The U.S. Senate is poised to resurrect Washington’s most conspicuous, wasteful taxpayer subsidy—the wind-production tax credit.
This giveaway expired in December. Yet on April 3 the Senate Finance Committee gave it new life by approving a $13 billion, two-year renewal within a package of 55 “tax extenders.” Once again, Washington is proving Ronald Reagan’s observation that “the nearest thing to eternal life that we’ll ever see on this Earth is a government program.”
The wind-production tax credit was first enacted in 1992. At the time, wind-power was considered a kind of “infant industry,” needing help to bring its technology up to speed and lead to lower costs. The tax credit has since been reborn eight times, even though President Obama’s Energy Secretary Stephen Chu in 2011 said that wind power is a “mature technology.” A mature technology should stand on its own in the marketplace.
The 2.3-cent tax credit for each kilowatt-hour of wind-power electricity produced is sometimes worth more than the energy it subsidizes. Sometimes in some markets, for example in Texas and Illinois, the subsidy is so large that wind producers have paid utilities to take their electricity and still make a profit.
The wind-production tax credit should not be renewed for three principal reasons:
1) It wastes money. The proposed two-year extension would cost taxpayers nearly $13 billion over the next 10 years, according to the Joint Congressional Committee on Taxation. In 2013, when Congress renewed the subsidy for one year, the cost was nearly $12 billion over 10 years. This is more than the federal government spends on energy research in one year.
A better use of taxpayer dollars would be to reduce the ballooning federal debt or to invest in research to find new forms of cheap, clean, reliable electricity. For example, what about a substantial cash prize from the U.S. Department of Energy for creating a truly commercial use for carbon captured from coal and natural-gas plants? Such a discovery would be the Holy Grail of clean energy—permitting the use of coal world-wide to produce an abundant supply of cheap, clean, reliable electricity to reduce poverty while protecting the environment.
2. The wind subsidy undercuts reliable “baseload” electricity such as nuclear and coal. Let’s say it’s 3 a.m. in Chicago. The wind is blowing, which it usually does at night when consumers are asleep and don’t need as much electricity. Because of the subsidy, wind producers can pay utilities to take their power and still make a profit.
But the electricity generated from coal and nuclear plants—which are hard to turn on and off—becomes less economical. As a result, utilities have an incentive to close these “baseload” plants. Negative pricing tied to wind power, along with the low price of natural gas, is causing utilities to close nuclear plants. The Center for Strategic and International Studies says that as many as 25% of our country’s 100 nuclear plants might close over the next 10 years.
On April 28, environmental groups, including the Center for Climate and Energy Solutions and Nuclear Matters, announced—they held an event in Washington at the National Press Club— that they were concerned about losing clean nuclear power, which provides 60% of America’s air-pollution-free electricity. And, in a country that consumes 20% of the world’s electricity, relying on windmills when nuclear power is available is the energy equivalent of going to war in sailboats when nuclear ships are available.
These are the consequences of government subsidies that pick winners and losers in the marketplace.
3. Wind-power subsidies destroy the environment in the name of saving the environment. The wind turbines that generate power in this country do not resemble the charming, picturesque windmills that dot the Dutch landscape. Instead, they are 20 stories high. Their blinking lights can be seen for miles. Their noise disturbs neighbors. Their transmission lines scar neighborhoods and open spaces.
In the Eastern U.S., onshore wind turbines work best on ridge tops. You would have to stretch these giant windmills the length of the Appalachian Trail, from Georgia to Maine, to equal the power produced by eight nuclear-power plants. And since wind turbines produce power only when the wind blows (about one-third of the time), even if you built that many windmills, you’d still have to build nuclear or other power plants to produce reliable electricity for computers, jobs and homes.
After nearly 22 years, eight resurrections and billions of taxpayer subsidies, it’s time to let the marketplace rule and allow wind power to rise or fall on its own. Save our money, save our nuclear plants and save our mountaintops.
Mr. Alexander, a Republican, is a senator from Tennessee.