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Facts about the PTC and industrial-scale wind  

Author:  | Economics, U.S.

1. Wind is a mature industry – it’s time for it to stand on its own. The Joint Committee on Taxation reports that between 1992 and 2015 [1], the cumulative cost of the PTC, without extension, will be approximately $17 billion with the bulk of this claimed by wind resources constructed since 2006. These costs are in addition to the anticipated $22.6 billion in direct cash outlays under the Section 1603 grant program now expired. Yet, after decades of government support of multiple kinds, the wind industry remains economically unviable.

2. The wind-sector slow-down is not tied to the end of the PTC. The wind industry insists it’s at risk of a slow-down without the PTC and jobs will be lost. But this view ignores crucial factors driving development in the United States. Demand for wind has eroded, in part, due to states meeting their renewable mandates. Lower natural gas prices have further reduced wind’s attractiveness as a ‘fuel saver’. Faced with these market conditions, wind developers are tabling projects. The Energy Information Administration [2] now forecasts flat growth in the wind sector for this decade regardless of what happens with the PTC.

3. Wind energy is costly, and government efforts to offset the cost distort the markets. Wholesale power contract prices for onshore wind are roughly two- to three- times the price of more reliable generation, making wind one of the most expensive power sources in the U.S. even after the PTC is factored in. The PTC offsets the high price of wind energy, giving the false impression that wind is competitive with other resources, but at 2.3¢/kWh, the subsidy’s pre-tax value (3.5¢/kWh) equals, or exceeds the wholesale price of power in much of the country. The size of the subsidy relative to wholesale prices is distorting competitive wholesale energy markets and harming the financial integrity of other, more reliable generation [3].

4. The industry’s job-creation claim is based on one-sided, simplistic modeling. The wind industry insists the PTC enables American jobs but ignores potential jobs that would be created given alternative spending of federal funds. Further, industry job forecasts fail to report on the more important net job creation. In states like Vermont, government models have shown that above- market energy costs tied to renewables reduce any positive employment impacts of renewable energy capital investment [4]. This is without taking into account additional costs associated with wind-related transmission build-out and grid integration costs associated with wind energy’s intermittency.

[1] M. Sherlock Testimony, April 2012. http://science.house.gov/sites/republicans.science.house.gov/files/documents/hearings/HHRG-112-SY21-WState-MSherlock-20120419.pdf

[2] Energy Information Administration. EIA Reference case for wind energy, June 2012. http://www.eia.gov/oiaf/aeo/tablebrowser/#release=AEO2012&subject=0-AEO2012&table=16-AEO2012&region=0-0&cases=ref2012-d020112c

[3] Northbridge Group, Negative Electricity Prices and the Production Tax Credit. September 2012. http://www.nbgroup.com/publications/Negative_Electricity_Prices_and_the_Production_Tax_Credit.pdf

[4] Vermont Department of Public Service, The Economic Impacts of Vermont Feed in Tariffs. December 2009. http://publicservice.vermont.gov/planning/DPS%20White%20Paper%20Feed%20in%20Tariff.pdf

This article is the work of the author(s) indicated. Any opinions expressed in it are not necessarily those of National Wind Watch.

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