Category — Production Tax Credit (PTC)
“The April 3rd action by the Senate Finance Committee certainly helps explain why a recent Gallup Survey shows that Congress currently has a 13% favorability rating. If the nation’s ‘Millennials’ understand how the Congress is adding to the debt that they and their children will bear, they may assign an even lower rating!”
The Senate Finance Committee that manages to make life miserable for millions of tax-paying Americans with its manipulation of the U.S. Tax Code. The Committee’s latest aids its friends, punish ordinary taxpayers, and loads another $85 billion in debt on our children and grandchildren.
On April 3, 2014, by “voice” (no fingerprints) vote, the Senate Finance Committee reported out an $85 billion tax break ”extender” bill — which the Committee calls the “EXPIRE Act.”  The bill includes billions in unwarranted tax breaks for special interests, including the wind industry.
As long as Congress fails to pass a balanced budget, every dollar provided to special interests in this $85 billion “Extender” bill is a direct addition to the national debt for the future (our future) to worry about. Further, each dollar that Congress adds to the national debt will be DOUBLED in about 15 years due to interest that will accrue on that debt.
An egregious example of an unwarranted special interest tax break in the Finance Committee’s bill is Senator Grassley’s wind and other renewable energy “Production Tax Credit” (PTC) and “Investment Tax Credit” (ITC). Grassley insisted on extending this 20-year old “temporary” tax break for another 2 years at a cost, according to the Joint Tax Committee, of more than $13 billion over the next 10 years (and more thereafter).
When Senator Toomey attempted to eliminate unwarranted energy tax breaks from the bill, Republican Senators Grassley, Cornyn, Thune, Crapo, & Portman joined Finance Committee Democrats in voting to keep the massive energy tax breaks in the bill! [Read more →]
April 16, 2014 No Comments
“Negative prices are not the goal of any healthy economy, yet the PTC fosters this behavior at the expense of other, reliable generation. Building more infrastructure to correct for this problem is exactly the wrong thing to do.”
The last extension of the federal production tax credit (PTC) , its eighth in over twenty years, expired at the end of 2013 and the industry is again clamoring for another extension. But this time, big wind is facing a more sophisticated argument advanced by critics who contend that the PTC is artificially depressing wholesale power prices, disrupting market signals and undercutting more reliable generation including Exelon’s fleet of nuclear power plants.
Wind for nuclear–and in a way that increases greenhouse gas emissions, or certainly fails to reduce it? The irony for climate policy has been noted by James Hansen who was informed that renewable-energy subsidies were intended to ”kill nuclear.” Wrote Matthew Wald in the New York Times:
To stave off climate change, sources of electricity that do not emit carbon will have to replace the ones that do. But at the moment, two of those largest sources, nuclear and wind power, are trying to kill each other off.
So much for wind power’s climate-change rationale.
Last month, the American Wind Energy Association (AWEA) released a detailed defense of wind arguing that its impact on energy prices is positive, with or without the PTC. But rather than making its case, AWEA’s rebuttal repeatedly misrepresented the rules governing competitive electricity markets and how out-of-market revenues impact energy prices. In this essay, we examine several of the assertions made by AWEA and show how they fall short.
Claim 1: Wind energy displaces the most expensive generation and decreases electricity prices.
This would be true if wind were reliable, but it isn’t. Under competitive wholesale market rules, most generators must ‘bid in’ firm levels of production for each hour of the next power day. Grid operators match available generation with hourly demand and schedule resources as needed. The most expensive generation dispatched in an hour sets the marginal price of supply. [Read more →]
April 15, 2014 2 Comments
“We have a long way to go before Chairman Camp’s tax reform bill is final and, no doubt, the debate over tax-extenders will be rigorous. But this is a rare opportunity for American taxpayers to once and for all eliminate the near-permanent temporary tax credits.”
Members of the American Wind Energy Association (AWEA) descended on Capitol Hill this week for a two-day member-only marathon to educate Congress on why the wind production tax credit (PTC) needs to remain a priority for American taxpayers. The PTC expired at the end of 2013.
Mark Albenze, CEO of Siemens’ wind power business in the Americas and a member of AWEA’s Board, touted his expectation of receiving a positive response from D.C. lawmakers. ‘We’re going to ask for as long an extension [of the PTC] as we can get to bridge the gap until we get a comprehensive energy policy,” he said.
But by the end of the day yesterday, the future of the PTC dimmed.
On Wednesday, House Ways and Means Chairman Dave Camp (R-MI) released his long-anticipated proposal to reform the U.S. tax code which offered no consideration for reinstating the PTC. But that’s not all. According to the bill, the uncapped, 20+-year tax credit, which currently stands at 2.3¢/kWh, would no longer be adjusted annually for inflation which means that projects now receiving the PTC would see their subsidy reset back to 1.5¢/kWh. [Read more →]
February 27, 2014 1 Comment
“It is precisely the fact that the market does not respect vested interests that makes the people concerned ask for government interference.”
- Ludwig von Mises, Human Action (1940), p. 334 [4th Edition, 1966, p. 337].
Government goes to those who show up. The wind industry got there first (concentrated benefits, diffused costs). But the pro-consumer, pro-taxpayer, pro-freedom movement has staged an impressive counter attack against government-dependent cronyism. Energy politics dates from the mid-nineteenth century in the United States–but never has more than one hundred pro-liberty groups spoken with one voice before.
Will the wind Production Tax Credit expire as scheduled at the end of this year? The American Wind Energy Association (AWEA) hopes not. Why? Because continued expansion depends on the timing of this huge subsidy (see this graph by the editors of Real Clear Energy).
Letter and Signatories
Here is the November 4, 2013, letter to Congress from more than 100 signatories, big and small, city and grassroots, energy related and not. More signatories may add to this list.
Dear Senators and Representatives: [Read more →]
December 18, 2013 2 Comments
“Economics is haunted by more fallacies than any other study known to man. This is no accident. The inherent difficulties of the subject would be great enough in any case, but they are multiplied a thousand fold by a factor that is insignificant in, say, physics, mathematics or medicine – the special pleading of selfish interests.”
- Henry Hazlitt, Economics in One Lesson (1946)
A year ago, the American Wind Energy Association (AWEA) was desperately fighting against the scheduled expiration of its most prized federal subsidy, the wind production tax credit (PTC). As I wrote at that time, AWEA’s argument–please government, keep our activity going for job creation and other economic gain–rested on a basic, long-debunked fallacy of economics.
AWEA believes that wind’s ”is” equals ”ought”–that recorded activity is a per se good. But there is an opportunity cost of action–what is not seen but known to exist from the economic law of scarcity.
Wind interests conclude that resources expended by them come from thin air rather than from the productive sector (taxpayers, ratepayers). Resources that do not go to wind, in other words, are resources lost to the economy as a whole.
This is wrong. A free-market redirection of resources away from wind power would free land, labor, and capital (the factors of production) for goods and services as determined by consumers, not government. [Read more →]
December 16, 2013 3 Comments
In the final hours of the 2012 fiscal cliff negotiations, the now 20-year old wind production tax credit (PTC) was granted a 1-year extension at the estimated cost of $12 billion.  This move was done behind closed doors, without debate or opportunity for amendment and no obligation of the Congress to find a way to pay for it.
With this most recent extension of the PTC, the Congress took no action to address the harmful effects  of the PTC on competitive wholesale energy markets.
The PTC is set to expire on December 31st. Until this long postponed day, the legislative opportunity is for the Congress to amend the flawed tax provision to relieve market distortions  and promote more reliable, least-cost renewable choices for taxpayers.
Market Signals That Work
Nearly two decades ago, electric energy markets in most of the U.S. were highly regulated. Wholesale electricity prices were determined based on a generator’s cost of installation plus direct production cost, and not on customer demand. Under deregulation, plant ownership shifted to independent power producers which, in turn, brought about competitive wholesale energy markets aimed at meeting consumer energy needs with the most reliable, least cost generation.
Once fully implemented, fossil-fired generators responded to market price signals. New power plants were built to meet peak demand requirements while discouraging construction of excess capacity. Competitive energy pricing dissuaded generators from building power plants long distances from load centers, thus limiting the deployment of costly transmission.
Improved management increased power plant efficiencies, operator profits and grid reliability while keeping retail prices in check. This coupled with air, water and other environmental rules led to U.S. energy resources becoming progressively cheaper, cleaner, safer, and with a smaller footprint.
The correct policy led to the best economic results for consumers. [Read more →]
April 24, 2013 1 Comment
After 20 years and many extensions, the federal Production Tax Credit (PTC) was scheduled to expire at the end of 2012. Neither the House nor the Senate saw fit to extend this overly generous corporate benefit when it was considered on its own merits, and the PTC did, in fact, expire.
But in the final hours of the fiscal cliff negotiations, a provision in the American Taxpayer Relief Act (P.L. 112-240) surreptitiously added a $12 billion, 1-year extension of the PTC. 
This move was done behind closed doors, without debate, any opportunity for amendment, or obligation of the Congress to find a way to pay for it.
The abuse of the Public Trust did not end there. With this extension, a critical change to the PTC was introduced that relaxed the eligibility requirements for the credit. Renewable energy projects now need only ‘commence construction’ by January 1, 2014, to qualify for the credit, instead of the projects being ‘placed-in-service’ by that date.
IRS Interpretation Forthcoming
March 25, 2013 7 Comments
Wind Jobs at PTC Risk: Not 37,000 per AWEA but 2,525 (these million-dollar jobs displace real jobs, too)
“The Congressional Joint Committee on Taxation, for example, has estimated that the cost of a one-year PTC extension is $12.1 billion. Thus, even accepting the Report’s grossly inflated number of 37,000 wind jobs, the cost to the American taxpayers would be $12.1 billion divided by 37,000, or about $327,000 per job. [But] … the cost for a one-year PTC extension could be as much as a staggering $4,792,079 per direct up-front job added ($12.1 billion ÷ 2,525 jobs).”
An intellectual nail has been driven into the wind-industry-driven Production Tax Credit, a governmental lifeline keeping an inherently flawed industry afloat. The new study, Inflated Numbers; Erroneous Conclusions: The Navigant Wind Jobs Report, was authored by Charles J. Cicchetti, a noted economics consultant and longtime economics professor (now adjunct) at the University of Southern California.
The remainder of this post highlights parts of the study (in blue). [Read more →]
March 8, 2013 5 Comments
It took a last minute change to a highly controversial bill and the last vote of the 112th Congress for Big Wind to eke out one more extension to the Production Tax Credit (PTC). With the dust now settling, it has become clear: President Obama rammed through the extension without debate or compromise.
Following the November 6 presidential election, the wind industry anticipated a quick vote on the PTC that would provide a multi-year extension and remove the issue from the larger fiscal cliff negotiations. That did not happen and with 60+ tax provisions due to expire at the end of 2012 many parties are vying for the same dollars. With December 31 fast approaching, the likelihood of an extension was becoming more uncertain by the day.
On Thursday, December 21, just prior to Christmas and a full six weeks after the election, Speaker Boehner and House Republicans gave up trying to negotiate a fiscal cliff package with the White House and passed a bill that addressed spending cuts sufficient to avoid the sequester. Nothing in the House bill hinted at a PTC extension.
Harry Reid now had two bills on his desk — the bill passed by the House on December 21 and the Senate finance committee tax-extender bill from August that was never scheduled for a floor vote. Reid knew he did not have the votes to pass either bill. He needed to come up with a compromise proposal that would also raise revenue and still pass both Chambers.
By this time, wind lobbyists had parked themselves in the Senate for one last push. And why not? The time and money spent to sway the outcome in the industry’s favor would pay off in billions. [Read more →]
January 10, 2013 4 Comments
“The sheer ridiculousness of the [six-year, front loaded PTC extension] outraged Congressional members and may well have changed the debate. It’s NO coincidence that within 24-hours of AWEA’s poorly received proposal, Denise Bode bailed. A move that sudden suggests the industry thinks it’s better off without her and probably without AWEA’s inflexible, out-of-touch campaign.”
The American Wind Energy Association’s relentless, year-long lobbying campaign to secure extension of the wind production tax credit (“PTC”) hit major headwinds last week, which precipitated the abrupt resignation of its CEO, Denise Bode.
Branded the “Save USA Wind Jobs,” AWEA’s plan tried to stigmatize Congressional members from Red and windy states with the argument: oppose the PTC, and you oppose American jobs.
But rather than gaining support, resistance intensified to extending the PTC. With only two weeks remaining in 2012, it’s not certain what will happen with the subsidy, but one thing is clear: AWEA’s robotic jobs jab has chilled its effectiveness. Big Bucks cronyism does have its limits.
Changing Market; Inflexible Messaging
Prior to 2008, wind was still a niche resource. Under 15,000 megawatts of installed wind was eligible for the PTC and the price tag for the subsidy, in total for its first 15 years (1992–2007), was under $6 billion and less than $1 billion in any one year. Each time the PTC was up for renewal, Congress complied.
Since then, wind installations in the U.S. ballooned to over 50,000 megawatts, and the carrying cost for a 1-year extension is now projected to be $12 billion.
In today’s economic climate, AWEA’s campaign messaging is withering under challenge. [Read more →]
December 17, 2012 18 Comments