The Production Tax Credit: Just the Facts
“The infant industry argument is a smoke screen. The so-called infants never grow up.”
- Milton and Rose Friedman, Free to Choose (Harcourt Brace Jovanovich, 1979), p. 5.
The 20-year-old production tax credit (PTC) has not done its work yet, claims the American Wind Energy Association (AWEA). It should be extended …. and extended … and extended.
The credit, now worth about 2.2 cents per kWh, or 40 percent or more of the wholesale average price of power, was first enacted in the Energy Policy Act of 1992, and has been extended six times, sometimes retroactively to cover the entire period without lapse.
What are the key facts regarding this subsidy to qualifying renewable energies, primarily electricity generated from wind and solar? This summary by the Institute for Energy Research (of which I am CEO) provides much good information for the ongoing debate given that the PTC is set to expire at the end of this year.
The PTC Is Costly
The PTC Creates An Unlevel Playing Field
· The PTC is 2.2 cents per kilowatt hour and wholesale electricity prices are frequently 4–5 cents per kilowatt hour.
· Wind production does not follow demand—it follows the wind. When wind production is high, demand is frequently low.
· Natural gas, coal, and nuclear do not receive the PTC, they frequently have to pay the electrical grid to take their power when electricity demand is low and wind production is high. This reduces the value of these reliable, dependable, cost-effective power plants.
Wind Power is Expensive and Unreliable
· But wind is not comparable to natural gas, or coal, or nuclear, or hydropower because wind is not dependable.  To truly compare wind to dependable, reliable source of electricity, you need to include the cost of backup for wind.
· Electricity production needs to follow electricity demand, but when electricity demand is highest (such as during the middle of afternoon in the summer) wind frequently does not produce much electricity at all. 
Wind jobs are Expensive–and Blowing Away
· Even with the PTC and wind generation additions, the wind industry lost 10,000 jobs between 2009 and 2010 – a 12% drop – and employment stagnated between 2010 and 2011. The wind PTC is not creating more jobs, but it is costing taxpayers more money each year. 
· Since 1995, shortly after the PTC was first established, wind power has grown from 0.09% to 2.9% in 2011 of total U.S. electricity production; EIA projects it will only grow to 11% by 2035. 
The PTC Was Supposed to be Temporary
· In 2002, Sen. Chick Grassley of Iowa claimed that wind needed the PTC for just a few years. He said, “I’d say we’re going to have to do it for at least another five years, maybe for 10 years. Sometime we’re going to reach that point where it’s competitive.”
For another critical look at a tax provision whose time should have never come but lingers and lingers, see “the most comprehensive information about the PTC, anywhere.”
Bottom line? Wind is still not competitive in either price or reliability. And taxpayers are poorer.
 Institute for Energy Research, Levelized Cost of New Electricity Generating Technologies, July 6, 2012, http://www.instituteforenergyresearch.org/2009/05/12/levelized-cost-of-new-generating-technologies/
 Daniel Simmons, California’s Flex Alert: A Case Study in Intermittent Energy, Aug. 13, 2012, http://www.instituteforenergyresearch.org/2012/08/13/wind-and-solar-have-little-value-when-trying-to-keep-the-lights-on-the-example-of-california-and-its-current-flexalert/.
 Institute for Energy Research, Will renewables become cost competitive anytime soon?, Apr. 1, 2009, http://www.instituteforenergyresearch.org/2009/04/01/will-renewables-become-cost-competitive-anytime-soon-the-siren-song-of-wind-and-solar-energy/.
 Christopher Prandoni, Life without the PTC ain’t that bad, Aug. 1, 2012, http://atr.org/life-ptc-aint-bad-a7095.