• The Heritage Network
    • Resize:
    • A
    • A
    • A
  • Donate
  • The New Math of Renewable Energy: $50 = $100

    Suppose you could produce $50 of electricity but it cost you $100 to do so. Would that make any sense? It would if you work at the White House.

    In a speech at a wind-turbine blade manufacturer in Iowa, President Obama called for extending two sets of subsidies that turn energy economics upside down and force higher costs on consumers and taxpayers.

    The first extension is for the production tax credit (PTC), which is set to expire at the end of the year. It provides wind-energy producers with a subsidy of about 40 percent of the wholesale cost of electricity. So, when a wind-energy producer sells $50 worth of electricity, Uncle Sam adds another $20 for a total revenue of $70 to the producer.

    The second extension is for the Advanced Energy Manufacturing Credit—originally funded in President Obama’s “stimulus” bill. This 30 percent credit cuts the cost of $100 worth of equipment to just $70.

    So there you have it. Fifty dollars of actual revenue is bumped up to $70 with the PTC and $100 of costs are cut to $70 after the special tax credit. That is, $50 = $100 after taxpayers make up the difference.

    When wind-energy advocates claim that wind power is on the verge of being competitive, they mean that after the PTC and the manufacturing credit, wind is almost, maybe someday soon, or maybe later (and only if you ignore transmission costs and fickleness of supply problems) on par with conventional power. What a deal.

    Perhaps not all of the costs of the wind farm will qualify for the manufacturing credit, but don’t despair. There is more. Many states and regions have renewable power mandates that force consumers to buy renewable electricity—regardless of costs. So there is almost no limit to how expensive renewable electricity can be and still generate a profit for the supplier.

    And even that’s not all. Many renewable energy projects and manufacturers receive federal loan guarantees that cut millions of dollars off their costs. In green-energy math, $50 may be greater than $100.

    No matter how slick the financial shell games may be—subsidies on top of subsidies on top of mandates—overpriced electricity cannot boost the economy. It may seem like a boost if you are the one getting the subsidy…at least for a while. The workers at the Iowa plant better hope their presidential green-energy photo op works out better for them than it did for Solyndra’s employees.

    Posted in Featured [slideshow_deploy]

    12 Responses to The New Math of Renewable Energy: $50 = $100

    1. billstanley1 says:

      "Many states and regions have renewable power mandates that force consumers to buy renewable electricity—regardless of costs." == 29 states plus D.C and Puerto Rico have adopted required percentages of electricity from renewable sources. In 2010, the average price of residential electricity in these states was 31.9% higher than it was in the other 21 states. Industrial rates were 30.7% higher and commercial rates were 27.4% higher. The 5 states with the highest rates, all with renewable requirements, were: Hawaii 28.1 cents per kilowatt-hour, Connecticut 19.25, New York 18.74, New Jersey 16.57 and New Hampshire 16.32. Idaho, without requirements, was 7.99. http://www.newsandopinions.net

    2. Ed Dursky says:

      As long as our lamestream media remains deeply embedded with the Obama regime…"$50 = $100" will become our permanent "new math". (Does the GOP stay away from exposing these lies because they are that damn afraid of attacking the "green energy" myth…or are they concluding that Americans are just too stupid to wrap their little heads around such complicated lies?)

    3. Blair Franconia, NH says:

      I was never good at math.

    4. mbarnardca says:

      All the PTC does is partially close the gap to the favourable subsidies, tax provisions and damage guarantees given to other forms of generation. Leveling the playing field by getting rid of the billions of public money that goes to fossil, nuclear and hydro would eliminate the need for the PTC. If you start adding in the negative externalities, the arguments become very different: how little base load can we get away with when renewables are so cheap? More jobs are just a bonus.
      http://www.quora.com/Clean-Energy/Renewable-Energ

    5. Not to mention the fact that current world wide wind capacity meets only a tiny fraction of the daily usage.

    6. Sanford Olnhausen says:

      If Obama can extend subsidies and cut credits so that $50 = $100, why can't he reverse the process to cut our National Debt from $15 Trillion to $7 Trillion?

      S L Olnhausen

    7. Sanford Olnhausen says:

      If Obama can extend subsidies and cut credits so that $50=$100, why can't he reverse the process to cut our National debt in half?

    8. Jimmy says:

      David: You make some interesting points here…however, you are wrong…if you want to really understand the math of wind, I invite you to come to Windpower 2012 in Atlanta next week and then visit a wind farm in the Kansas…This is where you will understand the math…not at the Heritage Foundation in Washington DC.

      Furthermore, I still am puzzled that you are not writing on the repeal of Price Anderson, the cap of liability for nuclear plants…if you want parity, then repealing of this liability cap is a must…I hope to see you write on that one soon…

    9. Jimmy says:

      David: You make some interesting points here…however, you are wrong…if you want to really understand the math of wind, I invite you to come to Windpower 2012 in Atlanta next week and then visit a wind farm in the Kansas…This is where you will understand the math…not at the Heritage Foundation in Washington DC.

      • Bobbie says:

        Windpower 2012 in Atlanta? is this where they explain how and where wind starts and stops? Why it's only felt and not seen? Where they teach wind efficiency? How intermittent won't effect a thing? Why it's important to waste miles of land for all wind energy can't give us? With these considered, I'd rather take Heritage's math than ignorance. Wouldn't you, Jimmy?

    10. David says:

      $50 = $100 UNDERstates the bad economics. The $100 omits the cost (operating + capital + corporate overhead) of generators backing up solar and wind facilities. Back-up is essential because solar and wind are UNreliable.

    11. Charles Weber says:

      The only reason why renewable energy is not competing with oil is that companies get oil almost free of charge. If oil sold for what it costs to make it out of limestone, gasoline would probably cost $12 per gallon. We are making a bad mistake sucking our oil dry for trivial purposes like generating heat. We are going to bitterly regret it, especially if a major war breaks out.

    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.

    ×