Category — Production Tax Credit (PTC)

The debate surrounding the Production Tax Credit (PTC) intensified last quarter following several high-profile attempts by Congress to extend the credit before it expires at year-end. Industry warnings of precipitous declines in clean-tech investment and imminent job losses have reached a fevered pitch. The New York Times, for example, reflexively accused budget-hawks in Congress of being preoccupied with safeguarding the dominance of the oil and gas industries.

The idea that wind, which represents less than 3% of total electricity generation in the country after huge taxpayer benefits and state mandates, could threaten the continued use of fossil fuels in electric generation is fantasy. It  demonstrates a general ignorance about wind energy’s purpose and its limited contribution to our energy portfolio.

While we might forgive a newspaper editor’s misunderstanding of the complexities of renewable energy policy, it’s quite another thing to see the same level of ignorance on display on Capitol Hill by the very people tasked with understanding and voting on these policies.

Last month, the House Subcommittee on Select Revenue Measures invited fellow House members to speak on behalf of bills they introduced or co-sponsored that would extend more than sixty expiring tax provisions, including the PTC. Of the nearly thirty witnesses who testified, one-third pressed for immediate extension of the credit. [Read more →]

Ending industrial wind subsidies is a quadruple win: it fosters real jobs, promotes economic growth, protects endangered species, and elevates environmental values over image-making.

The public is coming to this view, not only energy realists. In the face of repeated efforts to extend (seemingly perpetual) wind energy subsidies by industry lobbyists, taxpayers and grass root environmentalists have said: ENOUGH.

Informed and inspired by a loose but growing national coalition of groups opposed to more giveaways with no scientifically proven net benefits, thousands of citizens called their senators and representatives – and rounded up enough Nay votes to run four different bills aground. For once, democracy worked.

A shocked American Wind Energy Association and its allies began even more aggressive recruiting of well-connected Democrat and Republican political operatives and cosponsors – and introducing more proposals like HR 3307 to extend the Production Tax Credit (PTC).

Parallel efforts were launched in state legislatures, to maintain mandates, subsidies, feed-in tariffs, renewable energy credits, and other “temporary” ratepayer and taxpayer obligations. [Read more →]

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. [Read more →]

“Let’s focus on reducing the debt, increasing expenditure for research, and getting rid of the subsidies. Twenty years is long enough for a wind production tax credit for what our distinguished Nobel prize-winning Secretary of Energy says is a ‘mature technology’.”

In a speech last Wednesday on the floor of the United States Senate, Senator Lamar Alexander (R- Tenn.) called on Congress to reject any efforts to add a four-year extension of the Production Tax Credit.

His learned statement brings out a number of facts that contribute to the debate–and explains why ‘subsidy fatigue’ has set in with windpower. Alexander also explains why the future belongs to the energy efficient, not dilute forms of energy that carry a large environmental footprint.

The full transcript of his remarks, published in The Chattanoogan, follows.

Madam President, there are reports in some of the newspapers this morning that there is an effort to try to slip into the negotiation about extending the payroll tax break for the next year a big loophole for the rich and for the investment bankers and for most of the people President Obama keeps talking about as people whose taxes he would like to raise. 

What I mean by this is I have heard there may be an effort to put into the payroll tax agreement a four-year extension of the so-called production tax credit, which is a big tax break for wind developers.  I cannot think of anything that would derail more rapidly the consensus that is developing about extending the payroll tax deduction than to do such a thing.

We are supposed to be talking about reducing taxes for working people.  This would maintain a big loophole for investment bankers, for the very wealthy, and for big corporations.  We hear a lot of talk about federal subsidies for Big Oil.  I would like to take a moment to talk about federal subsidies for Big Wind — $27 billion over 10 years.  That is the amount of Federal taxpayer dollars between 2007 and 2016, according to the Joint Tax Committee, that taxpayers will have given to wind developers across our country. 

This subsidy comes in the form of a production tax credit, renewable energy bonds, investment tax credits, federal grants, and accelerated appreciation.  These are huge subsidies.  The production tax credit itself has been there for 20 years.  It was a temporary tax break put in the law in 1992. [Read more →]

If you haven’t heard from the American Wind Energy Association (AWEA), you probably will.

Ominous, scary ads are running nationwide warning of the crushing blow to American jobs if Congress fails to extend the Production Tax Credit (‘PTC’), the 20-year ‘temporary’ subsidy most credited for market growth in the wind sector. The PTC is due to expire at the end of this year.

Most of the ads target particular House members who, so far, have resisted the industry’s demands for their PTC earmark. The pressure is particularly heated right now as Congress negotiates the payroll tax holiday bill, which is viewed by many as the last best chance to attach an extension of the PTC before November’s presidential election.

AWEA is also leaning on its friends to do its bidding. Politicos from wind-friendly states like Iowa, and Kansas have written letters to members of the Congressional conference committee that’s now hashing out the tax bill. The letters repeat the same tired talking points about jobs.

Jobs Fallacy

It’s embarrassing to see these politicians blindly repeat what they’ve been told with no apparent understanding of the costs and impacts of pro-wind policies. Government (taxpayers) do not create jobs on net. Resources taken from the private sector reduced demand and thus (unseen) jobs to create the seen (wind) jobs.

But higher energy costs and misallocated resources in the process make us all poorer. Henry Hazlitt refuted ‘green jobs’ decades before the term was invented in Economics in One Lesson via his explanation of seen-versus-unseen jobs.

A Ballooned Subsidy

Do you think Senator Harkin or Governor Brownback realize that since the PTC was adopted in 1992, its annual cost has ballooned from $5 million a year in 1998 to over $1 billion annually today. Or that this open-ended subsidy of 2.2¢/kWh in after-tax income represents a pre-tax value of approximately 3.7¢/kWh? In many regions of the country the PTC equals, or exceeds the wholesale price of power! [Read more →]

Major wind projects are being cancelled or put on hold with waning public and private support. In recent weeks,

• Wind developer Terra-Gen terminated plans to build its Horseshoe Wind Farm in Illinois;
• NextERA suspended the permitting process for a 150-megawatt project in South Dakota; and
• Iberdrola announced its Desert Wind Energy Project in North Carolina was delayed and might be scrapped altogether.

In each case, company officials blamed current market conditions and the inability to secure a long-term power contract with area utilities.

PTC In Review

The American Wind Energy Association (AWEA) insists the industry is at risk of a slow-down if Congress does not act quickly to extend the Production Tax Credit (PTC), the federal incentive most often credited for market growth in the wind sector. The PTC expires at the end of 2012. [1]

But if the PTC were to expire, the damage would be less than what the AWEA claims.The industry has clearly grown addicted to the production tax credit, but our findings suggest that attributing market activity to the PTC is overly simplistic and fails to consider other crucial (government) factors driving wind development in the U.S.

The PTC was established by the Energy Policy Act of 1992 to stimulate use of renewable technologies for power generation by providing a production-based credit for the first 10 years of project operations. Initially set at 1.5¢/kWh, the credit is adjusted annually for inflation and today stands at 2.2¢/kWh. [Read more →]