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Overlapping wind energy initiatives spark claims of waste, as IRS increases tax credit

A recent government report shows billions in taxpayer dollars are being swept away by pricey wind energy initiatives that often overlap, even as the IRS moves to up the value of a popular tax credit.

The Government Accountability Office recently identified 82 federal wind-related initiatives implemented by nine agencies in fiscal year 2011. The nearly seven dozen initiatives were fragmented across agencies and had overlapping characteristics, and several that financed deployment of wind facilities provided some duplicative financial support, the report found.

Sixty-eight of the 82 programs overlapped with at least one other initiative “because of shared characteristics,” the 95-page report found. The five agencies that had the most initiatives, and therefore were looked at closest, were the Departments of Energy, the Interior, Agriculture, Commerce and Treasury. Those five departments collectively implemented 73 of the 82 proposals examined by the GAO.

Wind energy has been the fastest-growing source of U.S. electric power generation for a decade. The increase in demand has exposed several weaknesses in the chain of funding wind energy-related government projects.

“This labyrinth of overlapping programs has spawned a system in which a single wind project could have siphoned public funds from numerous federal and state programs,” Daniel Simmons, director of state affairs at the Institute for Energy Research, wrote in U.S. News & World Report. “These include a Section 1603 grant, accelerated depreciation, a DOE loan guarantee, state tax incentives, and indirect subsidies from a state Renewable Portfolio Standard. Adding to the waste, GAO reports that states often design their initiatives to skirt double-dipping laws.”

Simmons also said the lack of transparency is one of the biggest problems associated with the wind initiatives.

“The federal government should get out of the business of betting taxpayer dollars on energy projects and instead let the American (people) vote with their pocketbook on which projects should succeed,” he said.

Despite the GAO report that points out holes in the government’s approach to wind energy, the Internal Revenue Service announced last week it would be increasing the production tax credit available for energy generated by wind, geothermal, solar and certain biomass projects because of inflation.

According to an April 3 notice in the Federal Register, wind, geothermal and “closed-loop” biomass projects will now get 2.3 cents per kilowatt-hour of electricity produced, up from 2.2 cents.

The credit was set at 1.5 cents per kilowatt-hour in 1993 dollars and was indexed to inflation. The IRS has regularly updated the credit since then. The tax break – 2.2 cents per kilowatt-hour – costs taxpayers about $1 billion a year. The new increase adds another $545 million in expected taxpayer support for the wind industry, according to the Institute for Energy Research.

The issue of the tax breaks was a political hot button during last year’s presidential elections. President Obama, during his appearances in wind industry-heavy swing states like Iowa, stressed his support for the tax subsidy repeatedly.

Republican candidate Mitt Romney came out against it.

Calls to the IRS for comment were not immediately returned.