Why extension of the PTC is faltering

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[1] 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.

Conclusion

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.

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[1] 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.