Nearly 20 years after Congress approved the first tax breaks for wind power, renewable-energy producers are still profiting from the subsidies at the expense of taxpayers and electricity consumers.
What’s more, the rush to renewable energy is undermining the viability of the electric power system, pushing scores of base-load natural gas, coal and nuclear plants into premature retirement and putting grid reliability at risk.
The Energy Policy Act of 1992 created what’s known as the production tax credit, which gives 2.1 cents for every kilowatt-hour of wind electricity produced by a wind turbine during the first 10 years of operation. After years of subsidization, the cost of the production tax credit is expected to reach more than $65 billion before its scheduled phase out around 2029.
When Congress approved the tax credit, it was intended to support development of what at the time was an emerging technology. But wind power is now a mature technology that even its advocates acknowledge can compete on its own against traditional power sources without government assistance.
Due to advances in wind technology, the cost of wind power has fallen dramatically since 2010. According to the financial firm Lazard, wind power’s levelized cost at the lower end in 2019 was $28 per megawatt hour. By contrast, the cost of combined-cycle natural gas was $44 per megawatt hour, coal $66 and nuclear power $118.
Like wind, the cost of utility-scale solar power has continued to fall. The cost to manufacture a solar module is less than one-tenth of what it was a decade ago. But a generous subsidy known as the investment tax credit has bolstered solar’s growth.
Make no mistake, the U.S. economy will require a mix of energy sources to meet base-load generation needs for the foreseeable future. The alternative is reduced reserve margins and the growing risk of blackouts like those that brought everyday life to a stop recently in California. Weighing these factors, the way to avoid blackout anxiety is to eliminate tax credits for solar and wind power.