Hearing assessing the efficiency and effectiveness of wind energy incentives: Testimony of Robert Michaels PhD

Economist Robert Michaels PhD presented this important testimony at a hearing before the Oversight Subcommittee and Energy Subcommittee of the Committee on Space, Science, and Technology. Dr. Michaels addresses the inefficiencies of wind energy and high costs of the technology. The purpose of his testimony is provided below. To access the full testimony, click on the link(s) at the bottom of this page.

Purpose of Testimony

This testimony responds to the Committee's request that followed the March release of Government Accountability Office (GAO) Report GAO-13-136 ("GAO Report," cited as "GAO") on federal financial support for wind-generated electricity.2 That report enumerates and quantifies existing policy incentives, their costs, and possible rationales for their existence. These topics are important in light of the federal role in wind power's growth, which will have consequences for consumers' power bills, reliability of regional power grids, and the environment. GAO confines its report to wind technology, but some aspects of its study may also be relevant for other renewables, particularly those that can only operate intermittently such as solar generators. My testimony is also confined to federal support and deals only in passing with state financial support and "Renewable Portfolio Standards" (RPS) that set quotas on renewable power that utilities must distribute.

Putting the GAO Report in perspective requires some background on wind power and its place in U.S. electricity. Investment in wind turbines has grown substantially since the late 1990s. Today they produce 3.0 percent of the nation's electric energy, a higher percentage than any other non-hydroelectric renewable source. (GAO, 1) There are many possible sources of that growth, including technologies that have become more efficient, a relative abundance of sites for wind installations, active competition among producers of turbines, environmental regulations that pose lower barriers to wind than other renewables, state-level RPS laws, and the federal incentives that are the subject of GAO's report.

This testimony begins with a discussion of electric system reliability and the effects of increasing use of intermittent power resources such as wind. I document the operational problems that have arisen because wind turbines are not dispatchable by system operators, which are aggravated by the fact that wind in many areas produces the most power when power is least valuable. I then compare the costs of wind and fossil-fuel generation and consider recent findings of shorter useful lifespans for wind generators than originally expected. Further growth of wind in many areas will also require investments in transmission whose only use is to move wind power from isolated facilities to consuming areas. Unlike most other transmission facilities, such lines neither reduce the cost of delivered power nor improve reliability. I then consider the environmental effects of wind's growth, which need not be better than those of alternative generators despite the fact that wind turbines do not burn fossil fuels. I go on to discuss how once-popular reasoning that favored wind as a way to "diversify" generation are becoming irrelevant with the growth of unconventional gas production and increases in gas and oil reserves. Finally, I consider and find reason to reject the frequent claims of wind advocates that federal support policies have brought such macroeconomic benefits as job creation and rising incomes.

With these facts as background I then consider the potential significance of GAO's data on federal support for wind power, an activity entailing at least $4 billion in direct grants to producers and tax expenditures (i.e. selective reductions), as well as loan guarantees and other programs. I then examine how strongly GAO's economic arguments support its stated belief that these programs will bring the economic benefits of improved wind generation technologies. I find that the report's data is likely to be inconsistent with these arguments, and that neither the data nor the arguments provides a sound rationale for the programs under investigation. Specifically, less than one percent of these funds are spent on development activities that could potentially improve wind generation technologies, and the remaining 99 percent do no more than support
deployment of established technologies. This testimony is in no way intended as a criticism of GAO's findings or methods. I am an economist with no expertise in federal auditing, and I understand that the scope of the report requested from GAO is in some ways narrower than subsumed in my comments. GAO's data are important and useful, but any conclusions that the Office might reach on the basis of a wider study need not necessarily match those I have reached in this testimony.

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APR 16 2013
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