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  • End—Don’t Extend—the Wind Energy Tax Credit

    The Hill reports that a bipartisan group of Senators is urging lawmakers to extend the wind energy production tax credit, which is scheduled to expire by the end of this year. Congress should let the tax credit expire and offset the resulting tax hike with reductions elsewhere.

    The wind energy industry has grown substantially since the wind energy production tax credit was adopted in 1992, and yet wind produces only about 2 percent of our electricity nationwide.

    Electricity from wind by itself is more costly to produce (offshore even more so than onshore) than, for example, electricity from nuclear energy or coal. The additional costs are passed on to households in the form of rate increases. America’s poor pay an especially high price as electricity rates are needlessly inflated to force costly and unreliable energy sources into the grid.

    In addition, the direct cost of the subsidy to taxpayers, as reported by the congressional Joint Committee on Taxation, would be $6.8 billion from 2011 to 2015 for new projects implemented by the end of this year. This figure needlessly adds to America’s debt. And projects begun in response to an extension of the tax credit in the next year would only increase that number.

    Subsidies like the wind energy production tax credit also perpetuate the mediocrity of the wind industry by distorting the market processes that guide entrepreneurs and investors toward the most promising energy solutions. As Heritage policy analyst Nick Loris writes:

    The subsidy has been artificially propping up jobs in the industry and shifted labor and capital away from other, more productive sectors of the economy.… Wind can compete without subsidies and the industry won’t entirely disappear.… Rather than having the subsidies promote technological stagnation in the industry, investments and resources would flow toward the most promising wind companies and technologies. This would allow for a strong wind industry that that can compete without subsidies.

    Furthermore, as exemplified in the Solyndra scandal, government favors bestowed upon industries often go hand in hand with campaign contributions for supportive politicians. Government handouts or other special treatments encourage rent-seeking, or what’s often called crony capitalism. President Obama’s energy policy is filled with such favors in various forms, from subsidies and other  tax favors to loan guarantees.

    It is high time to wean wind off of federal government subsidies. Better yet, end all energy tax subsidies and offset those tax increases by lowering the corporate tax rate permanently, an approach put forth in legislation by Senators Jim DeMint (R–SC) and Mike Lee (R–UT) in a companion piece to Representative Mike Pompeo’s (R–KS) bill.

    Posted in Energy [slideshow_deploy]

    5 Responses to End—Don’t Extend—the Wind Energy Tax Credit

    1. Brett says:

      So, the author has no concerns that coal and oil are heavily subsidized, but wind, which also creates jobs, does it without any pollution, and further helps diversify the generation supply at a cost effective rate- is suddenly too rich for our budget?

      It's one thing if you advocate removing ALL subsidies. I could support that. But you don't. Instead you want to remove the one slice of power that is 100% clean, domestic and doesn't increase health costs- by the way, health costs are also real.

    2. Kevin@AWEA says:

      The misinformation about tax credits and the wind industry continues.

      The federal Production Tax Credit (PTC) is an effective tool to allow developers to raise private capital in the marketplace and bring renewable energy projects to completion. Furthermore, the PTC applies only to actual electricity produced from utility-scale wind turbines. A wind project developer does not receive the credit until the wind turbine actually generates power. As a business tax credit, funding is based solely on project performance, not evaluation by government officials.

      Rep. Steve King (R-Iowa) points out the sensible reasons for supporting the PTC that have led 18 House and numerous Senate Republicans to call for action against raising taxes on this important source of American jobs:
      “Low taxes in the form of the federal Production Tax Credit for wind have driven as much as $20 billion of private investment a year into the U.S. economy. Wind power is now one of America’s biggest sources of new electricity and fastest growing manufacturing sectors. It has accounted for more than a third of all new U.S. electric generation in recent years.”

      The cost argument is simply wrong. Numerous studies have shown that wind energy saves consumers money by reducing the use of expensive fossil fuels, thus driving energy bills down.

      Attempts to imply government favoritism are misguided and false. As Gov. Sam Brownback (R-KS) notes, “The wind industry has utilized a production tax credit, which has helped the industry see steady growth this decade.” The existing tax credit was regularly included in the federal budget under President George W. Bush.

      Wind accounts for 35% of all new electric generation capacity in the U.S. since 2007 and is ahead of schedule to provide the 20% of all U.S. electricity by 2030. American wind jobs are poised to quintuple in 20 years.

      Rep. King said it best: “Conservatives can and do support wind.”

      Let wind finish the job.

      • Bobbie says:

        conservatives do not support inefficiencies replace efficiencies especially when the need is false and coerced. Even the combination of wind and solar can't sustain the job. THEY'RE INTERMITTENT! ALWAYS!

        Average Americans with a brain do not support wind or methods of energy already proposed and concentrated by government that are highly unsustainable and grossly over priced. all the connection to cronyism is corruption and beneath the good of all Americans knowingly and unknowingly paying for it.

        Let the private sector of money and interest continue alternatives without the influence and subsidies by government, when or if it becomes efficient, consumer interests will grow. Freedom Kevin, look it up.

      • Katheryne says:

        From the Chicago Tribune, Feb. 17, 2012

        Kevin Borgia, who heads the Illinois Wind Energy Coalition, said several years of stability for the tax credit helped drive down costs for wind generation. Without the tax credit, the market for wind power generation will grind to a halt, he predicts.

    3. Marchant Wentworth says:

      Odd to see the Heritage Foundation opposed to the positions of both the Chamber of Commerce and the National Association of Manufacturers that both support an extension of the production tax credit.

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