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Commentary: end life support for Big Wind

The fate of Big Wind in Vermont is currently resting with a piece of legislation that has become hotly controversial in Congress.

To understand why, it’s necessary to grasp that Big Wind is almost entirely a product of a host of federal and state subsidies. Most of these are disguised as “tax expenditures” that allow Big Wind investors to offset their taxable income from other sources. For instance, Big Wind investors can depreciate their investments over five years – and take 50% bonus depreciation the first year.

The really crucial Federal handout is the Production Tax Credit (PTC). Under this provision a Big Wind developer can collect a $23 credit for every Megawatt hour of electricity produced. (“Big Wind” means ridgetop turbines producing more than 100kw of electricity. There are also many state and federal incentives for renewables generally, including small wind.)

The current crisis facing Big Wind’s profitability is the fact that the bonus depreciation and the PTC expired at the end of 2013. Big Wind, and the renewable industrial complex generally, has mounted a frantic lobbying campaign to get Congress to pass the “extender” bill to revive the expired provisions to enable more Big Wind money making. The Washington Post described the bill as “a full employment plan for lobbyists” and “fiscal irresponsibility plain and simple”, because there is no revenue source to cover the $85 billion in first-year tax expenditures ($13 billion for Big Wind.)

Vermont Senators Patrick Leahy and Bernie Sanders and Rep. Peter Welch are enthusiastic supporters of reviving the Big Wind PTC. It’s hard to explain the enthusiasm of these three for subsidy-sucking Big Wind, when so many of their constituents are opposed to it.

The “extender” bill is currently on hold in the Senate, partly because of opposition to many of the handouts contained therein (especially from anti-subsidy Tea Party Republicans), and partly because of Senate Democratic Leader Harry’s Reid’s tyrannical refusal to allow Republicans to offer amendments not approved by him.

One might view the Big Wind subsidies somewhat more favorably if wind power were a dependable and economically competitive energy source. It is not. It delivers irregular power during the 25% of the time (New England average) that suitable wind is blowing, at roughly twice the cost of power from the New England grid (or Vermont Yankee, which will go off line in three months).

When the wind blows at night, and power demand is low enough so that it can be met with baseload generation, the wind power producers actually pay the utilities to accept their power. More amazingly, when there is no wind, the turbines must suck power out of the grid to keep the huge blades slowly moving to prevent metal fatigue. This is called “parasite load”.

Congress, urged on by Leahy, Sanders and Welch, may pass the extender bill after this year’s election. If the PTC extension is included, Big Wind will get strong new life support.

And even more help is on the way. Gov. Shumlin and his ally Rep. Tony Klein will almost certainly ask next year’s Vermont legislature to enact a Renewable Portfolio Standard (RPS). This new mandate would require Vermont utilities to purchase increasing portions of their power from renewable sources, regardless of the cost to the ratepayers.

The new RPS would be an important component of Shumlin’s Comprehensive Energy Plan of 2011, that promises to mandate, tax and subsidize until 90% of Vermont’s energy consumption comes from renewable sources, including Big Wind, by 2050. The reason for this, of course, is to save our grandchildren from the “horrid future” Shumlin confidently predicts for them if we don’t take heroic steps now to combat the dreaded Menace of Global Warming.

If you have had enough of the expensive Big Wind subsidy carnival, what should you do? Get your three liberal members of Congress to back off from their support for including the PTC in the extender bill. Its expiration will almost certainly guarantee that no large wind project will ever again be built in Vermont.

But don’t stop there. Make it clear to candidates for governor and the legislature that you want Shumlin’s absurd “90% by 2050” mandate repealed, and the Renewable Portfolio Standard scrapped.

Just to drive the final nail in the Big Wind coffin, you could also ask them to enact a standby state production tax of $23 per Megawatt hour on electricity from new Big Wind projects, that would cancel out any revival of the Federal PTC.

– John McClaughry is vice president of the Ethan Allen Institute (www.ethanallen.org).