An Open Letter to Senator Hatch on the PTC

By Lisa Linowes — July 10, 2015

“The PTC offsets the high price of wind energy, giving the false impression that wind is competitive with other resources. But with capacity factors under 30%, project operation costs likely exceed the average wholesale price of energy in most areas of the U.S. Wind only appears to be a ‘cheaper competitor’ because it’s subsidized to a point where economics have no meaning in the wholesale market.”

We learned this week that the Senate Finance Committee plans to mark-up a new tax extender bill. This news comes just seven months after Congress enacted the controversial $42 billion tax credit (HR 5771) giveaway. Apparently, the promise of long-term broad base tax reform has again been pushed aside in favor of short-term relief for select taxpayers.

Over the coming months, a tidal wave of lobbyists will descend on Capitol Hill with countless reasons for why their industry deserves special consideration. The loudest among them will be promoters of wind energy. This open letter to Senator Orrin Hatch (R-Utah), chair of the Finance Committee, reminds him of another side of big wind that its promoters never mention.

Dear Senator Hatch:

We read Senator Grassley’s July 7 letter to you calling for the reinstatement and extension of the wind production tax credit. He touts the jobs created by the industry and the importance of “long-term predictable tax laws.” We would like to take this opportunity to present another side of the wind PTC, one that shows the high costs and negative impacts of subsidizing an industry for 23 years!

Under HR 5771 passed in December 2014, the wind industry secured a 1-year, $6.4 billion extension of the production tax credit (“PTC”), representing the second-largest payout under the bill. This was preceded by a $12 billion dollar extension passed in January 2013 and nearly $13 billion[1] in direct cash outlays issued under the Section 1603 grant program for wind projects placed in service by the end of 2012.

Contrary to claims about fossil fuel being heavily subsidized for decades, no traditional source of electric generation has ever received an open-ended, unlimited subsidy like the PTC for every kilowatt hour of energy put on the grid.

The PTC offsets the high price of wind energy, giving the false impression that wind is competitive with other resources. But with capacity factors under 30%, project operation, costs likely exceed the average wholesale price of energy in most areas of the U.S. Wind only appears to be a ‘cheaper competitor’ because it’s subsidized to a point where economics have no meaning in the wholesale market.

Substantial non-energy market revenues, including the PTC and renewable energy credits (RECs), keep wind in the black.

Since the PTC pays renewable generators the same price for placing a kilowatt-hour of energy on the grid regardless of time of day or seasonal demand requirements, the subsidy encourages renewable generation to be built in the wrong places and that operates when we need it the least.

Without the PTC, the industry would have to lower its capital costs, improve its efficiencies and narrow the price gap with gas. But as long as it is propped up by our tax dollars, there’s no need.

Warren Buffet recently reminded us that wind investment makes no sense without handouts from taxpayers. Bill Gates went further when he said recently that current renewables like wind are “dead-end technologies” and the cost of using wind and solar to reduce our carbon emissions is “beyond astronomical.”

We agree.

The cost in actual dollars is evident. What is less recognized are the significant and serious environmental and societal costs of building wind turbines.

Today, hundreds of thousands of acres throughout the United States have been transformed into sprawling electric generating facilities strung together with expansive transmission systems. Thousands of 400+ foot tall spinning towers consume our open spaces and threaten people and wildlife in their way.

Before you race to extend the wind PTC, Senator Hatch, we ask that you stop and consider the true impacts of your decision. The wind industry has had 23 years to grow and improve its product. Big wind is now a mainstream energy resource. We are at a point where the industry may be doing more harm to our markets and our communities than good. It is time to say no to the wind PTC once and for all.

——————-

[1] As of January, 2015, $23.7 billion in cash grants were distributed. More than half of this grant money went to wind energy projects.

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Lisa Linowes, through her scholarly research and advocacy work, is one of the nation’s leading critics of government-enabled industrial wind power.

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