November 1 2012
Wind is a Big Kid Now
The way people talk, you would think wind energy is a new industry that needs special tender loving government care in order to be a sustainable industry.
But new research from the American Energy Alliance reveals the wind industry may be more grown up than most people think. The study shows the Wind Production Tax Credit (PTC) is no longer needed to drive wind generation development.
The PTC was established by Congress in 1992 and grants wind producers a subsidy of $22 per megawatt hour of energy generated. The use of wind is one of the more senior energy technologies, even predating coal. Wind energy capacity has increased five-fold since 2006.
Wind’s growth in the energy sector is largely due to renewable portfolio standards (RPF’s). Renewable portfolio standards require increased production of energy from renewable sources. As such, the PTC has not been the main spur of wind energy growth. The tax credit expires at the end of this year, and its one year extension would cost an estimated $12.1 billion.
Furthermore, wind generation makes up 90 percent of renewable resources developed under non-federal programs, and thus plays a dominant role in the renewable energy sector. And without the PTC and various other federal incentives, wind generation is still expected to grow 50 percent by in the next 18 years.
Dr. David Dismukes, associate director of the Louisiana State University Center for Energy Studies explains the findings of his latest study:
“When you strip away all the rhetoric, the real issue is that wind is a mature industry whose growth is being fueled by aggressive RPS standards and is no longer in need of training wheels,” said Dr. Dismukes. “The PTC is a costly and inefficient subsidy that is clearly no longer necessary.”
These findings could spark a fight leading into the election and beyond as Congress debates which tax credits to extend and lobbyists attempt to make new relationships with incoming Congressmen and Senators. The PTC debate is infused with lobbying dollars as industries take competition from the marketplace and seek to win industry competition on the House and Senate floors.
The American Wind Energy Association spent $560,000 in the first quarter of this year alone, while Exelon, a Chicago based energy company has come out in force against the PTC, arguing it, “distorts today’s competitive wholesale electric markets, causing severe financial harm to other, more reliable clean energy sources.”
It is time for Congress to reevaluate the logic that subsidies are needed and effective at helping companies or new technologies compete with established businesses. But keeping subsidies that are not the drivers of industry growth also makes little sense.