of the impact of wind turbine development near the Naval Air Station (NAS) Kingsville in Kingsville, Texas. In his reply memo, the Commander, Navy Installations Command, M.C. Vitale informed Burke that "a study of the degradation to NAS Kingsville RADAR and NAVAIDS caused by electromagnetic interference from nearby wind farms, determined installation of wind turbines would reduce Navy's ability to train aviators safely. The Study further predicted that Navy would graduate 24-31 fewer pilots annually." Half of the US naval pilots are trained at NAS Kingsville.
Nearly 600 industrial-scale wind turbines are proposed to be built between 5 and 25 miles of NAS Kingsville. The Navy has already de-tuned RADAR in the south quadrant of the base to eliminate the adverse effects of the Kenedy 1 wind facility. Further radar optimization to account for other wind facilities will degrade target sensitivity and could result in NAS Kingsville operations closing. No action was taken by Admiral Burke.
3. Wind farms and the price of Air Travel. The FAA re-routes air traffic due to false returns from wind turbine clutter. While NEXRAD radar data could show what appears to be significant weather that would require re-routing, pilots report not seeing weather in the area. The National Weather Service admits on its website that "this confusion causes unnecessary and expensive aircraft re-routing and excess fuel consumption."
4. Wind energy ups electricity rates in Princeton, Massachusetts. Brian Allen, general manager of Princeton Municipal Light Department (PMLD) in Princeton, MA admitted in a letter to ratepayers this month that the two-1.5 megawatt wind turbines owned by the Department had lost $1,875,000 since the turbines went online in January 2010. Rather than lowering electricity rates as promised, the turbines cost Princeton customers an additional $774,000 in 2011. Allen anticipates losses to continue at the rate of around $600,000 a year assuming current wholesale electricity rates, no need for extraordinary repairs and that both turbines continue operating. In August 2011, one of the two wind turbines was taken out of production due to a mechanical problem. It did not go back on line again until in July 2012.
5. Expecting more from wind. In order for the US to achieve 20% wind power by 2030, the entire fleet of U.S. wind turbines would need to operate with an annual average capacity factor of 43.4%. Few existing wind plants in the U.S. today, and none east of the Mississippi, come close to meeting this level of annual average capacity.
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Wind proponents insist the industry is one of the fastest growing sectors of the American economy having doubled U.S. nameplate capacity since 2008.
But let's be clear: Recent growth in the industry is largely due to the massive infusion of public cash lavished on big wind under ARRA. Expiration of Section 1603 cash grants coupled with record-low natural gas prices, will likely collapse the stimulus-induced bubble and push installations back to mid-2000's levels. The production tax credit, if extended, will continue to offset above-market wholesale prices for wind power but the credit will not drive the same level of growth.
Wind and State RPS policies
In the last ten years, more than half of the states adopted renewable portfolio standards (RPS) that encouraged development of home-grown low-emission generation. State legislators voted in favor of the mandates after being convinced by proponents that more renewable resources in the energy mix, particularly those with no fuel cost, would replace fossil use, attract jobs and ultimately stabilize and reduce energy prices.
But the artificial no-compete power markets created by RPS policies for self-selected renewable resources drove up electricity prices and forced ratepayers to pay for energy they didn't need. In 2011 residential rates in states with mandates were 27% higher than those without mandates while industrial electricity prices were 23% higher.
Impediments to price parity with gas
The rapid run-up in installed wind since 2008, together with flat and declining energy demand, has resulted in state mandates being met and fewer utilities obligated to purchase wind at prices substantially above that of more reliable forms of generation. Factor in abundant supplies of low-cost natural gas, and it's unlikely wind energy will achieve price parity with coal or gas anytime soon, barring legislative actions that might raise the price of non-renewables.
The PTC offsets the high price of wind energy, giving the false impression that wind is competitive with other resources, but at 2.2¢/kWh, the subsidy's pre-tax value (3.5¢/kWh) equals, or exceeds the wholesale price of power in much of the country! Without the PTC, developers would need to substantially lower their capital costs and narrow the price gap with gas. However, cost reductions will carry the industry only so far.
The biggest impediment to wind achieving price parity with more reliable resources is the fuel source itself.
As long as wind farms operate at or under 30% capacity factors, there are too few hours of generation per year to spread the large upfront capital costs over. Energy sales alone are not sufficient to recoup capital costs or earn a profit because of two well known limitations of wind power. First, since wind typically generates at a time of day and year when the energy is least needed, the market price for its energy is low. Second, wind projects must be sited at the fuel source, which, for onshore wind is typically long distances from load. Locational constraints further lower the market value of wind's energy as well as drive up the cost of delivery (i.e. transmission).
Individual wind projects may still operate without the PTC or Section 1603 provided they're sited in areas with excellent, steady winds and within close proximity to existing transmission. But nationwide, such sites are increasingly rare.
Two technologies, if available, might enhance wind's value: forecasting and storage.
Efforts are underway to improve the predictability of wind energy through better forecasting tools. If grid-operators can more precisely anticipate when the wind will blow, how long it will blow, and at what speed and direction, it would aid in power dispatch schedules.
Improved storage technology can increase wind's usefulness as a capacity resource, but large-scale storage is prohibitively expensive and the technology is not fully proven. A DOE loan guarantee for $117 million went up in 'flames' in August when First Wind's 'innovative battery system' designed to flatten wide swings in wind output was destroyed by fire releasing massive plumes of toxic smoke into the air. The industry predicts it's at least 10+ years away from breakthrough technology that can store nighttime generation for dispatch during peak hours.
Despite a relentless, year-long campaign by the wind industry to get the PTC renewed, there is a growing realization that the subsidy has outlived its usefulness and may be harmful in its current form. This week, utility-giant Exelon declared "the PTC is no longer needed and distorts competitive wholesale energy markets causing financial harm to other, more reliable clean energy sources." If Congress let the PTC expire, the industry would respond quickly by finding ways to make up for the revenue shortfall. Turbine manufacturers, for example, would likely be pressured to lower prices by as much as 25-30% current levels. Developers will also turn to the states to recoup the rest of the funding via higher REC prices. Ultimately, costly government efforts to push rapid deployment of wind power, in spite of its inherent limitations, will falter and the industry will quietly shrink to a growth rate commensurate with the value of its energy.
 State RPS policies limit which renewable resources are eligible for meeting compliance.
 NREL found in Texas that total wind output could vary significantly in a short period, from almost 8,000 MW to near zero output. During periods of large variability, slight forecasting errors could have large consequences on system operations.
 This was the second fire involving the battery system since the project went online in March 2011.
 Assumes $1,200/kW pricing, a 30% capacity factor and half of the pre-tax value of the PTC ($35/mWh) recovered through reduced turbine prices.
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The American Wind Energy Association pumped millions into an aggressive political campaign aimed at securing the PTC's extension. It released the Navigant jobs study, funded a full-time media war room and lined up President Obama, DOE's Secretary Chu and Interior Secretary Ken Salazar as wind industry hucksters. Coordinated endorsement letters signed by the Governors' Wind Energy Coalition and brand name corporations were sent to Washington calling for immediate action while newspapers around the country published editorials rehashing the same talking points on why the PTC should be extended beyond 2012.
AWEA and its surrogates hit the topic hard, yet legislative efforts faltered. Even Mark Udall's regular pitch on the Senate floor went unnoticed.
It wasn't supposed to be this way and big wind's proponents seem shocked at the level of resistance encountered on Capitol Hill.
Carl Pope, former chair of the Sierra Club, blames the Tea Party. He's convinced its members will block anything that might help the nation's economy under Obama's watch.
In his Huffpo piece, Pope paints a dire economic picture of factories shutting, jobs lost and the unraveling of an entire manufacturing sector. By the end of his essay, Pope worked himself into an emotional fit calling the Tea Party behavior " unprecedented -- and unpatriotic."
Steve Thompson of German-based Availon, a wind industry service provider, wrote that letting the PTC lapse would "in effect impose a targeted tax increase on the wind industry, resulting in the loss of almost 40,000 American jobs."
And in a letter to Congressional leaders, Starbucks, Staples, Nike, Campbell Soup and many other name brand corporations argued that failure to extend the PTC would "tax our companies and thousands of others like us that purchase significant amounts of renewable energy and hurt our bottom lines at a time when the economy is struggling to recover."
Rebutting the claims
The claims by Pope, Thompson and name brand America may be effective but they're also grossly misleading and deserve a response.
According to the Joint Committee on Taxation ('JCT'), between 1992 and 2010, the cumulative cost of the PTC was approximately $7.9 billion. In the 2011-2015 budget window, the PTC is estimated to cost American taxpayers another $9.1 billion of which about 75% will be claimed by the wind industry. These costs are in addition to the anticipated $22.6 billion in direct cash outlays under the Section 1603 grant program which expired in 2011.
Carl Pope insists the industry and American workers will be harmed if the PTC is not extended but at no point does he consider the high cost of the subsidy or whether the country would be better served by spending the money elsewhere. In addition, wind's intermittency and remote siting mean that high upfront project costs and broad transmission expansion will place upward pressure on the price and delivery of the energy. Since the PTC is necessary to make wind projects economically viable, taxpayers deserve to know if they're getting the best value for their dollar.
Pope touts the fact that wind energy is "one of the fastest growing sectors of the American economy" but seems utterly unaware that the industry lost 10,000 jobs since 2009 or that the rapid growth was actually a bubble tied to the massive infusion of public cash lavished on big wind under ARRA. Expiration of Section 1603 coupled with record low natural gas prices, will certainly push the wind industry back to mid-2000s levels.
The PTC IS a tax
Thompson's self-centered claim that letting the PTC expire equates to imposing a tax on the wind industry is preposterous.
The PTC subsidizes wind project costs by providing an outside revenue stream for investors and project owners. The credit, in turn, artificially shields ratepayers from the true price of wind power by spreading the cost to all U.S. taxpayers. Since the PTC reduces revenues to the federal government, taxpayers are forced to pay more in taxes to ease the burden of high-cost wind on ratepayers.
Eliminating the PTC relieves Americans at large of the high cost of big wind and places the burden squarely on ratepayers purchasing the energy. If states like Iowa, Colorado and Texas mandate large wind development, it's appropriate that ratepayers in those states bear the full cost of their energy choices. Only then can they begin to make informed decisions on whether wind is the best option for meeting their renewable mandates.
Thompson's assertion that nearly 40,000 American jobs will be lost is another AWEA talking point that cannot be substantiated as I discuss here.
The PTC and Corporate Marketing
Corporations like Starbucks, Staples, Nike and Campbell Soup generally don't invest directly in wind energy development. Rather, they sign contracts to purchase renewable energy credits (REC), the "environmental benefit" of renewable energy produced elsewhere. One REC is created for each megawatt-hour of energy generated from a renewable energy facility. Businesses and residents who match their energy consumption to the number of REC's purchased often claim they are 100 percent wind-powered.
RECs are usually certified under the National Green-E standard which means they're produced from fuel sources other than fossil fuels, nuclear and hydropower greater than 5 MW. A wind project that slaughters thousands of bats and birds annually, destroys hundreds of acres of forest or important wildlife habitat, levels mountaintops, impacts scenic view sheds or "dark sky" reserves or harms those living nearby is, nonetheless, eligible for the coveted "Green-E" stamp-of-approval without question or reservation.
Expiration of the PTC will likely drive up REC prices in states with renewable energy mandates. But bear in mind, state mandates apply to utility sales only. Private REC programs, which are entirely voluntary, are nothing more than PR opportunities for corporations to flaunt their "greenness" before an un-informed public.
Let's be clear. Starbucks, Staples and other corporations who plead to Congress that their bottom line will be impacted if the PTC is not extended are asking American taxpayers to subsidize their marketing programs.
The amount of misinformation driven by the wind industry and its surrogates has reached a point where the public and Congress are less willing to blindly follow AWEA's lead. Pope, Thompson, Starbucks et.al. appear to have embraced the idea of wind without even a basic understanding of the industry or the federal subsidies that drive it. Such willful ignorance will likely continue to plague the industry and leave its followers confused by the rising resistance to their efforts.
 At 2.2¢/kWh in after-tax income, the subsidy represents a pre-tax value of approximately 3.7¢/kWh which, in many regions of the country, equals or exceeds the wholesale price of power.
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The American Wind Energy Association has made extending the Production Tax Credit ('PTC') its primary focus this year. Documents available on the trade group's website show that about $4 million of its 2012 budget ($30 million) was directed toward securing extension of the PTC. With job growth the number one political issue in the United States, AWEA's strategic plan calls for rebranding of the wind industry as an economic engine that will produce steady job growth, particularly in the manufacturing sector.
The problem for AWEA is that the industry's own record on job growth lacks credibility. Accurate information available in the public suggests the industry has inflated its overall job numbers.
Section 1603 and Jobs
Seventy-five percent of the Section 1603 largesse was lavished on big wind, yet, despite billions in public funding, the wind sector experienced a loss of 10,000 direct and indirect jobs in 2010 bringing AWEA's reported total to 75,000 jobs.
In April, NREL released its estimates of direct and indirect jobs created by projects receiving 1603 funding. The agency relied on the JEDI model ("Jobs and Economic Development Impacts") to estimate gross jobs, earnings, and economic output supported through the construction and operation of solar photovoltaic (PV) and large wind projects.
But an investigation by the House Subcommittee on Oversight and Investigations rightly objected to NREL's conclusions. The Subcommittee found that NREL overstated the number of jobs created under 1603, that it failed to report on the more important net job creation, and ignored potential jobs that would be created given alternative spending of Federal funds. The key sticking point was that NREL did not validate its models using actual data from completed projects.
The Subcommittee concluded that models used to estimate job creation were no substitute for actual data and added: "The Section 1603 grant program was sold to the American people as a necessary stimulus jobs program, and yet, the Treasury and Energy Departments do not have the numbers to back up the Obama Administration's claims of its success in creating jobs."
The problem with JEDI
Since NREL's JEDI model provides a gross analysis only, it does not consider how building a renewable energy facility might displace energy or associated jobs, earnings, and output related to other existing or planned energy generation resources (e.g., jobs lost or gained related to changes in electric utility revenues and increased consumer energy bills, among other impacts).
In other words, the model is one-sided, only considering the benefit side of a cost-benefit comparison and ignores everything else.
Validating AWEA Job Data
So what data do we have on wind industry jobs? Not much.
Apparently, AWEA is the only source of nationwide employment statistics in the United States for wind-related jobs.
Of the purported 75,000 direct and indirect jobs, the majority (around 60%) work in finance and consulting services, contracting and engineering services, and transportation and logistics. Twenty thousand are employed in wind-related manufacturing with the remaining jobs tied to construction and O&M.
But validating this information is not possible since no industry codes exist that isolate wind power establishments or wind turbine and wind components establishments. The North American Industry Classification System (NAICS) bundles wind-related manufacturers under the same code as the "Turbine and Turbine Generator Set Units" manufacturing industry (NAICS 333611), which includes "establishments primarily engaged in manufacturing turbines (except aircraft) and complete turbine generator set units, such as steam, hydraulic, gas, and wind."
At the end of 2010, the Bureau of Labor Statistics reported 26,218 total jobs in this industry. It's not credible that AWEA's estimated manufacturing jobs could represent the vast majority of employment under the NAICS 333611 classification.
In December, AWEA commissioned Navigant Consulting, Inc. to study the impact of the PTC on job growth in the wind industry. The study, also based on the JEDI model, considered two scenarios, one where the PTC is extended for 4 years (2013-2016); the other where the PTC expires at the end of this year.
Navigant's model showed that extension of the PTC would provide a stable economic environment and allow the wind industry to grow to nearly 100,000 American jobs over four years, including a jump to 46,000 manufacturing positions. Expiration of the PTC showed a loss of 37,000 jobs.
The message to Congress was clear: extend the PTC or you will be blamed for American jobs being lost. Even Interior Secretary Salazar peddled AWEA's numbers despite the Congressional report that raised doubts about the model.
Recent statements by AWEA prompted us to look at the numbers even further. In May, AWEA's Denise Bode told Windpower Monthly that of the estimated 75,000 wind jobs, at least 30,000 were manufacturing jobs -- a jump of 10,000 jobs!
Where did the additional manufacturing jobs come from?
As it turns out, Navigant tabulated direct and indirect jobs but also quietly added INDUCED jobs -- those jobs created when the overall level of spending in an economy rises due to workers newly receiving incomes.
Factoring in 'induced employment' was a radical departure from job figures previously provided by AWEA. Induced job figures are more abstract and inherently unreliable but a convenient way to inflate job numbers. We could find no documentation that explained this change in job reporting nor was the change footnoted in the Navigant study.
We spoke with a Navigant represent who suggested AWEA might have been incorrectly treating 'induced jobs' as 'indirect jobs' in its prior reports but that would not explain the inflation in manufacturing jobs. Total job counts would have stayed about the same.
In looking at the Navigant modeled numbers, it appears the wind industry currently only provides 58,000 direct and indirect jobs, not 75,000. A four-year extension of the PTC could result in a possible 70,000 direct and indirect jobs by 2016 (scenario 2) -- 5,000 less than the number AWEA touts today!
The change in job counts raises serious credibility issues about the industry's employment strength. But the absolute numbers tell only a piece of the story. Since Navigant's study is based on JEDI, the job figures represent gross numbers and do not consider them in the context of the larger economy. In that sense, Navigant's findings, like NREL's study, tell us nothing about the true impact of the PTC.
But one thing does appear to be true: AWEA's job figures, dating back to least 2009, may be nothing more than figures pulled from thin air.
 Lawrence Berkeley National Laboratory reports (p. 7): "The American Wind Energy Association, meanwhile, estimates that the entire wind energy sector directly and indirectly employed 75,000 full-time workers in the United States at the end of 2010 - about 10,000 fewer full-time-equivalent jobs than in 2009, mostly due to the decrease in new wind power plant construction." A recent AWEA blog (February 3, 2012) confirms the 75,000 is still current.
 Wind manufacturing represents under 1% of the 11.5 million domestic manufacturing jobs in 2010.
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Tens of thousands of acres across New York State have been transformed into sprawling electric generating facilities -- 18 in total -- where nearly 1,000 industrial-scale wind turbines consume the landscape and threaten communities in their way.
Think about that for a moment.
Now consider that another 1,500 giant towers will need to be erected by 2015 in order to satisfy the state's 30% renewable energy mandate.
New York's Renewable Portfolio Standard (RPS) can be credited with most of the wind development in the state. Officials insist the policy has helped New York diversify its energy resources and will ultimately lower electricity prices but such claims are more rhetoric than real. New York's RPS has already exceeded original budget projections, it's current renewable targets are unrealistic, and claims that prices will drop are predicated on a flawed understanding of how the New York wholesale power market operates.
New York first enacted its renewable energy mandate in 2004 through regulations adopted by the Public Service Commission (PSC). At the time, about 19.3% percent of electricity retailed in the state was derived from renewable resources, with the vast majority coming from large-scale hydroelectric facilities upstate and in Canada. The PSC ordered the state reach a 25% renewables target by 2013 which meant an incremental increase of 10.0 million megawatt hours (MWh) from projects built after 2003.
Unlike market-driven programs in other states, New York's RPS uses a government-administered central procurement system to acquire renewable "attributes" from qualified projects. Projects selected through a competitive-bid process receive long-term contracts to sell their renewable attributes to the state. One megawatt hour of generation produces a single renewable attribute. These payments serve as an added revenue stream for project owners. Funding for the RPS comes from fees charged on the monthly electric bills of NY ratepayers.
[click to view full size]
The mid-course review
When the RPS was enacted, the Public Service Commission established a budget of up to $741.5 million to acquire the renewable attributes. It also defined yearly incremental RPS targets measured in megawatt hours.
In a 2009 mid-course review of the program, a number of serious performance issues were raised.
The program had nearly exceeded its entire initial budget while just half of the renewable attributes anticipated at that time were under contract. Other questions raised in the review involved the cost of necessary transmission to meet renewable goals and whether the program would ultimately reduce electricity prices as claimed.
But rather than scale back the RPS or take more time to fully assess the program's costs and benefits, the Commission insisted there were substantial qualitative benefits and ordered the goal increased to 30% by 2015 and the budget expanded.
One Commissioner who opposed the order wrote:
"... to date, RPS costs have exceeded original projections, MWh targets have not been met, and the program's administration remains unchanged. With this history, it is difficult to see how the expansion of the RPS will achieve the results desired."
Wind In The Mix
At the start of 2012, New York had 4.67 million megawatt hours of large-scale projects under contract representing about 2% of the state's generation. Most NY-sited wind energy facilities were under contract. In total, wind is the dominate fuel in the RPS, representing 80% of all renewable fuels.
Since projects are awarded RPS contracts before they're built, the state must estimate operating capacity factors on intermittent resources. For wind, if a project fails to meet a minimum obligation (80% of the contracted energy) for three consecutive years the contract amounts could be reduced. The Noble Clinton, Ellenburg and Bliss wind facilities were all reduced by one-third for this reason.
We reviewed the contracted figures against actual production for operating wind projects and found that, in all but one case, the state significantly overestimated project capacity factors (see table). If the inflated capacity factors were adjusted downward to more accurately reflect wind's poor performance, the state would need to contract even more generation to meet the mandates. In general, New York's wind resource has proven marginal with annual average capacity factors ranging between 22-23% across all projects.
RPS and electricity prices
State officials insist the RPS will reduce electricity prices through a mechanism known as 'price suppression' whereby renewables with no fuel cost displace more expensive power in the wholesale market.
This argument may sound convincing but completely ignores how the wholesale market operates in New York.
The New York power market uses a day-ahead auction where generators are required to offer firm levels of production for each hour of the next power day. The energy price, in turn, is determined based on those bidding into the system; all generators receive the same price per MWh of production. Significant penalties are applied if a generator is unable to meet his commitment.
Because of its intermittency, wind typically does not operate in the day-ahead market preferring the real-time (spot) market which carries no penalties for non-performance. The real-time market represents less than 10% of available generation Since the price paid over ninety-percent of the generation is established 24-hours in advance, any participation from wind will have only a marginal impact on prices limited to the real-time market. Generators that bid in day-ahead who can back down are likely to do so to the greatest extent possible in order to save fuel and other costs. Since generators in the day-ahead market are still guaranteed payment, any price suppression from wind would be limited to the spot market. Thus, any downward pressure on pricing will go largely unnoticed.
Ultimately, New York's RPS will cost ratepayers billions of dollars to support the construction of new generation. And if the state continues to rely on wind as the dominate resource, more turbines will be necessary to make up for low capacity factors. The program is up for review again in 2013. It's time for the PSC to remove the rose-colored glasses and acknowledge the program for what it is: Regulatory Capture at its finest.
1. NY's RPS supports two tiers of projects, Main Tier and Customer-sited Tier. Main Tier projects include those built to meet grid-scale energy needs. Customer-Sited Tier applications support smaller behind-the-meter renewable generation. The bulk of the electricity needed to reach the RPS mandate comes from Main Tier resources.
2. Attribute prices ranged from as low as $14.75/MWh in 2007 to as high as $28.70/MWh in 2011.
3. The PSC forecasted 5.79 million MWh by the end of 2009. The state had acquired 3.03 million MWhs.
4. The incremental increase of only 0.4 million megawatt hours needed to reach the 30% target assumes that New York reaches significant energy efficiency goals aimed at reducing electricity needs in the state. If energy efficiency were not included in the analysis, the state would require 17.0 million MWh of new renewable generation to meet the RPS.
5. New York typically signs 10-year contracts for 95% of the energy from large wind projects. The Cohocton/Dutch Hill contracted less. Maple Ridge 1 contracted 100%. (see table)
6. Actual annual generation (MWh) varies in NY due to the variable nature of renewable energy, including hydroelectric. Demand in NY also dropped since the RPS was enacted. Since the RPS was enacted, renewables in the state increased from around 19.3% to about 23% today, including all generation.
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The debate surrounding the Production Tax Credit (PTC) intensified last quarter following several high-profile attempts by Congress to extend the credit before it expires at year-end. Industry warnings of precipitous declines in clean-tech investment and imminent job losses have reached a fevered pitch. The New York Times, for example, reflexively accused budget-hawks in Congress of being preoccupied with safeguarding the dominance of the oil and gas industries.
The idea that wind, which represents less than 3% of total electricity generation in the country after huge taxpayer benefits and state mandates, could threaten the continued use of fossil fuels in electric generation is fantasy. It demonstrates a general ignorance about wind energy's purpose and its limited contribution to our energy portfolio.
While we might forgive a newspaper editor's misunderstanding of the complexities of renewable energy policy, it's quite another thing to see the same level of ignorance on display on Capitol Hill by the very people tasked with understanding and voting on these policies.
Last month, the House Subcommittee on Select Revenue Measures invited fellow House members to speak on behalf of bills they introduced or co-sponsored that would extend more than sixty expiring tax provisions, including the PTC. Of the nearly thirty witnesses who testified, one-third pressed for immediate extension of the credit.
Representatives Bass (R-NH) and Welch (D-VT) from New England, Deutch of Florida, Reichert of Washington and others repeatedly echoed the same AWEA talking points about job creation, the need to reduce reliance on fossil fuel, risks of climate change and, my favorite, economic opportunity for their state.
Like the Times, they touted the importance of the U.S. remaining a strong global clean energy market.
And like the Times, not one of those advocating for the PTC had a clue the role of the subsidy in the power market or the likely outcome if the subsidy were to expire. Either that, or political expediency ruled the day and they didn't care.
PTC and RPS Policy Links
In the early 1990′s following enactment of the PTC there was no demand for wind power. States did not have renewable mandates and by time the Asian Financial crisis hit, oil prices collapsed taking with them any financial incentive to install costly renewables. When energy prices recovered somewhat there was an uptick in wind development but it was concentrated in four states with renewable programs - California, Iowa, Minnesota and Texas.
In the years 2000, 2002 and 2004, the PTC expired and wind development stalled but in that same period, energy prices were fluctuating, the 9/11 terrorist attack shocked the US economy and we slipped into recession. Claims that expiration of the credit alone caused wind development to stall are overly simplistic. In fact, given available data, it's impossible to isolate the PTC's affect. Some energy experts maintain the PTC was largely irrelevant in those years.
After 2004, the subsidy may have contributed to growth, but so did State policies mandating renewables..
When states adopted Renewable Portfolio Standards (RPS)  as a means of addressing climate change wind installations showed marked growth. Legislators believed claims made by wind proponents that wind, with no fuel costs, would protect ratepayers from dramatic swings in fuel prices, and eventually stabilize and lower energy prices. In return, they envisioned a transition to more renewables, the decommissioning of older fossil plants and cleaner air.
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.
The PTC subsidizes project capital costs by providing an outside revenue stream  for investors and project owners. The credit, in turn, artificially shields ratepayers from the true price of wind power.
Yet, federally subsidizing wind is not enough to incite utilities to buy.
RPS policies created demand for wind  by establishing non-competitive segments of the power market for qualifying renewables. Today, over half of the states have RPS policies which apply to more than 50-percent of total U.S. electricity load.
Life after the PTC: No Free Lunch
The PTC and RPS combined provide the wind industry a market for its energy and a means of shielding ratepayers from the true cost of their product. But the PTC disproportionately benefits ratepayers in States with renewable mandates by distributing the high cost of wind to taxpayers at large.
Some complain that Americans are double-paying for wind - once through above-market energy prices and again in their taxes, but this is not true. In fact, we are paying the true price of wind allocated in both the rate-base and the tax-base. If the PTC were to expire, people living in Georgia, Wyoming and other states with no RPS policies would rightfully be relieved of subsidizing policies enacted in other states. But what would happen in states with mandates?
Existing wind projects that are still collecting the PTC would not be impacted, but proposals for new wind would be under pressure to significantly lower their capital costs and improve their production numbers in order to account for the lost federal revenue. In addition, the value of the renewable energy credits would likely increase thus placing even more upward pressure on renewable energy prices. Legislatures will be forced to confront the real cost of wind power and evaluate whether the policy will ever deliver on goals originally envisioned.
The AWEA insists the PTC is an effective tool to keep electricity rates low. In fact, it is nothing more than a cost imposed on all taxpayers in order to accommodate development of a politically well-connected, high-priced, low-value resource that cannot meet our electric capacity needs.
Wind also benefited from rising natural gas prices (over $5 per million BTU) making wind power contracts an attractive way to displace higher-cost natural gas generation.
RPS policies mandate utilities supply a minimum percentage of their customer load with electricity from qualified renewable sources.
The open-ended subsidy of 2.2¢/kWh in after-tax income represents a pre-tax value of approximately 3.7¢/kWh.. The PTC is tied to the Consumer Price Index (CPI) and therefore is scaled each year. Today, the PTC costs US taxpayers $1.5 billion per year.
 Wiser, R., Namovicz, C., Glelecki, M., Smith, R., Renewables Portfolio Standards: A Factual Introduction to Experience from the United States Some states allow out-of-state generation to count toward their RPS requirements. Renewable capacity built in a non-RPS state may be used to meet another state's mandate.
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The health and safety of those living in proximity to industrial wind turbines are at risk due to a lack of objective, practicable siting standards.
Given the lucrative and enabling energy policies now in place to promote renewable generation across the U.S., local communities are under significant pressure to develop land use regulations aimed at protecting their residents from poorly siting industrial wind plants. Inevitably, such efforts invite difficult technical questions regarding turbine noise, shadow-flicker, decommissioning and a host of others related to building and operating industrial power plants.
The controversy surrounding wind energy development complicates the siting issue making it difficult to know what or who to believe when it comes to standards. A review of existing wind ordinances adopted in other communities is helpful but standards that might work in one area are not necessarily right for another given population densities, terrain, and other environmental considerations.
Working with no standards
Rules and regulations guiding the siting of wind energy projects essentially do not exist as James Luce, chairman of the Washington State Energy Facility Siting Council, made clear in the Council's October 2011 order recommending conditional approval of the Whistling Ridge wind plant.
In the order, Luce wrote:
The Council is challenged by the fact that it has no rules for siting renewable resources. ...For guidance, we look to our previous decisions, organic statutes and regulations developed primarily for thermal projects. And we use our best judgment to "balance" competing considerations. ...Absent rules, the Council proceeds on a case-by case basis and our decisions inevitable leave room for questioning whether the correct result was reached.
A lack of guidelines does not mean a lack of evidence. But guaranteeing the evidence is taken seriously by review boards is another matter.
Noise models and non-standards
This is certainly the case regarding wind turbine noise. Despite extensive expert testimony that credibly demonstrates the flaws inherent in noise predicting models used by the wind industry, the methods are still utilized.
In two separate proceedings before the Vermont Public Service Board -- Deerfield Wind and Kingdom Community Wind -- Kenneth Kaliski of RSG, Inc. modeled turbine noise emissions at different points within several thousand feet of the proposed towers. Kaliski relied on the Cadna A software tool used by the wind industry, which is based on the ISO 9613-2 standard for sound prediction.
Kaliski knows the ISO 9613-2 standard was never validated for wind turbine noise but insisted its use was appropriate. He argued that by using another tool, the "CONCAWE algorithm," in conjunction with Cadna A he could more accurately predict turbine sound levels. He calibrated his 'modified' ISO method using sound data from a wind farm in Kansas but admitted on cross that he never calculated a "standard confidence interval" before applying his findings to projects in Vermont. He provided no data supporting how his modeled data in Kansas compared to actual sound data surveyed at the Kansas site, nor did he attempt to explain how the mountainous topography, different ground and atmospheric conditions, and foliage found in Vermont compared to that of Kansas and what adjustments he made (and potential errors introduced) to account for the differences.
In short, Kaliski used modeling software (Cadna A) outside its accepted parameters, applied a second tool previously tested at a site located on flat farm land, threw in undocumented adjustments for the Vermont setting and declared his noise predictions accurate for the Vermont sites because he said so -- with no way for any independent party to validate his work.
The flaws in Kaliski's work were obvious but ignored by the Vermont Public Service Board. Instead, the Board imposed a post-construction noise limit on the projects that was itself, non-standard. Neither wind project is in-service at this time but we have good reason to expect operating noise levels will prove problematic for nearby residents.
Public safety and non-standards
This same 'standard-less' approach appears to have guided the Ohio Power Siting Board when it approved the Buckeye Wind LLC application to construct a wind facility in Champaign County, Ohio. The Board's order was upheld in a 4-3 decision by the Ohio Supreme Court but the two dissenting opinions were appropriately critical.
On the question of public safety, Justice Evelyn Lundberg Stratton cited the risks of blade shear. Buckeye assured the Siting Board that a "shorn blade could fly only 500 feet", 41 feet less than the minimum setback from neighboring properties. But when the Board's staff asked Buckeye for supporting data, testimony revealed that Buckeye's prediction pertained to a different, smaller turbine, and that "no such calculation existed" for the proposed turbines.
Justice Lundberg Stratton wrote:
Nevertheless, despite lacking either evidence or sufficient competence in physics even to attempt to calculate the distance a blade could fly, the staff member responsible signed off on Buckeye's proposal. His portion of the investigatory report stated, 'Staff believes that the Applicant has adequately evaluated and described the potential impact from blade shear at the nearest property boundary.' ...even though this appeal represents the final review of the final order of the board, we have no evidence that the project is being built safely away from yards and homes, and we never will. Yet the majority affirms the order.
The Buckeye wind project is not built but the company's flawed testimony on blade shear has already been demonstrated in the field. On April 26, two blades on a Vestas V90 1.8 MW wind turbine sited at a different project in Ohio shattered under high wind conditions catapulting blade debris up to 1,300 feet from the turbine's foundation.
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The wind industry insists its turbines safely co-exist with birds; that the risk of bird mortality at a modern wind energy facility is low due to proper pre-construction assessments.
Two eyewitness accounts from last fall tell a different story.
The first incident took place at the Wolfe Island wind facility located in Canadian waters between Ontario and New York State. The 86 Siemens 2.3MW turbines began commercial operation in June 2009.
On Friday morning September 30 at 9:30 AM it was surprising to personally witness the destruction of a flight of Canadian Geese by one of the Wolfe Island turbines.
Here is what happened from a clear view second floor window at our home on Tibbetts Point Rd [Cape Vincent, NY]. I watched geese lift off and form up along the shore of Wolfe Island. At about a hundred feet of altitude they wheeled into the wind, headed in a west/southwesterly direction. As their climb into a headwind slowly took them over Wolfe the wind speed gauge at our house continued to read a strong and steady 22-25 mph. It was overcast. The river was rolling.
Crossing Wolfe they flew into the plane of spinning turbine blades. This one turbine is directly across from our home and closer to us at about a mile and a half. Through 8X binoculars the carnage was mesmerizing.
Imagine a scene of blade impacts repeatedly knocking dark puffs of feathers against a grey sky. With such a strong wind, limp bodies seemed to be blown backwards out of the turbine. Amazingly the rear of the flight followed into the blades. They seemed oblivious to the destruction of their leaders. With strong headwinds slowing their passage the period of danger and destruction was prolonged. After about two thirds entered this gauntlet the flight finally broke off, lost it's V shape and scattered.
I called loudly to my wife to run upstairs but by then it was over. The time was ten maybe fifteen seconds. It was strange to sit and watch this happen in silence. I could hear none of their honking. It seemed so odd to witness movements that suddenly changed from the beauty of ordered flight to instant plunging death. It made such an impression that details were entered into my log that day.
Those log details and recalled impressions are now shared. Draw from them what you will.
This story is not unique. In December, New York resident Kelly Johnson-Eilola described the horror she witnessed when traveling upstate New York near Noble Environmental's Ellenburg wind energy facility.
I drove through some very thick fog. As I traveled state Route 190 from Ellenburg to Brainardsville my fog lights illuminated one of the grizzliest scenes I have experienced. I counted 15 bloody, mutilated corpses of snow geese spread out over several miles.
I counted only those on the road because those were the only ones I could see due to the heavy fog. I do not know how many more were spread across the yards and crossroads.
Shortly after passing state Route 374, I noticed there were no more dead birds. I only saw the dead birds as I drove near the wind turbines.
The big corporation and landowners who stand to make large sums of money putting up wind towers of monstrous heights in the towns of Hopkinton and Parishville keep telling us that the towers are safe.
The wind industry propaganda says that windows kill more birds than wind turbines. How many geese have flown into your windows? I can’t say I have ever known that to happen.
But I do know that last night a whole flock of geese flying over the woods and farms their ancestors have always traveled were smashed, battered and thrown to their death.
I can only pray that no humans were injured when the falling dead geese struck them or their vehicles.
The US Fish and Wildlife Service estimates that 440,000 birds are killed yearly by wind turbines and related infrastructure. The events described here are not isolated incidents. What is unique is that the destruction was witnessed and made public.
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The Big Wind lobby has descended on Washington DC and its objective is singular -- secure a four-year extension of the Production Tax Credit ('PTC'), the 20-year ‘temporary' subsidy most credited for market growth in the wind sector. The PTC is due to expire at the end of this year.
For the last month, the industry poured millions of dollars into its nationwide campaign aimed at convincing the public that any lapse in the subsidy would prove a crushing blow to American jobs. Most of the ads targeted Congressional House members who resisted the industry's demands for their PTC earmark. The cry for action reached a fevered pitch last week as Congress negotiated the payroll tax bill, viewed by many as the last best chance to attach an extension of the PTC before November's presidential election.
Politicos from wind-friendly states like Iowa and Kansas wrote letters repeating the same tired talking points about jobs. It was embarrassing to see these politicians blindly repeat what they were told with no apparent understanding of the costs and impacts of their pro-wind policies. They clearly viewed their support of the PTC as safe politically. Not so fast.
The Public Pushes Back
Last week the American public proved that support of the PTC was, well, complicated. Thousands of Americans from eigtheen states signed letters to Congress asking their representatives to vote NO on extending the PTC.
Three key arguments were raised in the letter:
1. Since the PTC was adopted in 1992, its annual cost has ballooned from $5 million a year in 1998 to over $1 billion annually today. The open-ended subsidy of 2.2¢/kWh in after-tax income represents a pre-tax value of approximately 3.7¢/kWh, which in many regions of the country equals, or exceeds the wholesale price of power!
2. If the PTC were to sunset, taxpayers would still be obligated to cover nearly $10 billion in tax credits for wind projects built in the last decade. This debt is in addition to the nearly $20 billion already accrued for wind projects built under Section 1603.
3. Despite the billions in public funding since 2008, the wind sector lost 10,000 direct and indirect jobs, bringing the total to 75,000 jobs. In states like Vermont, government models have shown that above-market energy costs tied to renewables have the deleterious effect of reshuffling consumer spending and increasing the cost of production for Vermont businesses. These increased costs reduce any positive employment impacts of renewable energy capital investment.
The PTC -- Outdated and Inefficient
Even if we accept that earmarks for big wind are still appropriate, the PTC is highly inefficient and should, at least, be updated to respond to current market conditions. For example, since it is uniform across the country the PTC supports poorly sited wind development in some areas while in other areas pays for projects that would have been built regardless of the credit.
The policy also ignores other crucial factors driving wind development in the U.S. including State mandates and energy prices. With more than half the states demanding renewable development, some policy experts question why projects receive benefits from both State renewable portfolio policies and the PTC. Good question!
Last week Congress listened to the American public and said 'no' to extending the PTC. By all accounts, the Big Wind lobby was stunned by the vote and has now pulled out all the stops to pressure Congress to vote for an extension as soon as possible. This time, their pressure will be met with an equivalent response from Americans nationwide who are determined to stop this unneeded, wasteful spending perpetuated by lazy, thoughtless politicians.
The message from taxpayers is simple: The cost of the PTC is excessive, the benefits elusive and, big wind's pitiful performance as measured against industry promises makes this entitlement an easy one to sunset.
 Lawrence Berkeley National Laboratory reports (p. 7): "The American Wind Energy Association, meanwhile, estimates that the entire wind energy sector directly and indirectly employed 75,000 full-time workers in the United States at the end of 2010 - about 10,000 fewer full-time-equivalent jobs than in 2009, mostly due to the decrease in new wind power plant construction." A recent AWEA blog (February 3, 2012) confirms the 75,000 is still current.
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If you haven't heard from the American Wind Energy Association (AWEA), you probably will.
Ominous, scary ads are running nationwide warning of the crushing blow to American jobs if Congress fails to extend the Production Tax Credit (‘PTC'), the 20-year ‘temporary' subsidy most credited for market growth in the wind sector. The PTC is due to expire at the end of this year.
Most of the ads target particular House members who, so far, have resisted the industry's demands for their PTC earmark. The pressure is particularly heated right now as Congress negotiates the payroll tax holiday bill, which is viewed by many as the last best chance to attach an extension of the PTC before November's presidential election.
AWEA is also leaning on its friends to do its bidding. Politicos from wind-friendly states like Iowa and Kansas have written letters to members of the Congressional conference committee that's now hashing out the tax bill. The letters repeat the same tired talking points about jobs.
Ballooning Costs - Losing Jobs
It's embarrassing to see these politicians blindly repeat what they've been told with no apparent understanding of the costs and impacts of pro-wind policies.
Do you think Senator Harkin or Governor Brownback realize that since the PTC was adopted in 1992, its annual cost has ballooned from $5 million a year in 1998 to over $1 billion annually today. Or that this open-ended subsidy of 2.2¢/kWh in after-tax income represents a pre-tax value of approximately 3.7¢/kWh? In many regions of the country the PTC equals, or exceeds the wholesale price of power!
Even if the PTC were to sunset, taxpayers are still obligated to cover nearly $10 billion in tax credits for wind projects built in the last decade. This is in addition to the nearly $20 billion in debt already accrued for wind projects built under Section 1603.
Like AWEA's ads, our windy politicos complain about the loss of jobs if big wind is not coddled further by the government. How would they respond if told that despite the billions in public funding since 2008, the wind sector lost 10,000 direct and indirect jobs, bringing the total to 75,000 jobs? 
Or that States like Vermont have found that above-market energy costs tied to renewables have the deleterious effects of reshuffling consumer spending and increasing the cost of production for Vermont businesses". These increased costs reduces any positive employment impacts of renewable energy capital investment.
It takes only 0.1 jobs per megawatt to operate a wind plant. Most of the sector's jobs are temporary construction positions with less than 20,000 involved in the manufacture of industrial parts that could be used in turbines.
If we accept that earmarks for the wind industry are still appropriate, the PTC is highly inefficient and should, at least, be updated to respond to current market conditions. For example, since it is uniform across the country the PTC supports poorly sited wind development in some areas while in other areas pays for projects that would have been built regardless of the credit.
The policy also ignores other crucial factors driving wind development in the U.S. including State mandates and energy prices. With more than half the states mandating renewable development, some policy experts question why projects receive benefits from both State renewable portfolio policies and the PTC. Good question.
Pushback to Wind Push
Finding politicians to mouth support for big wind is not hard. But the American public is not as easily manipulated. In a letter last week to a Nevada newspaper one reader responded to AWEA's call to action by contacting his Representative, Joe Heck, and asking him to "kill all the tax breaks and subsidies for wind, solar, and ethanol energy," adding that "if they cannot stand alone without government help, they will have to reinvent their technology or go out of business."
This weekend, a letter signed by over 200 ranchers and residents was sent to the Nevadan congressional delegation, asking that they vote NO on any further extensions of the PTC. Similar letters were sent from states across the U.S. representing over two-thousand signers.
When Enron (the parent of Enron Wind Corp.) declared bankruptcy in 2001, the government said no to a bailout, and 4,000 workers were laid off in Houston, Texas and elsewhere around the world. But on that day forward, economies became more efficient with skilled employees leaving failure to gain viable consumer-driven employment. Today, mirage "green" jobs can go to real jobs in the booming real energy industry.
The PTC is one earmark many Americans know about, and their opinion of it is remarkably consistent: The cost of the PTC is excessive, the benefits elusive and frankly, big wind's pitiful performance measured against industry promises makes this entitlement an easy one to sunset.
 Lawrence Berkeley National Laboratory reports (p. 7): "The American Wind Energy Association, meanwhile, estimates that the entire wind energy sector directly and indirectly employed 75,000 full-time workers in the United States at the end of 2010 - about 10,000 fewer full-time-equivalent jobs than in 2009, mostly due to the decrease in new wind power plant construction." A recent AWEA blog (February 3, 2012) confirms the 75,000 is still current.
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