production tax credit

Post image for PTC: Costly Climate Policy Dud

The wind energy production tax credit (PTC) expires at the stroke of midnight, Dec. 31, unless Congress votes to renew the tax break. A one-year extension would add an estimated $12.1 billion to deficit spending over 10 years. A six-year extension, advocated by the wind industry, could add $50 billion.

The fiscal cliff looms and the national debt already exceeds GDP, but if Congress cared more about the general interest of taxpayers than about the special interests of campaign contributors, the nation would not be sliding towards insolvency.

Whether Congress should renew the PTC or let it expire is the topic of this week’s National Journal Energy Experts Blog. Twenty wonks weigh in, including your humble servant. I heartily recommend the contributions by Sen. Lamar Alexander (R.-Tenn.), Craig Rucker, Phil Kerpin, Benjamin Zycher, Thomas Pyle, James Valvo, and David Banks.

My contribution addresses the environmental side of the debate, in particular the claim that recent extreme weather events demonstrate “just how badly our nation needs to take advantage of our vast wind energy potential,” as one contributor put it.

Below is a lightly edited version of my comment.

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Of all the lame arguments used to sell Americans on the proposition that wind power, an industry propped up by Soviet-style production quota in 29 states and numerous other policy privileges, deserves another renewal of the 20-year-old production tax credit (PTC), the lamest is the claim that the PTC helps protect us from extreme weather.

PTC advocates talk as if Hurricane Sandy and the Midwest drought were obvious consequences of anthropogenic global warming, and that subsidizing wind energy is a cost-effective way to mitigate climate change.

They are wrong on both counts.

Neither economic analyses nor meteorological investigations validate the asserted link between recent extreme weather events and global warming. When weather-related damages are adjusted (“normalized”) to account for changes in population, per capita income, and the consumer price index, there is no long-term trend such as might indicate an increase in the frequency or severity of extreme weather related to global climate change.

A 2012 study in the journal Climate Change  examined 370 years of tropical cyclone data from the Lesser Antilles, the eastern Caribbean island chain bisecting the main development region for landfalling U.S. hurricanes. The study found no long-term trend in either the power or frequency of tropical cyclones from 1638 to 2009. It did however find a 50- to 70-year wave pattern associated with the Atlantic Multidecadal Oscillation, a mode of natural climate variability. [click to continue…]

Post image for Production Tax Credit: Remove Big Wind’s Training Wheels, Report Argues

“Remove Big Wind’s training wheels” and let the production tax credit (PTC) expire, argues University of Lousiana State University Professor David Dismukes in a report published by the American Energy Alliance (AEA), a grassroots free-market research and advocacy group.

Wind energy lobbyists and their congressional allies are pushing for a one-year extension of the PTC, first enacted in 1992. The Joint Committee on Taxation estimates the one-year extension would increase the cumulative federal deficit by $12.2 billion over the next 10 years. Wind industry lobbyists warn that not renewing the PTC would kill jobs. One could reply that jobs dependent on market-rigging tax breaks impose a net loss on the economy and should not be created in the first place.

The AEA report, however, does not take this tack. Rather, the report argues that wind doesn’t need the PTC because it is already competitive and will become more so as efficiencies improve. For example, the report cites a Breakthrough Institute estimate that unsubsidized wind costs $60 to $90/MWh, which “compares favorably with new combined cycle natural gas generation, at around $52 to $72/MWh,” making wind generation “likely already competitive with natural gas in areas that have high wind speeds.”

I’m not persuaded because, as explained in other posts, a megawatt of unpredictable, unreliable wind capacity has less value than a megawatt of predictable, reliable natural gas or coal capacity. Nonetheless, the AEA report presents several criticisms of the PTC that strike me as spot on, three of which are discussed below. [click to continue…]

Post image for Production Tax Credit: High Cost Subsidy for Low Value Power

In Wind Intermittency and the Production Tax Credit: A High Cost Subsidy for Low Value Power, economist Jonathan Lesser finds that “the vast majority of the Nation’s wind resources fail to produce any electricity when our customers need it most.” He also cautions that the wind energy production tax credit (PTC), which would add $12.2 billion to the federal deficit if Congress extends it for another year, adds billions of dollars in hidden costs to ratepayers “while undermining the reliability of the grid.”

Lesser’s analysis is based on nearly four years of data from three interconnection regions that account for over half of total U.S. installed wind capacity: Electric Reliability Council of Texas (ERCOT— over 10,000 MW of wind capacity), the Midwest ISO (MISO — almost 12,000 MW of wind capacity), and PJM Interconnection (PJM — over 5,000 MW of wind capacity).

In all three regions, over 84% of the installed wind generation infrastructure fails to produce electricity when electric demand is greatest.

In MISO, only 1.8% to 7.6% of wind infrastructure generated power during the peak hours on the highest demand days. In ERCOT, 6.0% to 15.9% of installed wind generated power, and in PJM, between 8.2% and 14.6% of wind produced power.

Demand for electricity is highest in the summer, especially during heat waves. But that is often when the wind stops blowing. The July 2012 heat wave is a case in point:

The July 2012 heat wave in Illinois, where temperatures soared to 103 degrees in Chicago, provides a compelling example of wind generation’s failure to perform when needed most. During this heat wave, Illinois wind generated less than 5% of its capacity during the record breaking heat, producing only an average of 120 MW of electricity from the over 2,700 MW installed. On July 6, 2012, when the demand for electricity in northern Illinois and Chicago averaged 22,000 MW, the average amount of wind power available during the day was a virtually nonexistent 4 MW.

[click to continue…]

Post image for Why Can’t We Get All Our Electricity from Wind?

Wind energy advocates often point out that a State, the U.S., or the entire world has enough wind energy to supply all of its electricity needs many times over. Writing in Scientific American, for example, Mark Jacobson and Mark Delucchi note that the world in 2030 is projected to consume 16.9 trillion watts (terawatts, or TW) of power, with about 2.8 TW consumed in the U.S. Total wind flows worldwide generate about 1,700 TW, and accessible wind resources total an estimated 40-85 TW. 

Based on such math, the American Wind Energy Association (AWEA) argues, for instance, that Arizona has enough wind to meet 40% of its electricity needs, Michigan wind resources could meet 160% of the State’s electricity needs, and wind in Oklahoma could provide nearly 31 times the State’s electricity needs. Yet despite ratepayer subsidies, special tax breaks, and renewable energy mandates and goals in 37 States, wind supplied 2.2% of total U.S. electric generation in 2010. Why don’t we get lots more of our electricity from this ’free,’ ‘non-polluting’ ‘renewable’ source?

The chief impediments are wind energy’s inherent drawbacks. First, wind energy is intermittent — at any given time the wind may blow too hard or too soft or not blow at all. Second, wind is non-dispatchable. When Shakespeare’s Owen Glendower boasted, “I can call spirits from the vasty deep,” Henry Hotspur replied: “Why, so can I, or so can any man; but will they come when you do call for them?” Like Glendower’s spirits, the winds answer to no man. The wind is not ours to ’dispatch’ as electricity demand rises or falls. 

There are three main ways of compensating for wind’s intermittency and non-dispatchability — pumped storage (pump water uphill when there’s too much wind relative to demand; let it run downhill and drive turbines when there’s too little wind), natural gas backup generation, and wind dumping (idle the turbines when demand is low). Incorporating those techniques to keep supply in balance with demand adds to the cost of wind electricity, which is typically more costly than coal- and gas-generated electricity even without storage and backup.

What’s more, according to a new Reason Foundation/Independence Institute report, the storage, backup, and idling costs become prohibitive as wind’s share of total generation increases beyond 10-20%. [click to continue…]

Post image for Ted Turner: Bass-ass Backwards on Wind

Media mogul and climate alarmist Ted Turner addressed the American Wind Energy Association’s annual gala this week. The highlight of his speech, as reported by the Huffington Post, was when he told the audience, “Let’s go out and kick their asses. That’s what they need, a good ass-kicking.” The antecedent of “their” and “they” was the coal industry.

Turner’s machismo seems to have been lost on the wind folks. The day after Turner called for an ‘ass-kicking,’ AWEA representatives held a conference call with reporters, in order to publicize their plea for an early extension by the Congress of the Production Tax Credit, the lifeblood subsidy of the wind industry. Without this ultra-generous taxpayer give-away, there would be no wind industry in America, because there isn’t a utility in the country that would pay full cost for intermittent, expensive energy.

Needless to say, Ted Turner’s tough talk comports poorly with the AWEA’s begging for a handout.