Category — Subsidies/cost of windpower
[Editor note: This is the second of a four-part series reprinting the January 15th letter of Mr. Schleede to the Senate Finance Committee concerning the Baucus tax-reform proposal dated December 18, 2013. Part I yesterday reprinted the executive summary and conclusions; Parts III and Part IV next week will cover the environmental wealth effect issues of current public policies favoring wind power.]
The Senate Finance Committee has ignored adverse economic impacts of the massive tax breaks and subsidies that have been provided to owners of wind turbines and “wind farms” and, in effect, has proposed continuation of large tax breaks for these owners – all at the expense of ordinary taxpayers and electric customers.
The economic impacts of the proposed tax breaks on electric customers is not even mentioned in the rationale for the Committee’s new tax break scheme – unfortunately, another indication of the wide gulf between thinking and actions of members of Congress and the interests of ordinary people outside Washington who are burdened by costly Congressional actions.
High electricity bills, one of the impacts of wind energy subsidies, are directly harmful to consumers with limited income, and they drain money and jobs from local economies. Apart from the direct adverse impact on consumers and local economies, the economics of wind energy are decidedly negative because electricity from wind is high in true cost and low in true value.
High True Cost of Electricity from Wind
On the cost side, wind energy advocates have emphasized the fact that the energy source or “fuel” for wind turbine is free. They have played down or ignored the facts about the full, true monetary cost of wind energy, which must take into account all of the following: [Read more →]
January 17, 2014 2 Comments
“Clearly, the wind industry would be a huge beneficiary of [this] proposed tax break scheme…. Almost certainly, lobbyists for the wind industry were heavily involved in the drafting of the Committee’s proposal…. It’s time for the Congress to consider the national interest, including the interests of citizens, taxpayers, and electric customers, before again extending tax breaks for the wind industry.”
MEMORANDUM FOR: Chairman and Members the Senate Finance Committee
SUBJECT: Energy Tax Break Proposal announced on December 18, 2013,
Thank you for the opportunity to comment on the December 18, 2013, Staff Discussion Draft of the Senate Finance Committee’s Energy Tax Reform proposal.
Your proposal to repeal all existing renewable energy tax breaks is a good one and it should proceed. Your proposal to adopt a new renewable energy tax break scheme should be scrapped.
This memorandum provides comments on the portion of the proposal dealing with energy used to generate electricity covered on pages 3 and 4 of the above cited document.
The Committee’s proposal that would base the availability and size of the proposed tax break for energy used in producing electricity on “cleanliness” (specifically, “greenhouse gas emissions”) measured at a “generating facility” is faulty in three important respects; specifically: [Read more →]
January 16, 2014 2 Comments
Wind proponents cite their industry as one of the fastest growing sectors of the American economy, having doubled U.S. nameplate capacity since 2008. But let’s be clear: that recent growth is largely due to the massive infusion of public cash lavished on big wind under the American Recovery and Reinvestment Act of 2009 (ARRA), which is anticipated to pay out $22.6 billion in direct grants with 85% claimed by wind.
Expiration of Section 1603 cash grants, coupled with record-low natural gas prices, will likely collapse the stimulus-induced bubble and push installations back to mid-2000′s levels. Even if the production tax credit (PTC) is extended, offsetting above-market wholesale prices, recent growth will not be repeated.
Wind and State RPS Policies
In the last ten years, more than half of the states adopted renewable portfolio standards (RPS) that encouraged development of home-grown low-emission generation. State legislators voted in favor of the mandates after being convinced by proponents that more renewable resources in the energy mix, particularly those with no fuel cost, would replace fossil use, attract jobs and ultimately stabilize and reduce energy prices.
But the artificial no-compete power markets created by RPS policies for self-selected renewable resources  drove up electricity prices and forced ratepayers to pay for energy they didn’t need. In 2011 residential rates in states with mandates were 27% higher than those without mandates while industrial electricity prices were 23% higher. [Read more →]
September 14, 2012 5 Comments
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 →]
May 10, 2012 16 Comments
There has not been much published on wind costs, except, generally speaking to give the impression that they are reasonable and manageable. Unfortunately, at the level of wind implementation being contemplated, particularly in the Western world, the costs are an unsupportable amount of national wealth.
On the other hand, there has been a considerable amount published on the impact of introducing large amounts of wind into electricity systems, most of it again claiming manageable considerations. Those that cite Denmark should review this series of posts. I am not aware of any conclusive analyses supporting wind integration, as most are superficial at worst, or limited in some considerable way at best.
I expect in time, based on a proper analysis, or through further real, and unhappy, experience, that none of the claims for wind will be confirmed. I expect that such will show that wind is much more problematic, and risky to our supply of electricity than is generally believed. It also represents a substantial risk to our financial systems. [Read more →]
July 14, 2011 12 Comments
Energy Subsidies and Big Wind: Sen. Alexander Sets the Record Straight (renewables 50x that of fossil fuels)
“So I ask the question: If wind has all these drawbacks, is a mature technology, and receives subsidies greater than any other form of energy per unit of actual energy produced, why are we subsidizing it with billions of dollars and not including it in [the energy subsidy] debate? Why are we talking about Big Oil and not talking about Big Wind?”
“We have been debating tax subsidies to the big oil companies. The bill proposed by the senator from New Jersey would have limited it to just the big five oil companies even though many of the tax breaks or tax credits or deductions they receive are the same tax credits that every other company may take– Starbucks, Microsoft, Caterpillar, Google, and Hollywood film producers, for example. Many of the other credits look a lot like the [research and development] tax credit or other tax credits all American businesses may receive.
Well, I am one Senator who is very intrigued with the idea of looking at all of the tax breaks in the tax code. There are currently about $1.2 trillion a year in what we call tax expenditures, and those are intended to be for tax breaks we think are desirable. I am ready to look at all of them and use the money to reduce the tax rate and/or reduce the Federal debt. But if we are going to talk about energy subsidies — tax subsidies — we ought to talk about all energy subsidies.
Renewables vs. Fossil-energy Subsidies
Senator John Cornyn of Texas has asked the Congressional Research Service to do just this. It is an excellent study, and I commend Senator Cornyn for asking for it. This is some of what it finds: According to the report, fossil fuels contributed about 78 percent of our energy production in 2009 and received about 13 percent of the Federal tax support for energy. [Read more →]
May 23, 2011 13 Comments
We’ve all heard the pitch about how wind is free and that once a windpower facility is constructed, the cost of generation is appropriately set low thanks to no fuel expense. We’re also often reminded that no fuel cost means wind will help insulate consumers from wildly fluctuating energy prices.
The concept is easy to grasp, and rural communities considering whether to host a wind facility are likely to conclude that the project will produce local and regional benefits in the form of lower electricity bills.
The fact is, the price of electricity within a grid region is set at a single price known as the market-clearing price (MCP). In most organized electricity markets, electricity generators are encouraged to participate in a daily or day-ahead auction process whereby a uniform market price–the MCP–is established. The MCP is the offer price of the highest-priced generation accepted within the market.
Ross Baldick states in his paper, Single Clearing Price in Electricity Markets:
Consider a simple electricity system with baseload coal generators having low production costs of approximately $25/MWh, and gas-fired peakers having higher production costs of approximately $100/MWh. Off-peak, when demand is lower, only the coal generators may be necessary to meet demand. The market-clearing price for energy is set by the coal offer price, which can be expected to be around $25/MWh. However, on-peak, when demand is higher, both the coal and the gas-fired generation may be required to meet demand and the market-clearing price will be set by the offer of the gas-fired generation, which can be expected to be around $100/MWh. On-peak, both the coal and the gas-fired generation receive the market-clearing price.
How It Works
The New England ISO (ISO-NE) and New York ISO (NYISO)[i] typically operate using a day-ahead auction where generators are required to offer firm levels of production for each hour of the next power day. The energy price, in turn, is determined based on those bidding into the system; all generators receive the same price per megawatt hour of generation. Significant penalties are applied if a generator is unable to meet his commitment. [Read more →]
September 27, 2010 5 Comments
Sharp increases in windpower output on the Pacific Northwest electricity grid has lead to a number of problems. This has fallen into the lap of the Bonneville Power Administration (BPA), the Pacific Northwest federal power marketing authority that must integrate the large influx of wind energy into the electricity grid.
In 1998, the BPA’s wind generation was roughly 25 megawatts (MW). Today, it totals 2,780 MW and, with the Oregon Renewable Portfolio Standards passed in 2007, over 6,000 MW of wind power is expected to be on-line by 2013. Often overlooked are the impacts of increasing wind generation on the reliability and affordability of electricity that might very well outweigh any of the environmental benefits that are proclaimed to exist.
The negative aspects of wind are quite apparent. Obviously, wind is unpredictable and inconsistent, creating a significant problem for BPA and electric utilities. To prevent brownouts or overloads on the grid, BPA has to schedule energy production in advance and the ability to predict when and how hard the wind will blow is extremely limited (usually a two or three day window) and is often inaccurate.
Because wind power is so unpredictable, every MW must be backed up by an equal amount from reliable, reserve energy sources to replace the energy lost when the wind dies down. This means BPA must have a “balancing” reserve equal to or greater than the wind power capacity utilized at any given time. In the Pacific Northwest the backup source has traditionally been federally owned hydroelectric dams, which are shut on and off to respond to fluctuations in wind energy. [Read more →]
July 22, 2010 33 Comments
Editor’s note: Notwithstanding some recent gains, e.g. Cape Wind’s Interior Department permit, the projected U.K. Thames Array, and the politically motivated Danish pronouncement of renewed offshore installations, global offshore wind has progressed very slowly, especially in Germany. This article by Ms. Linowes, founder of the Industrial Wind Action Group, provides some of the reasons why offshore wind is such an environmental and economic troublemaker.
After nine years of debate and millions of public and private dollars, the decision to permit America’s first offshore wind project fell on the shoulders of one man, U.S. Department of the Interior Secretary, Ken Salazar. Hindsight notwithstanding, there was no chance Salazar could disapprove the Cape Wind application. Does anyone doubt the Obama administration would dare to ignore the tsunami of political favoritism already bestowed on the project, no matter how unjustified? And given the administration’s stated goal to nurse the U.S. economy back to health through the green movement, a denial of the permit would have unleashed a public firestorm virtually impossible to contain.
Let’s face it, the Alliance to Protect Nantucket Sound had an uphill battle in the message war from the beginning. As early as 2003, even before Windaction.org was organized, everyone knew about the wealthy ‘NIMBYs’ (“Not in my backyard”) on the Cape waging war against the one opportunity in the region to see renewables built in a substantial way.
At the time, New England had less than ten megawatts of wind installed, and most people were convinced Cape Wind represented an environmentally safe, low cost, economically beneficial development that could lead the nation in eliminating our reliance on fossil fuel. The NIMBYs, even those with the Kennedy name, were discredited in the press as little more than self-serving hypocrites unwilling to take one in the view for the betterment of the whole.
This attitude still prevails today in some quarters but the realities of wind energy’s flaws are beginning to take hold and we believe the Alliance and its supporters will ultimately be vindicated.
The announcement of Salazar’s decision opened an emotional relief valve and pressure built-up over nine years was volcanically released. Stories about Cape Wind’s approval flooded the web with words like ‘Finally!’ splashed across the screen. The public was informed in no uncertain terms that Cape Wind would be built, offshore wind in the U.S. was on the upswing, and the country had officially established itself as a player in the offshore arena.
From my perspective, Salazar’s action was significant, but not for the reasons stated above. Rather, from this point forward, politics and public opinion will no longer drive the discourse. The Cape Wind decision and the public record on which it’s based will be challenged on the facts to determine whether the project is commercially reasonable and whether it will operate in compliance with existing laws. To be frank, there is no assurance Cape Wind will survive the scrutiny. [Read more →]
May 2, 2010 13 Comments
The wind industry is showing increasing signs of desperation as some unpleasant realities are emerging despite the unending propaganda storm from the American Wind Energy Association (AWEA).
Not only has it come out that Big Wind lobbied (and helped produce!) a report from the National Renewable Energy Laboratory that slagged a Spanish study showing the epic failure of wind economics in Spain, but now, wind energy executives are admitting that they can’t obtain parts to build wind plantations unless they’re built abroad.
And, showing that hubris knows no bounds, they’re also lobbying for the U.S. to up the ante on wind, passing a renewable energy standard that would guarantee wind energy profits into the indefinite future.
According to The Hill, wind executives are engaging in a lobbying-flurry on Capitol Hill this week, going after the “Buy American” agenda that Senator Chuck Schumer is pushing with regard to renewable power projects funded with stimulus grants. Schumer has become somewhat agitated to learn that most (79%) of the US stimulus money spent on renewable energy has gone overseas creating manufacturing jobs abroad, but creating little but taxpayer debt here in the U.S.
The Hill quotes Donald Furman, senior vice president with Iberdrola Renewables as admitting that Schumer’s buy-American plan “will cause my company not to build the number of projects that it was going to build simply because we can’t get the equipment that would satisfy the requirement.”
This admission is only surprising because it was made in public. Anyone who knows that China’s labor rate is under $1.00 per hour, and that China holds 95% of the rare earth elements needed to produce most renewable energy systems could have told you that manufacturing of renewable equipment is going to happen mostly in China.
A second major focus of the industry lobbying this week is pushing Congress to approve a Renewable Electricity Standard, which would require utilities to supply ever greater amounts of electricity from renewable sources. The windmongers are pushing for a standard that would require 25 percent renewable energy in the US supply by 2025, a level that is not only more aggressive than existing House and Senate targets, but is almost certainly completely unattainable, and would be both expensive, and detrimental to energy system stability.
All of this comes atop a burgeoning wind power scandal uncovered by Chris Horner of the Competitive Enterprise Institute. Through Freedom of Information requests, Horner has obtained evidence that a report by the National Renewable Energy Laboratory which bashed a high-profile Spanish study of wind power’s many failings was ginned up by lobbyists from the AWEA, the Global Wind Energy Council, and the uber-liberal Center for American Progress, all with the cooperation of the EPA, and the DOE.
Renewables have their place (such as off-grid solar), but the only way to determine what that place is would be through removing subsidies and regulatory mandates from all energy sources and letting the market sort it out. Setting that utopian wish aside, it’s hard to argue that wind power is a good investment if you have to gin up lame government reports to slam your critics; build your parts in China; subsidize the energy at historic levels; and still have to adopt mandates to force your wind power onto an unwilling market.
March 12, 2010 1 Comment