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  • 7 Myths About the Wind Production Tax Credit

    The wind production tax credit (PTC) has created an industry that produces overpriced, intermittent power, and it will continue to produce overpriced, intermittent power so as long as there is a PTC to pay for it. Here are the top seven myths associated with the PTC:

    Myth #1: Wind power is, or will soon be, cheaper than conventional sources.

    Fact: If this were true, then there would be no need for subsidies.

    First, this is a rerun of an argument that has been made for at least 20 years. Second, if wind were already cheaper, then it could compete right now. If it is on the verge, then wind-power producers could enter into long-term contracts (which they already do) that would allow them to recoup their investments in the near future when wind will supposedly be so cheap. Neither case argues for subsidies.

    Myth #2: We need to extend the PTC so that businesses will have certainty.

    Fact: The only uncertainty regarding the PTC arises from attempts to extend it.

    The legislation in force has been very clear ever since it was written: Wind turbines put in place by December 31, 2012, qualify for 10 years of production tax credits. Windmills placed in service this year will continue to receive credits—which are worth 40 percent or more of the wholesale value of electricity—for every kilowatt-hour generated until 2022.

    Myth #3: Subsidizing wind stimulates the economy.

    Fact: Subsidies do not strengthen the overall economy.

    Subsidies may well provide jobs and income for those receiving the subsidies, but, as the Spanish experience illustrates, whatever job-creating mechanism the subsidies put in play is offset by running this same mechanism in reverse elsewhere: Financing the subsidies requires taxing other parts of the economy.

    In fact, the positive impact of the subsidies is more than offset, since the value of the resources employed in the subsidized industry exceeds the value of the output produced. (If it didn’t, they wouldn’t need subsidies.)

    Myth #4: We need to subsidize wind to stay competitive with those countries that are already doing so.

    Fact: Countries that subsidize wind are not to be emulated.

    Four years ago, the model for a “green economy” was Spain, but as its economy crashed, it dumped the subsidies. If Spain truly believed subsidizing wind power strengthened its economy, it would have increased the subsidies.

    Even Europe’s economic powerhouse, Germany, is backing off of its wind subsidies as the cost becomes prohibitive and the difficulties of integrating the intermittent supply threaten its grid.

    So now China is the model for our new-energy economy. We should note that China has only the 122nd highest GDP per capita in the world—well behind countries such as Bulgaria and Botswana. There are no calls to model our economy after those two, and there shouldn’t be any for aping China’s economic policies.China gets richer as its economy becomes more like ours—not the other way around.

    Myth #5: We need to switch to wind because we are running out of fossil fuels.

    Fact: We have centuries of the fossil fuels needed for electric power.

    The U.S. Energy Information Administration estimates that we have between 200 and 500 years worth of coal in the U.S. Though production of shale gas has grown so dramatically that projections are difficult, a conservative estimate shows that we have 100 years of natural gas available in the U.S. It’s worth remembering that long-run projections of fossil-fuel availability have frequently underestimated the actual reserves.

    Myth #6: Wind power provides energy security and reduces our dependence on foreign oil.

    Fact: Wind does not substitute for oil.

    The U.S. generates less than 1 percent of its electricity from oil and has enough domestic coal and gas to provide electric power for centuries. Throw in nuclear, and our ability to provide our own electricity is virtually unlimited. It may be that electrifying our automobile fleet would reduce oil imports, but charging the batteries in electric cars can be done more cheaply with abundant, conventional, domestic fuels than with wind.

    Myth #7: Wind power will stop global warming.

    Fact: An all-out program to increase wind power would not significantly reduce global temperatures.

    The Waxman–Markey cap-and-trade bill, with its 80 percent CO2 reduction target, would have limited CO2 emissions far more than would any wind-power subsidies. However, the Waxman–Markey bill would (at best) moderate world warming by only 0.11 degrees centigrade by the end of this century.

    Posted in Featured [slideshow_deploy]

    8 Responses to 7 Myths About the Wind Production Tax Credit

    1. Jim Wiegand says:

      David Kreutzer is a smart guy and everyone should be listening to his message. I happen to know because I am an expert on wildlife and have been after this industry for years about their massive slaughter to birds and bats. I have seen so many bad decisions and so many bogus/fraudulent documents produced, that I see any support for wind projects as an endorsement for corruption. Beyond the propaganda and media hype here is the reality of wind energy. Wind energy per kilowatt, is the most costly and destructive form of energy production we have today.

    2. ted gander says:

      Have you ever walked through a wind farm? It is very difficult as you have to climb over the massive piles of dead birds and bats…

    3. jeff archer says:

      the number one killer of avian species is the windows in buildings (large and small structures included). so move outta your house, level it and then live underground! btw #2 killer is house cats!!!

    4. Joe says:

      I like the part that says we have a conservative estimate of 100 years of gas. What comes after that? But then I am guessing we do not have to worry about that, because we will not be here.

      I think it would be interesting to see the pictures of the massive piles of dead birds and bats who have been blind sided by a wind mill blade. I have tried to hit a bat with a tennis racket in my house and they are quick. I have taken down several birds with my car but I'm going to keep driving.

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

        Joe,

        The tips of the blades are going hundreds of miles per hour–a bit faster than your tennis racquet. The bats are generally not killed by the blade but by dramatic drop in pressure from the front side of the blade to the back side–it causes their lungs to explode, which is well documented.

        In any event, the impact on wildlife was not part of my argument.

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

        Joe,

        So, you really think you know enough to make energy plans for more than a century into the future?

    5. AWEA says:

      As long as there are multiple billions of dollars in direct cash subsidies for fossil fuels, the argument against the PTC is nothing but a pathetic joke. Cry about a few dead birds and bats all you want, oil/gas/coal create more problems than wind turbines ever could. Any discussion about ending the PTC for wind should be in the same conversation about subsidizing the oil/gas industry for over 100 years. If wind is expected to stand on it's own after 20 yrs, lets see the oil/gas industry do the same thing after 100 yrs of being financially propped up by the tax payers. Think about those billions of annual tax payer dollars going into the pockets of insanely wealthy corporations the next time the gas prices hit $4 and $5 per gallon or more. Oil, gas and coal subsidies need to end, period. Bickering about ending the PTC for wind and solar energy is a pathetic distraction from the real issue of handing money over to the fossil fuel industry that simply does not deserve it.

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

        Billions in oil subsidies per year, really? You must be talking about the 199 tax deduction that is just 6% for oil and gas, but 9% for all other manufacturers–including wind turbine producers, solar panel producers, newspapers, software makers, etc. How is this an oil and gas subsidy? See: http://www.heritage.org/research/reports/2011/05/

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