Schumer-Manchin: A terror unleashed

The Schumer-Manchin bill that dropped last week should erase any doubt whether Congress is serious about lowering inflation, addressing energy costs, or protecting the environment. It’s not!

Ironically dubbed the Inflation Reduction Act of 2022, Schumer-Manchin will do nothing to reduce inflation. But what it will do is far worse. Schumer-Manchin will unleash the largest industrialization of U.S. open lands not seen since the damming of our western rivers. The modern “environmental” movement will finally realize its dream of transforming the mid-section of the United States, from North Dakota to Texas and Nevada to Ohio, into a massive electric generating facility powered by wind and solar.

Schumer-Manchin on Inflation and Taxes

Schumer-Manchin purports to curb inflation through deficit reduction by raising $300+ billion more in new taxes than it spends. If the money is used as promised, and not squandered on new spending, its effect will be insignificant against the CBO’s $16 trillion 10-year cumulative budget deficit projection. Penn Wharton models show that any net deficit reductions won’t occur for another 5 years and that the impact on inflation will be “statistically indistinguishable from zero” through 2031.

This assumes the new revenues are realized at all.

How much of the $313 billion raised in corporate minimum taxes will be avoided by these same companies investing in government-favored tax shelters like renewable energy? Then there’s the matter of IRS compliance. As it turns out, our biggest tax revenue losses are not from the wealthy who engage in legal acts of tax avoidance like investing in renewable energy. Low- and moderate- income taxpayers wrongfully claiming earned income and child care tax credits are a serious factor. But how much enforcement will Congress permit when its members are already upset over the IRS disproportionately auditing low-income taxpayers? As for the $288 billion saved by allowing Medicare to negotiate prescription drug prices, Americans need only look at how the Feds handled the Covid vaccine and home-test packs to understand that this is more happy talk than real.

The Big Wind and Solar Jackpot

This brings us to the spending side of Schumer-Manchin.

Schumer-Manchin serves one main purpose: to feed the bloated, gluttonous renewable energy industrial complex that’s been leeching off the public purse for 30-years.

The bill erases the 2016 phase-out of the wind production tax credit (PTC),[1] restores the credit to its full value (2.6¢ per kWh) and extends it through to the end of 2024. But there’s more. The bill injects a new provision where wind energy projects that started construction during the phase-out will reap the full PTC if placed in service in 2022! Don’t be surprised if we learn that Big Wind colluded with senate Democrats over project construction schedules in order to maximize their credits earned. The urgency to ram this bill through may be more about Big Wind’s timelines than the midterms.

Such brazen acts are standard practice for an industry that has repeatedly lied about its ability to survive without subsidies. Remember 2012, when the largest turbine makers asserted that the market would continue to grow even without the PTC? Then there was 2016 when Congress promised, with the industry’s backing, that the phase-out would end the subsidy for good. None of it was true.

Solar also secures a windfall under Schumer-Manchin. The investment tax credit (ITC) jumps back to 30% for facilities placed in service in 2022, 2023 and 2024 with the added bonus that projects meeting certain criteria for domestic content and project location can earn up to 50%!

The New PTC/ITC

The Schumer-Manchin bill provides that after 2024 the traditional PTC and ITC programs expire but the benefits live on through the new “Clean Electricity” tax credit program. Eligible facilities are those placed in service after 2024 that produce zero emissions. “No longer we’re picking winners and losers. It’s tech neutral,” boasted Senator Wyden (D-OR) who put the cost of the bill’s clean energy credits at $260 billion over ten years.

Tech neutral? On the surface, maybe. But make no mistake, this is nothing more than a repackaged wind and solar subsidy program with a few batteries thrown in for good measure.  Let’s explain:

New zero-emission resources, including small modular nuclear or hydrogen generation, won’t reach commercial scale anytime soon. Of the other technologies eligible for the PTC/ITC under current law, wind and solar are the only ones being built in a material way and the only ones that will continue under Schumer-Manchin. The others (geothermal, qualified hydro, municipal solid waste, open-loop biomass etc.) are either too capital intensive, require too much labor to be viable, can’t meet the zero-emission requirement, or are out-of-favor with the environmental community.

As further proof, Schumer-Manchin explicitly retains 1992 as the base year for inflation adjustments. That’s the year the Energy Policy Act of 1992 – which created the PTC – was adopted! The bill’s authors are reasonably certain that no other resource but wind (and maybe solar), will try to claim the production credit. All other provisions in the bill addressing inflation adjustments amend the base year to 2021, 2022 or 2023.

Wind and Solar Credits Made Permanent

It’s been reported that Schumer-Manchin extends the PTC and ITC for 10 years through to 2032 but that’s not what the language says.

The credits phase out after 2032, but only after annual greenhouse gas emissions from U.S. electricity production drop by 75% or more below 2022 levels. To achieve this level of emission reduction, the US would have to severely constrain the public’s access to reliable generation, which won’t happen. The numbers below speak for themselves.

The upshot is that the wind industry, after 30-years, has found a path to making the 1992 PTC permanent!

Billions of dollars more in PTCs and ITCs will pour into Big Wind and solar projects that are not accounted for in the 10-year, $260 billion price tag Senator Wyden cited. New wind and solar projects built after 2032 will be PTC/ITC eligible! Also remember that the PTC is earned on each megawatt hour produced during the first 10 years of project life, which means that facilities placed in service in 2025 earn the subsidy well past 2032. In all cases these payouts will be in addition to the $113 billion already anticipated in PTCs/ITCs under current law!  

Destroying the Environment to Save It

For those less concerned with cost and more concerned with saving the planet, think again.

The environmental destruction that will be left by developers marching across the country carpeting our ridgelines and open lands with 600-foot spinning turbines, solar panels, substations, and miles of high voltage transmission is impossible to quantify. Habitats will be degraded and destroyed, viewsheds industrialized, and wildlife killed or displaced. Federal and state agencies will be hamstrung by new permitting rules – also part of Schumer-Manchin – that will impair their ability to avoid and minimize project impacts. Incidental take permits will be issued for protected species at a level never seen before. Politics, not science, will drive permit approvals as the emphasis shifts to operational mitigation. After a project is built, there may be a year or two of post-construction monitoring after which people will move on but the harms will continue.

How do we know this? Because it’s been happening for two decades. Under Schumer-Manchin we will see more of the same but at an accelerated level involving highly conflicted lands.

Development patterns for the last few years inform how much wind and solar is likely to be built over the next decade. The wind industry managed to install 61,000 new megawatts (MW), or roughly 30 thousand turbines, during the period when the PTC was phasing down. Under a full PTC/ITC regime, an unlimited timeframe to build within, and an industry that will weaponized Schumer-Manchin to force approval of its projects, we could easily see a doubling of the current wind capacity bringing the total to nearly 280,000 MW by 2032.

Utility-scale solar will be built at an equal pace. By the end of the first half of 2022, 66,000 MW of solar was operating with another 74,000 MW in the pipeline. The pipeline will get built and much more will follow. The destruction of Nevada’s deserts is already underway. Schumer-Manchin will make it impossible to stop. Meanwhile, solar developers are targeting our richest farmlands (think food supply and food security) from Maryland to Iowa while promoting the idea that the soil will revert to full food production immediately after the panels are removed. Experts at the North Carolina Cooperative Extension explain why this is not true. None of this considers the explosion of new battery storage and potentially 30,000 MW of offshore wind that Schumer-Manchin will push forward.

The land requirements will be enormous. Based on published project footprints of recently sited wind projects in Wyoming, Oklahoma, New Mexico, and Colorado, new wind turbines will spread across 30 million acres (50,000 sq. mi.) by 2032. The wind industry will push the narrative that the space between turbines is dual use and shouldn’t count as part of the project but that argument doesn’t fly anymore. The space is filled with turbine noise, flashing lights and flickering shadows cast over a mile away. Ask visitors to Texas who describe West Texas as an alien landscape where one can drive for miles and miles and see nothing but wind turbines. For solar, there is no space between panels for animals to thrive, and any vegetation in the way will be mowed down and the land left barren.

The degradation of these sprawling industrial complexes on our historic, visual, and environmental resources has been ignored by the media and dismissed by wind and solar boosters for years. Those who raise concerns, few of whom are part of national environment groups, have been attacked, marginalized and dismissed as NIMBY ("not in my backyard").

Senator Manchin knows this which makes his support of Schumer-Manchin so surprising.

When he was governor of West Virginia, his State experienced an alarming situation with bat mortality at the 44-turbine Mountaineer wind project owned and operated by NextEra (formerly FPL Energy). Studies conducted on site estimated levels of bat mortality “…among the highest ever recorded in the world.” This and other catastrophic environmental events prompted West Virginia Reps. Rahall and Mollohan, both democrats, to hold congressional hearings in 2007. Rep Mollohan’s opening comments captured the issue this way:

“[T]here is little reason to believe that the wind energy projects that are being built in environmentally sensitive areas will be any less deadly to wildlife than those built in the past. The cumulative impact of all these projects on wildlife has to be of concern to Congress.” …[W]ind energy developers are not going to voluntarily take all the steps that are reasonably necessary for the protection of wildlife. They just aren’t going to do it. These developers are for profit corporations that, like any other, are answerable to shareholders. Their basic imperative will always be to get turbines up and running and thereby generating some amount of electricity, not much, by the way, and more importantly for their owners major tax credits.”

Rep. Mollohan’s statement is as true today as it was in 2007, when the U.S. claimed just 11,600 MW of operating wind. Unfortunately, nothing came of the hearings after congressional Democrats, joined at the hip with Big Wind, crushed the effort for federal action. As for the Mountaineer project, NextEra would not allow further studies after the bat kills were discovered and, according to Rep. Mollohan, “refused to alter its operations in a way that could reduce bat mortality.”

Other Factors to Consider

Senate Democrats still promote the notion that adding renewables to the grid reduces electricity prices. This is false. Tax credits provide a significant out-of-market revenue source for developers by shifting costs to taxpayers at large. Wind and solar are not cheaper, they’re subsidized! When wind and solar energy floods the grid in excess of demand, they depress market prices which harms more reliable (unsubsidized) generators. There is no justification for any government program that undercuts healthy, competitive businesses, but that’s what’s happening. No traditional source of electric generation has ever received an open-ended, unlimited subsidy comparable to the federal PTC paid for every megawatt hour of energy put on the grid. But there’s another reality that keeps the subsidies flowing. After 30-years the business of Big Wind and solar is no longer about energy production. It’s about tax avoidance. An entire industry has grown around renewable energy tax policy and that industry holds tremendous sway on Capitol Hill. 

Solar panels and parts of wind turbines and batteries are largely sourced from outside the United States, particularly from China. It will take years before manufacturing moves onshore even with the incentives Schumer-Manchin offer for domestic content. Until then, forced labor in China to build and mine these components will continue. 

Take a Breath

Schumer-Manchin is part of the single-minded, "hurry up and get it done" mentality behind the renewables push in the United States. This coupled with the unconstrained flow of taxpayer subsidies to any developer who shows up has left no time for communities, businesses, or governments to consider the conflicts and consequences of their actions. The wind and solar industries, wrapped in a faux green cloak, have convinced the public that they’re best positioned to save the planet while doing little to address the destruction their projects cause.

Environmentalists, concerned citizens, and all our elected representatives must reject Schumer-Manchin immediately. Passing this legislation will irreparably damage our open spaces, precious wildlife, and teetering economy with repercussions on the U.S. that will last for generations.

[1] A Q&A that explains the production tax credit program and 2016 phase out can be found here.