November 22, 2017
Letters, U.S.

The hidden costs of wind-power subsidies

The Wall Street Journal | Nov. 21, 2017 |

Your editorial “Big Wind and Tax Reform” (Nov. 11) says the production tax-credit subsidy takes billions out of the pockets of working Americans and transfers the money to rich investors. That’s not half of it.

In addition to the $24/megawatt hour in production tax credits (PTC) in the first 10 years of a project’s life, wind payments under power-purchase agreements (PPAs) with utilities and nonutilities (like Facebook, Amazon, Google, etc.) can average $70/Mwh and more over contract lengths that are typically 20 years and longer.

Thus, wind energy is guaranteed compensation from extra-market sources that is two to four times the $20 to $30/Mwh typically received by true market participants. Wind operators typically offer power to the market at negative prices to make sure that they won’t be bumped offline so that they can continue to produce and earn both the PTC and PPA payments.

Most of the new power transmission in the U.S. in recent years is being built to bring wind energy to large population centers. The cost of the billions invested in new transmission projects is passed through to electric customers at rates of return exceeding those allowed by state public utility commissions. According to a recent report on wind energy technology by the Berkeley Lab, about $20 billion in new transmission will be built annually between 2014 and 2019. For context, annual transmission expenditures are about equal to the value of all coal sold to the electric sector by U.S. producers in 2016.

Congress (and some states) made the market for renewable energy, and rich investors continue to force large chunks of unneeded energy into the nation’s power markets. The negative prices for wind power force local utilities out of wholesale power markets because utility-owned generation can’t compete with subsidized, mandated power, especially with demand growth very low or flat.

Retail electric rates should be declining because, according to the wind lobby, renewables are so inexpensive. This is clearly not the case. Wholesale power prices are down but retail rates are not.

Rogersville, Mo.

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