Subsidizing big wind: The Real Costs to Taxpayers

INTRODUCTIONN

For two decades, the domestic wind-energy sector has enjoyed a lucrative subsidy known as the production tax credit (PTC). That tax treatment, which provides wind-energy producers with 2.2 cents for every kilowatt-hour of electricity produced, expires at the end of 2012.

But the production tax credit is only one of the subsidies given to the wind industry. In addition to direct subsidies, the industry is given a de facto subsidy at the state level in the form of mandates for renewable energy consumption. Another indirect subsidy: the exemption that the wind industry has been given with regard to enforcement of federal wildlife laws.

Proponents of wind energy claim that the subsidy is needed so that the wind industry has more time to mature. They also frequently cite the number of jobs that may be lost if the tax credit is terminated. Nevertheless,a look at the wind industry from four different angles—direct subsidies, mandates, cost of jobs produced, and ongoing exemptions from federal wildlife laws—shows that no other part of the energy industry receives such preferential treatment.

Findings:

• On a per-unit-of-energy-produced basis, the PTC provides a subsidy to the wind industry that is at least 12 times greater than that provided to the oil and gas sector and 6.5 times greater than that provided to the nuclear industry.
• More than two-thirds of the American population live in states that have mandated the use of renewable electricity, and those mandates are imposing significant costs on ratepayers.
• If viewed solely as a job-saving measure, a one-year extension of the PTC will cost about $329,000 per job.
• Despite numerous violations, the Obama administration—like the Bush administration before it—has unofficially exempted the wind industry from prosecution under the Eagle Protection and Migratory Bird Treaty Acts. If Congress extends the PTC, federal taxpayers will, in effect, be subsidizing the killing of federally protected birds.

CONCLUSION

No other segment of the energy sector gets as much preferential treatment as the wind-energy industry. Up until last year, the corn-ethanol industry enjoyed both a mandate and a subsidy. Congress ended the corn-ethanol subsidy, but the industry still enjoys a mandate. The wind-energy sector is lobbying hard in Congress to retain the production tax credit even though more than 220 million people live in states with mandates on renewable-electricity production. The wind industry has had 20 years of subsidies. If it cannot manage to stay in business without subsidies, it doesn’t deserve to be in business.