Menu

Politics

Budget

Blowing money around? Wind subsidy under fire as Congress weighs extension

wind_calif_061913.jpg

June 19, 2013: Shown here is a wind turbine at a wind farm in California.Reuters

A costly subsidy for wind energy producers is coming under fire as Congress weighs whether to extend it past Dec. 31, with a new study charging that it shifts millions from taxpayers to benefit a select few. 

"Subsidies to wind producers come at the expense of taxpayers everywhere," the study from the Institute for Energy Research states

The longstanding tax credit for the wind energy industry was last extended in early January, after frantic budget and tax negotiations that lasted through New Year's Eve. It's up for renewal once again at the end of this year, and once again caught in the middle of a broader political melee over the budget. 

If fiscal hawks get their way, the credit will expire. Dozens of House lawmakers wrote to House Ways and Means Committee Chairman Dave Camp, R-Mich., last month urging him to scratch the credit. They claimed the provision, estimated to be worth $12 billion over the next 10 years, is driving growth in the industry despite a lack of "market demand" -- and the credit "is now more valuable than the price of the electricity the plants actually generate." 

IER, in a study sharply disputed by the wind energy industry, argued that the program is "terribly inequitable." Its study attempted to calculate which states are "net takers" of the subsidy and which are "net payers" -- in other words, which states receive more in subsidies than they pay out, and vice-versa. 

The study found 10 states received more than 72 percent of the "transfers" in 2012. At the top of that list were Texas, Iowa, Oklahoma and North Dakota, which each received, net, more than $100 million from the tax credit (the study looked at a credit called the wind production tax credit, as well as two similar programs). The biggest payers were California, New York, Florida, New Jersey and Ohio. 

The credit itself dates back to 1992, when it was worth 1.5 cents per kilowatt-hour of electricity produced; today, the rate is 2.3 cents. The study notes that wind energy still makes up a relatively small portion of the U.S. electricity supply. But most states, which aren't major hubs for the industry and therefore don't receive much from the tax credit pool, "unfairly shoulder the burden." The money generally flows from eastern states to western states. 

But the wind energy industry is accusing the IER study of ignoring a host of factors, including that the subsidies themselves aren't the only benefit from the tax credit program. 

In a point-by-point rebuttal, the American Wind Energy Association said the IER study "strategically ignores" studies showing economic benefits to all states. 

The group says wind power has generated "$25 billion in private investment," and that every state has at least one functional wind project or plant or related jobs. 

"American wind power supports 80,000 full-time jobs," the group claimed. 

The group said wind energy is helping bring down electricity prices overall and using tax incentives to spur growth in domestic energy production is "nothing new." 

Indeed, federal tax incentives have been in place for decades for fossil fuels and other sectors, in addition to more recent subsidies for alternative energy like solar and wind. And it is the nature of subsidies that they generally take taxpayer money from everybody, and direct it to a relative few. 

"Like a chain smoker, the fossil fuel-funded Institute for Energy Research (IER) seems addicted to spreading misinformation about wind power," the American Wind Energy Association said in its rebuttal. 

The IER is a research group aligned with the oil and gas industry, largely opposed to new environmental regulations and frequently at odds with alternative energy sectors like wind. 

Another pro-wind power group, the Governors' Wind Energy Coalition, also recently wrote to congressional leaders urging them to renew the tax credit. They claimed that the uncertainty over the credit last year has already cost them investments and jobs. "The nation's wind industry developers do not need this tax credit forever, but they do need policy certainty in the near term to bring their costs to a fully competitive level," the letter, signed by several Democratic and Republican governors, said.   

But critics argue that the tax credit benefiting the industry has become too lax. The IER study notes that Congress changed the eligibility rules so that wind facilities can claim the credit for years so long as construction begins in 2013 or 5 percent of the total cost is committed in that time -- even if the projects don't come online for another two years.