A top House Republican is calling for less government backing of the wind business after an audit found that financial support went to some wind energy projects that would have been built without any federal aid.
The yearlong U.S. Government Accountability Office study of the nearly $4 billion the federal government used to promote wind energy development in fiscal year 2011 was released by Science, Space and Technology Committee Chairman Lamar Smith, R-Texas, on March 28. In a statement accompanying the report, Smith questioned the Obama administration’s desire to expand federal spending on wind energy.
“We should eliminate duplication, not throw more money at overlapping initiatives,” Smith said. “The GAO’s findings are another reason why taxpayers should not continue to pick up the tab for billions of dollars in wind energy subsidies.”
The GAO identified 82 federal wind-related initiatives implemented by nine different agencies in fiscal year 2011. It also noted that there are dozens of state-level wind-promoting policies such as renewable portfolio standards.
But the vast majority of federal support for wind in 2011 came from just two Treasury Department programs. About $2.7 billion of the $2.9 billion spent on wind was via the Treasury Department’s Section 1603 grant program, a now-expired American Recovery and Reinvestment Act initiative. The industry also benefited from $1.1 billion of tax subsidies, mainly provided through Treasury’s 2.2-cent-per-kWh wind power production tax credit, or PTC.
Nevertheless, the audit described the variety of other tax credit, subsidies, loan guarantees and grants available to wind developers as “fragmented” and “overlapping.”
As a result, there was some “duplicative financial support” for wind projects, it found. The audit pointed to an unnamed Oregon project that used federal and state incentives to fund more than 65% of its capital costs. That led private financiers to reap a return of about 30% on their investment in the wind farm.
“Federal support in excess of what is needed to induce projects to be built could instead” be used to encourage other projects or reduce the federal budget deficit, the GAO concluded.
The auditors recommended that agencies with wind programs “assess and document whether the incremental financial support of their initiatives is needed in order for applicants’ projects to be built and take this information into account in determining whether, or how much, support to provide.” The Treasury, Energy and Agriculture departments all generally agreed to the GAO’s recommendations.
But the American Wind Energy Association suggested that the entire focus of the report was off-base. “It’s unusual to single out one industry, since numerous federal programs encourage all the various forms of energy,” AWEA spokeswoman Ellen Carey said in an email. “These programs are in place because it has always been in the public interest to ensure stable, low-priced energy, which in turn supports U.S. economic growth.”
That said, AWEA is primarily concerned with one of the 82 federal wind-related initiatives the GAO examined: the PTC. “Predictable policies, not a lot of programs, are what this country most needs to realize American wind energy’s full potential,” Carey said. The PTC for wind energy, which is set to expire at the beginning of 2014, “is threatened with expiration every year or two. That has seriously hampered the industry’s growth,” she said.
This is not the first time Republicans have used government subsidy data to attack wind support. Smith’s science committee colleague Cynthia Lummis, R-Wyo., chairwoman of the Subcommittee on Energy, questioned the cost of continuing the PTC for wind at a March 13 congressional hearing on Congressional Budget Office energy subsidy estimates.
Democrats have defended the federal support for wind. “It’s dangerous to just demonize some of these incentives,” Rep. Eric Swalwell, D-Calif., said in an interview after the energy subsidy hearing. “I don’t think we have fully understood the best way to harness [wind energy] – the best way to connect it to the grid. That’s why I’m not giving up on it.”
Americans are also more broadly in favor of wind energy than the Republican Party, according to a nationwide survey released March 27. The polling firm Gallup found that 71% of Americans support placing “more emphasis” on wind power production, second only to solar, which 76% of Americans favor.
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