“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.

First, the claim that wind is still an “infant industry” in need of special tax coddling doesn’t pass the laugh test. Wind has grown from just eight megawatts (MW) of installed nameplate capacity in 1980 to 50,000 MW as of Aug. 2012, and in 2011, wind power represented 45% of all new generation under consideration by regional interconnection organizations, independent system operators, and utilities. This industry has outgrown any plausible need for training wheels.

Second, because 30 states and the District of Columbia have renewable portfolio standards (RPS) programs that establish Soviet-style production quota for renewable electricity (see map below), the long-term growth of wind energy is guaranteed regardless of whether Congress extends the 20-year-old PTC or lets it expire:

Data confirms that these state renewable mandates not only drove the explosion of wind generation capacity development [a nearly five-fold increase from 2006 to 2011], but also established a guaranteed increasing future market for wind energy anticipated to triple in size by 2030 even if the federal PTC expires. The U.S. Energy Information Administration (“EIA”) forecasts that even if the PTC and other incentives are eliminated, renewable generation will still be on track to rise from 500 billion kilowatthours (“kWhs”) in 2011 to approximately 750 billion kWhs by 2035 (or a 50 percent increase in wind generation). This is a guaranteed increase in market share, even without the federal wind PTC, that is not offered to any other type of traditional power generation technology such as natural gas, coal, or nuclear.

Wind accounts for 90% of all renewable energy developed under state RPS programs. At a recent Platts Financing U.S. Power conference, a Standard & Poor analyst estimated that even without the PTC, state RPS programs would generate about $150 billion in contracts over the next 10 years. If future RPS targets are met with wind, installed capacity will more than double from today’s 50 MW to 127 MW by 2035 (see chart below). Offering an additional $12.2 billion in tax breaks on top of the guaranteed markets created by RPS programs would allow this pampered industry to “double dip” at the corporate welfare trough.

Third, the PTC is inequitable, a hidden wealth transfer from taxpayers who live in states with little or no wind energy development to ratepayers in states with the most stringent renewable energy mandates:

Notably, over 50 percent of currently-active wind capacity is located in only five states; over 75 percent is located in just 11 states. Under the federal wind PTC, however, taxpayers in the states without RPS mandates pay approximately 24 percent of the PTC funding, even though they receive no direct economic benefit. As such, the current federal PTC structure unfairly shifts the cost of wind energy development from taxpayers in the RPS states to those with little or no wind development, forcing taxpayers across the country to support an industry concentrated in a few states.

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.

I just finished watching the Sunday morning political talkies, and the second biggest ad buy of the day was in support of H.R. 1380, the NAT GAS Act, legislation that was produced by billionaire T. Boone Pickens to benefit the natural gas industry. T. Boone Pickens is a major player in the natural gas industry, so he basically made H.R. 1380 to make himself richer. That’s why this blog has referred to H.R. 1380 variously as the “Pickens Your Pocket Boondoggle Bill,” and the “T. Boone Pickens Earmark Plan.”

The advertisements I saw left me troubled. They indicated that T. Boone Pickens is less tone deaf, and therefore potentially more successful, than the last time he tried to get the Congress to enact legislation that he wrote to further enrich himself.

That was the 2008 “Pickens Plan,” and it was even bigger rip-off than H.R. 1380. The “Pickens Plan” was a simple four-step strategy: (1) subsidize wind produced by T. Boone; (2) subsidize transmission towers to deliver T. Boone’s wind power to cities; (3) force Americans to buy wind power produced by T. Boone; (4) force American motorists to fill their cars with T. Boone’s “leftover” natural gas, the stuff that was displaced by T. Boone’s wind power.

The first time around, T. Boone Pickens thought he had all his bases covered. He’d long been a big GOP donor, so he had that going for him. He relied on Democrats’ reflexive support for unreliable, expensive “green” energy like wind. Just to be sure, he supported their campaign coffers, too. Finally, he had a great public relations hook: “energy independence.” He could show videos of American flag burning in the Middle East and promise to wean the U.S. off Saudi crude with T. Boone’s wind and gas.

It was a great plan…with one fatal flaw. T. Boone Pickens branded his Plan with his face! He actually labeled his self-enrichment scheme the “Pickens Plan.” A lot gets past the American electorate, but they are intrinsically suspicious of legislation written by billionaires. It was too obvious a huge special interest payoff. And so it failed.

The ads I saw this morning were ALL burning flags, and ZERO T. Boone Pickens. This worries me, because it’s a much more effective pitch than, “billionaire T. Boone Pickens deserves even more money.”

According to the Industrial Wind Action Group, wind farms degrade the performance of 39 percent of radar stations operated by the Departments of Defense and Homeland Security.

Maryland

Offshore wind energy is so expensive that even the Democratic-controlled State Legislature is balking at the price tag of Maryland Governor Martin O’Malley’s (D) proposed “Maryland Offshore Wind Energy Act.” The legislation would force the state’s investor owned utilities to minimum 20-year contracts for 400 megawatts to 600 megawatts of offshore wind power. Governor O’Malley’s office estimates that the legislation would cost ratepayers about $1.50 a month, but this projection is based on unrealistically optimistic assumptions. Independent analyses peg the costs at up to $9.00 a month. The disparity in estimates has elicited a negative response from O’Malley’s own party in the legislature: the Washington Post reported this week that two Democratic lawmakers key to the bill’s prospects have suggested they need more time to vet the legislation than is left in this year’s session.

Kentucky

By a bipartisan vote of 28 to 10, the Kentucky State Senate last week passed a resolution exempting the coal industry from EPA regulation, according to the AP. The non-binding resolution, which was introduced by Sen. Brandon Smith (R), is now before the House of Representatives.

Colorado

The Colorado Public Utilities Commission held hearings last Friday on Xcel Energy’s request to lower its “Solar*Rewards” subsidy for installations of photovoltaic panels. This year, Xcel ratepayers are projected to pay 4 percent of total sales (about $100 million) on Solar*Rewards subsidies that will result in .3 percent of generating capacity. The Colorado Solar Energy Industry Association claims that the loss of the subsidy would cause a 75 percent contraction in the state’s solar industry.

The Wyoming House and Senate have passed the nation’s first tax on wind energy and sent the bill to Governor Dave Freudenthal.  The Democratic Governor proposed the new tax to the Republican-dominated legislature last month and so is almost certain to sign the bill into law.

The new excise tax of one dollar per megawatt hour will begin in 2012 and will apply  to windmills that have been generating electricity for three years or more.  Revenues are to be split 60-40 between counties and the State.

Amusingly, Denise Bode, CEO of the American Wind Energy Association, complained about the proposed tax on the grounds that it would discourage wind power production:  “It is very disturbing to hear that one of the great States for resources wants to tax the industry and discourage the development of jobs in their State.”  She did not mention that Wyoming already taxes oil, natural gas, and coal production, which is why it doesn’t levy a personal income tax.  Nor did she mention that wind power receives huge subsidies from federal taxpayers.  The Department of Energy’s Energy Information Agency estimated in 2008 that wind receives $23.37 in federal subsidies per megawatt hour.  So Wyoming has quite a ways to go before it captures the entire federal subsidy.

It will be interesting to watch how quickly other States follow Wyoming’s example.