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  • Wind PTC Already Phasing Out—for Certain

    The production tax credit (PTC) for wind energy is set to expire at the end of this year, but its supporters are arguing for an everlasting extension using twisted logic.

    For a while, the argument was that businesses need certainty. The law as it currently stands provides certainty—eligibility for the PTC ends on December 31, 2012. Supporters of wind energy, in their Orwellian thinking, replaced the certainty of existing legislation with debate about uncertain modifications of the existing legislation.

    A subsequent argument is that the PTC needs to be “phased out” instead of just stopped. Though the eligibility date has a sharp cutoff, the financial flows themselves do follow a phase-out pattern. Wind generation that is put in place by December 31 will receive the tax credit for next 10 years.

    For instance, in January 2013, all wind turbines placed in service after January 2003 will receive the PTC. Then, in February 2013, the 10-year eligibility for turbines placed in service in February 2003 will expire. Each subsequent month, another group of wind turbines comes to the end of its 10-year-eligibility period and the program winds down until January 2023, at which point no turbines will be eligible for the PTC.

    This is the way the current legislation is written. There is a certain, clear cut-off date for eligibility, and the payments phase out in a perfectly predictable pattern over a 10-year period. Certainty? Check. Phase-out? Check.

    What proponents of a PTC extension really seem to want is a perpetual series of extensions to provide an immortal tax benefit. Since the benefit is so juicy, it is perfectly understandable why they would want it.

    So far this year, the wholesale prices of electricity in the different U.S. markets average from less than three cents per kilowatt hour (kW-h) to about 4.5 cents per kW-h. The PTC provides a subsidy of 2.2 cents per kW-h to wind energy producers. So this PTC subsidy is equivalent to 50 percent to 70 percent of the wholesale price of electricity. (Note: It is the wholesale market into which the wind producers are selling their energy.) That’s a big subsidy.

    Though you would not know it from wailing and gnashing of teeth over the expiration of the PTC, many states also have renewable energy standards that force ratepayers to buy wind, solar, and biomass produced electricity regardless of how much it costs. These renewable standards are separate from—and, for wind-power producers, in addition to—the PTC.

    Without a PTC, some wind will be competitive and some will not. That is how business goes. However, a business that cannot survive without taxpayers paying for 50 percent of the costs (in addition to the benefit of the renewable mandates) is not one that is helping the economy overall. Instead, it is using resources whose value exceeds the value of the electricity produced.

    The current law is costly and inefficient. Nevertheless, it is unambiguous and has a 10-year horizon for reducing total payments. Ten years is plenty long enough to live with this bad policy.

    Posted in Energy [slideshow_deploy]

    21 Responses to Wind PTC Already Phasing Out—for Certain

    1. PR1 says:

      It’s not just the subsidies, it’s the "extra" costs – like coal impacting us to the tune of >200 billion/yr in health bills (look it up) and the very real threat of GHG emissions etc. If you want the market to decide, that’s OK, just make absolutely sure the market gets ALL the information it needs, not just what you want it to have. Wind is more competitive than given credit for if all costs are factored. It is a smart hedge, and well worth the gamble. Price per kWh has dropped 3X since 2003, 20X since 1992, because the subsidies brought in the competition. They made it worth fighting for. Wind is now nipping at coal in levelized pricing (per DOE) – which is an amazing achievement. The subsidies are paying off for all of us if you look at the broader picture (a cleaner, diversified energy mix). GE and others are coming out with grid scale storage technology (meaning wind power can be turned into a smoother 24hr source). All made possible by the market the subsidies created. The PTC doesn’t have to last forever

      • David Kreutzer, Ph.D. David Kreutzer says:

        See my reply to David, below.

      • Paloma says:

        I am SO tired of people blaming coal for adverse health impacts. I checked with a Thoracic Radiologist at Mayo Clinic and was told that coal plants DO NOT cause asthma, or any of the other imaginary health impacts. If you work in a coal mine and do not wear protective gear, you will most certainly have lung related health issues – but airborne particulates exacerbate pre-existing conditions like asthma, they do not cause them.

        I've been watching for the development of grid scale wind energy storage and there is none on the horizon. GE isn't anywhere close to having such a system and neither is anyone else.

        Wind energy is subsidized on more levels with federal grants, federal feed in tariffs, federal tax subsidies, state mandates, state grants, state tariffs, state tax breaks and subsidies, and consumer surcharges for "green" energy. Xcel Energy allows people to pay an additional fee each month and tells their consumers they are choosing to get their energy from green sources. Ha! There is no separate grid for wind energy so this amounts to fraud.

        Wind energy is not economically sustainable. Wind energy is unreliable. Wind energy is environmentally unfriendly: turbines are decimating bat and bird populations across the globe. Wind energy does not reduce CO2 emissions, but as FAA emails FOIA'd in the Cape Wind mess show, turbines create micro-climate change so they add to our global warming problem. The money we shovel into the sinkhole called "wind" ends up in the pockets of greedy Wall Street types and foreign corporations. We have been funding this since the Carter Administration – since 1980. I think it's time to stop.

        • PR1a says:

          I think GE just opened a $170 million battery plant in Schenectady,NY for this purpose. They may be moving quicker than you thought. Check it out. "Durathon"

          Yes, I read in the NIH that the cause of Asthma is unknown (mix of heredity and environment) – they do say coal can trigger Asthma attacks though – so at the very least it leads to suffering. But check out this study
          http://wvgazette.com/static/coal%20tattoo/Harvard

          They claim 173-525 billion a year in "extra" hidden costs of coal. A fair amount of that is health related.

          It is a complicated issue no doubt. I think that wind is very quickly becoming sustainable and should be given the chance. It would be competitive if the other energy sources included all their hidden costs (and their subsidies) too.

          • christensen411 says:

            Sustainable?? Uh huh…. well there's always that issue of rare elements that are indeed RARE. This study concluded that all REEs might be gone in 15-20 years. http://ipezone.blogspot.com/2010/10/prc-rare-eart

            But hey, why not — I'm sure you must support opening up rare earth element mining in the US, am I right??? After all, that foreign dependence is a bad thing.

            PS — you are only looking liabilities of coal. A true externality assessment would include the benefits & liabilities of all considered sources. E.g. – benefits of having low-cost reliable electricity from coal — a major factor in the economic success of the US. I would think that such a benefit would easily be in the Trillions of dollars.

      • Paloma says:

        Talk about hidden costs. ALL information related to actual production from wind is Trade Secret. We are told capacity = production but it doesn't match up, not by a long shot. Power Purchase Agreements are also Trade Secret. So, we don't know what we're getting and we don't know how much we're paying for it. We do know, thanks to people like Mark Glaess of Minnesota's Rural Electrical Cooperative, that rural electric companies are losing millions 35+ because they are mandated (forced) to buy wind energy. That wind energy comes at night, when no one needs it, so in order to keep the grid stable, the companies dump that power. We pay for it, they have to pay for it – and it is thrown away because people are mostly sleeping at night. This is fiscally irresponsible and beyond irritating, not to mention dangerous.

    2. christensen411 says:

      Hey at PR1 — yeah it's about those "extra" costs — the ones not being included in the TRUE cost of wind, the ones being hidden from the public.

      Furthermore, not all KWs are equal. Wind provides NO firm capacity — NONE. It is in no way comparable to any generation that does provide copious firm capacity. Subsidizing DEFECTIVE energy performance does not make sense.

      Oh and about that "grid scale storage technology" it's always just right around the corner — and I notice you didn't comment on the project cost or the environmental impact — I think I know why.

      And lastly, you seem concerned about coal & health bills etc — what about Rare Earth Elements and the fact that China controls 97% of the world's supply. EACH turbine requires thousands of lbs. in Rare Earths — which are truly RARE and not infinite in supply. Have you seen the devastation caused to the people and the environment over in China by mining these? What about all this foreign dependence we always hear about? If we are going to break this, shouldn't we be mining Rare Earths in the US, then what??? Oh, but that's all part of this BIG lie that you people like to ignore.

    3. coal KW says:

      PRI wrote, "200 billion a year in health bills (look it up).." PRI, if you have studies or data you want share with the group, feel free to link it.

    4. David Ward, AWEA says:

      The production tax credit (PTC) does indeed last 10 years for wind farms completed before December 31, 2012, but with as much success wind power is having because of the PTC in states like Ohio, Nevada, Michigan, and also traditionally Republican states like Idaho, Utah, Kansas, and Texas, we can’t afford to stop the progress of the wind energy industry overall.

      Additionally, the long-term savings for consumers created by wind energy are predicted to be significant. For example, according to the Wall Street analysis firm Bernstein Research, the Southeast alone could save $23 billion by 2030 by investing today in wind. Similarly, a study from Charles River Associates concluded that installing 14 gigawatts of wind power in the Lower Plains would provide an economic benefit of around $2 billion per year, with $900 million per year coming in the form of direct consumer savings on electric bills.

      Furthermore, recent polls are showing that the majority of voters support the wind energy investment in their states. This past week, a Public Opinion Strategies Iowa found 57% of voters are “less likely to vote for candidates who do not support expanding wind power generation.” The poll also found that 59% of independents in particular–the very voters any presidential candidate needs support from for success–believe wind energy has been good for the Hawkeye State’s economy and job production.

      • David Kreutzer, Ph.D. David Kreutzer says:

        David,

        First, I don't base my analysis on what polls show is popular.

        Second, all the other arguments you give are arguments for why wind shouldn't need a production tax credit or renewable energy mandates. If wind power is as great a deal as you describe, utilities and public utility commissions should be moving to wind without any inducement.

        The Bernstein study you cite shows the opposite of what you claim. Wind is much more expensive than either coal or natural gas (even though Bernstein assumes a much higher gas cost than we currently have). Coal beats wind even when they adjust for CO2 emissions. Wind only works when there is a CO2 penalty on gas and coal, and there are significant subsidies for wind on top of that. [See the table on page 7.]

        Of course if we subsidize something enough it will appear competitive if we don't include the cost of the subsidy. That is a disingenuous policy argument.

        • Bobbie says:

          Thank you very much, Mr. Kreutzer for your outstanding journalism using logical common sense and reasoning with intelligent insight and personal integrity rarely seen outside the Heritage foundation and in the political arena of democratic dominance! All considerations gives much wiser and clearer perceptions of reality that some government officials don't use their mentality to consider and would rather we the people didn't either so they shut us up by blatant ignorance only to force us to look to depend on centralized government who's costs and dishonorable conduct brought us all the trouble we struggle with today! Sorry to rant! Thank you always!

        • Byron says:

          I used US EIA data to plot curves showing the decrease in CO2/MWh versus the growth in wind and solar generation and the growth in natural gas fired generation. (Coal generation declined, hydro and nuclear did not change significantly). The curve for the decrease in CO2/MWh closely followed the curve for increased gas-fired generation but the curve of increase in wind and solar generation was far from matching the decreased CO2/MWh curve. My analysis, the majority of CO2/MWh decrease is due to increased gas-fired generation. If the money the feds spent subsidizing wind and solar had gone to increasing the amount of combined cycle power or new ultra-supercritical coal plants instead of causing market disruptions that discourage construction of new plants to replace aging coal fired power, there would have been an even more significant decrease in CO2/MWh.

      • christensen411 says:

        I see AWEA's Rapid Response team is out. Mr. Ward — successful wind power in Idaho??? I live in Idaho. I don't think Idahoans, as whole, are thrilled with wind energy. Last year, Idaho killed the states sales tax given to the wind industry. Idahoans are becoming educated on looking at the NET picture. For example: how much wind energy is INCREASING our power rates. The co-chair of Idaho's Energy Interim Committee summed it up nicely when he said in committee meeting (7/2011):

        “ Representative Eskridge said it would also be helpful to have a presentation examining what the true cost of wind generation incorporating integration costs, transmission costs, reserves costs and so on. He said it would seem to be more than what is seen on the initial purchase price.”
        http://legislature.idaho.gov/sessioninfo/2011/int

        And about all those touted jobs that we get for those tax credits/cash grants. Here's an example of what this looks like – this Goshen wind project in my area ended up with 5 permanent jobs — it received $78,055,029 in cash grants from the US Treasury!!
        http://www.bp.com/liveassets/bp_internet/alternat
        http://www.treasury.gov/initiatives/recovery/Page… (Scroll to bottom where it says “awards”).

        NOT a good deal for taxpayers! Now, couple that with increased powers rates — a double- whammy to the taxpayers and the economy.

        This is about looking at the NET picture — something that is NOT being done. Please refrain from hoodwinking here.

        And I don't even want to hear about CO2 emission reductions — NO REGULATORY AGENCY DEMANDS UNBIASED ANALYSIS AND MEASUREMENT of say, fuel consumption with and without wind. Not ANYPLACE in the world. We know that fossil plants which are forced to balance wind’s large and rapid variations run less efficiently than they would have without wind. Even this new SIMULATED study done by Argonne shows this. http://www.forbes.com/sites/jeffmcmahon/2012/05/3

        But the BIG question is: with YEARS of wind performance under our belt now in the US, WHY are we not analyzing ACTUAL (i.e. not simulated) grid performance??? Why are states with RPS not looking to see if such mandates — er — energy taxes — are REALLY doing their job?? When AWEA holds the lock and key to supporting data of their claims — and that data/claims are directly linked to their life vein — the PTC etc. It grows a little suspicious.

        • Paloma says:

          Really great comments, christensen411! The AWEA echo chamber isn't working as well as it used to and Americans are getting fed up with the lies and b.s. we're being fed about the benefits of "wind". I live in the Mississippi River Flyway, which the windy's seem to think they can move, in order to blanket the area with turbines. We have a Gamesa owned project that is proposed for siting, literally, on top of sinkholes! I can't think of a more appropriate metaphor: siting sinkholes for taxpayer money on top of real sinkholes. The project is called Eco-Harmony and is located in SE Minnesota. Texas oilman, T. Boone Pickens hired a national survey team to fabricate an avian and bat impact study so he could install wind with easy transmission line access. That project, AWA Goodhue, is largely responsible for the AWEA seeking a loosening on restrictions to kill bald eagles because there are eagles nesting as close as 1/4 mile from turbines. There is nothing sustainable about wind energy, and in fact, I would say that turbines pose a threat to the very thing we need to protect to maintain sustainability: the planet. Did you see the FAA emails published after the Cape Wind opponents filed a FOIA? Wind turbines create micro-climate change. That's right, they increase global warming and the government knows it. Politics, not science or common sense, pushes money down this tidy bowl. Since it's my money, I'd like it to stop.

      • Paloma says:

        Dear Mr. Ward, Please release the actual production numbers for wind instead of using capacity numbers. Please also release information related to the Power Purchase Agreements. Currently, both are Trade Secrets so we are unaware of what we are getting and how much we are paying for it. I believe the reason for this is because you are afraid of the truth. You know that if those figures become public data the citizens of the United States will be demanding our money back. I read a lawsuit involving a Morgan Stanley owned wind company. In this case the developer's attorney received 1 million dollars for each turbine installed on top of his already cushy salary. I understand that is fairly standard.

        Wall Street has stolen enough of my money. The AWEA policy paper, which I read and found absolutely disgusting and despicable, shows how you buy politicians and policy. Science is not the over-riding factor in wind, and reducing CO2 emissions with wind is a fallacy. Governor Romney's announcement that he would end subsidies for wind has caused life-long Democrats (in their 60's) to decide they will vote for him instead of Barack Obama. Citizens have beaten you at the PTC extension game on 6 occasions, taking time from our busy lives to call Washington to demand they stop this nonsense. I believe calls were 2-1 AGAINST allowing you to remain at the federal teat.

        Give Americans who are not investigating this some real numbers. Give them some real data. Let them know permitting of wind is political, not scientific or based in environmental concerns. You are destroying sustainable agricultural landscapes everywhere with your ridiculous wind turbines. Stop.

    5. christensen411 says:

      I have one more comment that I want to make especially after watching today's Senate Finance Committee hearing. I heard a great quote once: "Time is always on the side of Truth." One example that comes to my mind is Spain. “Eight times, Obama publicly referred to Spain’s program as being a model for a U.S. wind energy program.1” Look at Spain TODAY, and see how wind (and solar, for that matter) impacted them. 3,4 And for that VERY reason, Obama no longer touts Spain.

      1 – http://pajamasmedia.com/blog/breaking-released-em

      2 – http://www.businessweek.com/news/2012-05-29/spain

      3 – http://www.energytribune.com/articles.cfm/6193/Cr

      4 – http://www.americanthinker.com/2010/02/wind_energ

    6. Lisa Linowes says:

      Dr. Kreutzer – thanks for your post. I offer one amendment. To compare the PTC to wholesale prices of electricity, one would need to scale-up the PTC to its pretax equivalent. Assuming a 37% marginal tax rate, the PTC has a pre-tax value of 3.5 cents/kwh thus representing between 80% and over 100% of the wholesale price of energy. It's no wonder big wind is clinging to this overly generous subsidy. –Lisa Linowes

      • David Kreutzer, Ph.D. David Kreutzer says:

        Lisa,

        You make a great point. Any revenue from actually selling electricity is subject to the corporate income tax, while the tax credit goes straight to the bottom line. I apologize for underestimating the generosity of the PTC!

        David

    7. Chris O'Neil says:

      "Subsidies" is one of the most bastardized terms in politics. The Internal Revenue Code affords all businesses and individuals lots of "subsidies" every year. They used to be called deductions, write-offs, and credits. The bigger the taxpayer the bigger the deductions. Fact is, wind power has been at the "get a leg up" trough for about 15 years too long. The technology is no longer new or fledgeling. And the product it produces brings society zero material benefit. So it's time to step away from the teat.

      Wind projects are heavily subsidized at an exorbitant rate. Not accounting for state incentives, ratepayer mandates, and various policies, wind generated electricity is generously subsidized by federal taxpayers. According to the U.S. Energy Information Administration, wind generators take federal subsidies at a rate of $56.29 per megawatt hour (MWh) of electricity produced. Compare this to the subsidy rates for reliable generators like natural gas and coal, which receive 64 cents/MWh, Hydro: 82 cents, Nuclear: $3.14, and Geothermal: $12.85/MWh. In 2010 the $5 Billion in federal subsidies for wind power was more than three times the amount that went to natural gas and coal power combined. Note that in the same year natural gas and coal produced thirty times more electricity than wind: 69% of all American electricity, while wind produced 2%. On a per BTU basis, the comparison is laughable.

      Federal subsidies – total dollars per generation source. EIA http://www.eia.gov/analysis/requests/subsidy/pdf/

      Federal subsidies per unit of electricity produced. IER http://www.instituteforenergyresearch.org/2011/08

      Total US electricity generation in 2010 EIA http://www.eia.gov/electricity/annual/

    8. John says:

      How do renewable energy certificate's figure into this ? Are they part of the government subsidie's ?

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