• The Heritage Network
    • Resize:
    • A
    • A
    • A
  • Donate
  • Wind Suppliers are Paying People to Take Their Energy.

    Yes, you did read that title correctly, and no, it is not a joke. This is what happens when wasteful subsidies distort the market:

    In the first half of 2008, prices were below zero nearly 20 percent of the time. During March, when negative prices were most frequent, prices were below zero about 33 percent of the time. After mostly taking the summer off, negative power prices were back to near 10 percent in October. This seems a little crazy. During these negative price periods, suppliers are paying ERCOT to take their power. Consumers (at least at the wholesale level) are getting paid for using power, and the more power consumers use the more they get paid. These prices are a big anti-conservation incentive. You could, as a correspondent put it to me, build a giant toaster in West Texas and be paid by generators to operate it.”


    This isn’t the cast in West Texas. Instead, the negative prices appear to be the result of the large installed capacity of wind generation. Wind generators face very small costs of shutting down and starting back up, but they do face another cost when shutting down: loss of the Production Tax Credit and state Renewable Energy Credit revenue which depend upon generator output. It is economically rational for wind power producers to operate as long as the subsidy exceeds their operating costs plus the negative price they have to pay the market. Even if the market value of the power is zero or negative, the subsidies encourage wind power producers to keep churning the megawatts out.”

    Alex Taborrak at Marginal Revolution compares it to farm subsidies and offers a better option for President-elect Obama: nuclear. The United States has not built a new commercial nuclear reactor in over 30 years, but the 104 plants operating today prevented the release of 681.9 million metric tons of CO2 in 2005, which is comparable to taking 96 percent of cars off the roads. If CO2 is the problem, emissions-free nuclear power must be part of the solution.

    It also proves why nuclear shouldn’t be subsidized, either. The government shouldn’t pick a winner and a loser, even if nuclear is the winner. Government interference in the marketplace causes a misallocation of resources away from where they could be most efficient used.

    That being said, it makes little sense for the government to set renewable targets and exclude nuclear from the mix. When they do, it’s the consumer that pays the higher price. Most recently, the House of Lords Economic Committee reported that meeting EU targets for renewable energy will increase electricity prices by 38% in the UK, arguing “that nuclear energy presents a viable, low-carbon alternative that is not intermittent and can be produced at a significantly lower cost than renewable energy.”

    Having central planners set energy mandates and lavish subsidies hasn’t worked for years, and any attempt by the Obama Administration and the 111th Congress will do much more economic harm than the marginal, at best, environmental benefit.

    Posted in Energy [slideshow_deploy]

    4 Responses to Wind Suppliers are Paying People to Take Their Energy.

    1. quantumfoam/townvill says:

      You guys just make too much sense. The democrats will probably put you on their hit list.

    2. Thomas Gray South Ca says:


      A new regulatory structure is necessary, but requires careful thought, planning and vetting prior to implementation. The most critical and needed component however, is a “lessons learned analysis”. This also has not been discussed, but discussions should begin soon, and should have been a part of the TARP bill.

      A cogent and comprehensive analysis of the elements of causation including government individuals, elected officials, regulatory agencies, must be investigated and fully examined for their contributions and / or possible malfeasance that caused this debacle. This must be outside of the Congress and completely objective

      ================================================================================================ Coment,

      These two proposed programs may { critical } be applied to the advancement of affordable electricity. there is an ongoing battle over who decides what energy sources are to be used to make electricity to know what partys are working for affordable electricity or not.

      The sub prime loan bundled,,,rated,,,insured,,,and resold,,, """debacle""" was caused by among a few others two things, the government """elected officials""" 1, changed government regulations to promote such loans,,, 2, the banks,,, and in some cases were forced by government mandate to make such loans made THE loans.


    3. W Howard Baker, Bard says:

      You don't seem to understand. Obama and the Democrat Congress have no intention of solving the energy problem or the economic one either. Their intention, as outlined by Rahm Emmanuel, is to make our crisis as large as possible, thus allowing them to usher in socialistic and totalitarian policies under the guise of environmentalism. These will meet little resistance since the American people will be open to anything to get them out of their predicament. This is the way Mussolini and Hugo Chavez have done it in the past. This will allow Obama and the far left liberals in the Democrat Party to enact the "CHANGE" that they desire. THE CHANGE TO FASCISM!! I use "fascism" instead of "socialism" as fascism is the socializing of a single nation where socialism implies a worldwide ideology. Mussolini and Hitler found that men wouldn't die for socialism but they would for a fascist Italy or Germany and apparently Hugo Chavez, with his ties to the Russian Navy, has figured out the same thing.

      So don't expect the government to open up the restrictions on nuclear or drilling even for natural gas. Saul Alinsky and Marx have taught Obama too well.

    4. pete schweaty says:

      wind energy needs a boost as does solar. why hasn't a nuke been built in the last 30 yrs?- its not simple. There are secutiry and environmental concerns there. I am not really pro wind or solar. BUT there is no silver bullit either. btw- I think what TX (US leader in wind power) is doing is nuts adding 18GW in the 6-7 yrs. I would rather see more Nuke but I think the real story is trying to strike a balance. it seams most of the comments posted here prove people have a hard time balancing that in their minds.

    Comments are subject to approval and moderation. We remind everyone that The Heritage Foundation promotes a civil society where ideas and debate flourish. Please be respectful of each other and the subjects of any criticism. While we may not always agree on policy, we should all agree that being appropriately informed is everyone's intention visiting this site. Profanity, lewdness, personal attacks, and other forms of incivility will not be tolerated. Please keep your thoughts brief and avoid ALL CAPS. While we respect your first amendment rights, we are obligated to our readers to maintain these standards. Thanks for joining the conversation.

    Big Government Is NOT the Answer

    Your tax dollars are being spent on programs that we really don't need.

    I Agree I Disagree ×

    Get Heritage In Your Inbox — FREE!

    Heritage Foundation e-mails keep you updated on the ongoing policy battles in Washington and around the country.