Time to Tell the Alternative Energy Industry to Grow Up

by Jackie Moreau on December 15, 2011

in Blog, Features

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The Senate Finance Committee gathered this week to discuss whether the time has finally come to cut the umbilical cord of tax incentives from the mollycoddled alternative energy industry.  This may sound childish, but many of the witnesses pushing for an extension of expiring tax incentives for renewable energy characterized their allegedly up-and-coming market in such terms.  Venture capitalist Will Coleman for Mohr Davidow Ventures maintained that despite alternative energy’s “rapid growth,” such as in wind, “it is still in its infancy.”  Paul Soanes, President and CEO of Renewable Biofuels, testified: “The industry is like a child that needs some nurturing.”  The question then becomes: will a renewed tax extension fund a future pride-and-joy of profit or a prodigal embarrassment (I.e. Solyndra).

Multiple testimonies that lauded the progress of alternative industries like wind, solar, and ethanol as job creators and strong global competitors were belied by an overwhelming sense of immediacy.  Coleman insisted that without continued subsidies, “We may in fact cripple America’s ability to compete.” Soanes urged, “Congress needs to act now to extend the PTC (production tax credit).”  Martha Wyrsch, President of Vestas-American Wind Technoloy warned, “If the PTC is not extended immediately, we will have to make tough choices…Our future is in jeopardy.”

It turns out that government funding can only be the wind beneath your wings for so long.  How long, you ask?  Don’t ask me—or any of the witnesses.  The question of when these industries would be able to stand without the tax-credit crutch was reiterated several times by members such as Chairman Jeff Bingaman (D-NM) and Sen. John Cornyn (R-TX); a direct answer could not be given.  Coleman stated ,“We need enough certainty to move the industry up and give investors certainty.”  Martha Wyrsch, President of Vestas-American Wind Technology, urged, “We’re so close. There’s an opportunity… it would be a mistake to stop.”  The most veracious answer was given by energy tax policy specialist Molly Sherlock: “It is a difficult distinction to make as to when they are mature.”

Should the American taxpayer really have to fund an industry whose puberty cycle seems never-ending in the hopes that it may, one day, hit its much anticipated growth spurt?  The only way to see if any industry (including the fossil fuel industry) can rise to the occasion is to let it compete independently, taking risks within the free-market.  Sen. Mike Pompeo (R-KS) recently introduced bill that enforces this development: The Energy Freedom and Economic Prosperity Act (H.R. 3308) would abolish all energy tax subsidies and use the resulting savings to lower the federal corporate income tax rate.  This piece of legislation establishes a level the playing field, leaves taxpayers off the hook, while enabling the true success stories to emerge in the marketplace.

Peter Garbutt December 15, 2011 at 7:30 pm

You may be right.
But I’d first ask how much the US Government helps the fossil-fuel industry?
Level playing fields?

Geoff Sander December 15, 2011 at 7:32 pm

The so called “renewable energy” industry is a bottomless pit for taxpayers’ money. It will never be self-sufficient because people will never willingly pay the exorbitant prices required to cover the costs of production. More importantly, as people learn that in fact wind power doesn’t result in the shutdown of coal plants & that bio-fuels actually increase fossil fuel consumption & emissions, they will rebel against the entire fraudulent industry. Check out Kids Before Trees to learn more. https://www.smashwords.com/books/view/80505

Kevin @ AWEA December 16, 2011 at 11:53 am

A more honest view of energy subsidies is provided in a recent report, “What Would Jefferson Do?” * from DBL Investors, which found that “current renewable energy subsidies do not constitute an over-subsidized outlier when compared to the historical norm for emerging sources of energy. For example: … the federal commitment to [oil and gas] was five times greater than the federal commitment to renewables during the first 15 years of each [subsidy’s] life, and it was more than 10 times greater for nuclear.

The call for an end to all energy subsidies from Rep. Mike Pompeo (R-KS) could be a laudable goal if it treated all energy resources fairly, and treated energy fairly relative to other sectors. Unfortunately, his proposed legislation doesn’t work that way. It unfairly singles out the most promising source of new manufacturing jobs while protecting billions of dollars in incentives for other energy sources and all non-energy sectors. Honest reform of tax incentives must start with a level playing field.

The fact is, with the threat of the PTC coming to an end, the companies that build wind farms are not making plans and American manufacturers are not receiving orders. Job layoffs have started already. The wind industry is facing the recurrence of the boom-bust cycle it has seen in previous years when the PTC was allowed to expire briefly before being renewed by Congress. In the years following expiration, installations of new wind turbines dropped between 73% and 93%, and many jobs were lost. Such a dramatic drop in business is hard on companies and workers and their families at the best of times, but it will be a very punishing blow in the current economy.

The development of wind power and other renewable energy sources is important for the future of the country and health of the environment. Wind energy is clean, abundant, and homegrown, and its cost is dropping. The case for continuing to invest in it is very strong.

*Available here:

Barry December 17, 2011 at 12:01 am

“Production” subsidies don’t mature. They will never determined by the market but by the price of substitutes out of China. The latter are in turn part-determined by China’s propensity to subsidize its production.

The US industry has taken anti-dumping action against China’s renewable energy industry on the grounds that it is subsidized. Chinese industry will be able to bight back, calling the records of the Senate Committee as evidence.

Bruce Hesher December 17, 2011 at 12:30 am

The renewable industry covers a lot of different technologies. Some are mature but still have incentives, others are still maturing and incentives might be justified. It is necessary to treat different technologies accordingly. Solar water heating and solar electric are examples.
Solar water heating is mature. We have been doing it for over a hundred years. It makes financial sense to the consumer to put a solar water heater on their home or business and pay for it themselves with zero incentives.
Solar electric systems are not mature but are getting there. Incentives for them may be justified but, need to be of a known limited time frame so that the industry has tangible targets to achieve. Without targets, financial models will be developed to depend on the taxpayer forever.
Tax incentives for weatherization (insulation, radiant barriers, energy efficient appliances, etc.) are not justified. Conservation and weatherization measures have the shortest financial paybacks. They should be promoted through education not legislation. Let the businesses that are involved in their manufacture and installation promote them.

Lawrie Ayres December 18, 2011 at 6:55 pm

Proponents of wind power and solar for that matter, fail to include the cost of the back up power supply in their calculations. Whilstever the percentage of power derived from renewables is small relative to total generating capacity the need for spinning reserve is very small. If renewables were to gain a larger slice of generating capacity spinning reserve would need to expand as well. Spinning reserve is expensive, inefficient and creates emissions. The statement that wind is emission free is patently false unless the reserve is being supplied by hydro or nuclear in which case it would be cheaper to rely on them and scrap wind and solar altogether.

Scottar January 13, 2012 at 2:19 am

Don’t leave out the fact that wind and solar require at least five times the capacity factor due to a dismal indeterminacy production tract record. That requires exorbitant infrastructure costs of raw materials, including rare earth minerals of which China has a monopoly on, and these materials require fossil energy to extract and smelter the required end items for manufacturing the hardware.

So without the RPS mandate both PV solar and wind exist much on the market place. It may be decades away before they become a viable candidate but by then both nuclear fission and fusion will have superseded them.

You want solar or wind?, do it on your dime and not the taxpayers. When you look at levelized costs both nuclear and fossil beat renewables hands down, and that’s from a US-IER study- Levelized Cost of New Electricity Generating Technologies.

Stupidity is doing the same relative thing and expecting different results.

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