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Joint Letter Opposing Extending the Production Tax Credits and 1603 Treasury Grant Program (time for free-market, fuel-neutral energy policy)

This letter to Congress was sent by American Energy Alliance, Americans for Prosperity, Club for Growth, Council for Citizens Against Government Waste, Freedom Action, The National Center for Public Policy Research, and Sixty Plus Association. It is reproduced here for its educational value in the general debate over special government favor to politically correct energies.

Dear Senator:

We strongly oppose extending the production tax credit and reviving the 1603 Treasury grant program. The U.S. is risking the energy equivalent of the housing meltdown through a continuation of these policies. Electricity prices are already increasing and these programs will only fuel the increase. Other nations’ economies are already reeling from the much higher electricity prices such sources mean for industry and families.

It is increasingly clear that the intervention of politicians and bureaucrats in the energy sector has had devastating economic consequences and led to embarrassing scandals. Yet the Senate is considering amendments to extend disastrous subsidies for windmills and other form of politically-preferred energy sources….

The PTC was created by the Energy Policy Act of 1992. The wind industry insisted at the time that it needed short-term help from taxpayers and would soon be able to compete on its economic merits. Twenty years later, wind is still uncompetitive, unreliable, and expensive, as reported by the Energy Information Administration (EIA). Yet Congress increased subsidies for wind dramatically in recent years, to a record $5 billion in 2010, according to the EIA.

Even with lavish subsidies and renewable mandates in many states, windmills provide just 2.3 percent of America’s electricity generation and according to estimates from the Energy Information Administration, wind will only produce about 4 percent of our electricity by 2035. Worse, redundant back-up capacity is required for when the wind isn’t blowing and demand is high.

Wind has been used to generate electricity for over 100 years and can no longer be seen as an infant industry. After decades of subsides and special treatment, wind must someday stand on its own as an economically sustainable industry. Now is a great time to start, and you only need look at Germany’s current experience to see the probable effects of the continuation of these ruinous policies.

As Der Spiegel recently reported in an article entitled Rising Energy Prices Endanger German Industry:

  • There is no sign yet of the green economic miracle that the federal government promised would accompany Germany’s new energy strategy. On the contrary, many manufacturers of wind turbines and solar panels complain that business is bad and are cutting jobs. Some solar companies have already gone out of business. The environmental sector faces a number of problems, especially—and ironically—those stemming from high energy prices.
  • The price of electricity is moving in only one direction: steeply up. For the Krefeld plant, the cost of a kilowatt hour of electricity has tripled since 2000.

Electricity prices in Germany are 36.7 cents (U.S.) per kilowatt hour compared to less than 12 cents per kilowatt hour in the U.S. and yet wind and solar still cannot compete.

Germany’s energy subsidies are not working, and the government is reducing subsidies for renewable energy sources because they can no longer afford them, placing the renewable industries that exist solely because of government subsidies in jeopardy.

We believe that the U.S. is not in any better economic condition than Germany to continue shoveling cash borrowed from the Chinese into technologies that only produce energy if lavished with subsidies, mandates and grants.

The subsidization of “green energy” may be popular with your constituents right now, just as government programs promoting home loans to those who couldn’t afford them were before the inevitable bubble burst. There is no reason to believe the “green energy” experiment will turn out any differently than the housing experiment, with all the economic dislocation attendant to such government folly.

We urge you to stop digging this hole any deeper, and to spare the consumers and businesses the terrible pain that will surely eventually accrue because of uneconomic sources of energy. After more than 20 years of direct subsidy payments, it is time to tell the mature renewable energy industry to get a job.

3 comments

1 Power Engineer { 03.13.12 at 8:00 am }

I note that the wind subsidy (PTC) at 2.2 cents per kWh is greater than the cost of the natural gas (1.75 cents per kWh*) burned in a combined cycle plant.

*Based on a heat rate of 7,000 BTU /kWh and a natural gas price of $2.5 per mmBTU. ( to calculate cost using the numbers of this example multiply 7 times 2.5 which gives the cost in $/MWH. Divide by 10 to get the cost in cents/kWh).

2 Kepler { 07.23.12 at 8:10 pm }

Does anyone know what the subsidies are for oil, coal or gas … is there an index or comparison across the board that compares real costs, “all things being equal” of all energy sources … one could go out find folks on the other side complaining that the fossil fuels industry gets over $600 B in subsidies while the renewables sector gets about $60 … I do not know if these #’s are real and true, only that I have seen them published at a major industry event and by studies from at least 2 different groups (one of which was a UN study). I am just trying to understand the real costs … anyone?

3 rbradley { 07.23.12 at 9:14 pm }

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