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Government Gluttony at the American Wind Energy Association (Summers/Browner/ Klain memo indicates growing ‘wind fatigue’)

By -- November 15, 2010

The American Wind Energy Association (AWEA) is on a mission to keep its members fat and happy as they bloat up at the public trough. The goals are simple:

1) Create a set-aside power market that pays a premium for wind energy and eliminates competition for lower-cost, more reliable fuel options;

2) Encourage policies that pave the way for wind-related transmission development at the expense of rate- and taxpayers; and

3) Make permanent the free-flow of public subsidies for renewables and shield the spigot from changing political and economic tides.

In the last two years, AWEA’s had some success. On the power market front, more than half the States have RPS programs mandating that a percentage of their electricity needs be met with renewable energy. Many states have loose enough standards to avoid the damage that otherwise would be done, but Texas, in particular, has coerced its way into windpower growth (the legacy of Enron, by the way).

Senator Bingham (D-NM) introduced a bill seeking the same non-compete set-aside for the entire country that he hopes will be acted on during the lame-duck session. (See Daren Bakst’s criticism of this proposal here.)

On transmission, the Federal Energy Regulatory Commission (FERC) issued a notice of proposed rulemaking (NOPR) that considers amending transmission planning and cost allocation processes to facilitate broader public policy goals — i.e. a national grid system to deliver wind power. This deviates from current rules that look mainly at grid reliability. And Obama’s $787 billion stimulus, passed in February 2009, authorized billions to be spent on renewable energy and energy efficiency initiatives, which kept the wind industry from collapsing when the big investment banks needed bailing out.

The debates surrounding a national RPS policy and actions by FERC’s transmission priorities are not settled and will likely come down to cost. But the stimulus programs that spent lavishly on pet wind projects — while a success for AWEA members — are proving to be a waste for the public.

Under the stimulus, we saw the investment tax credit (ITC), which was popular back in the 1980s, brought back again. The ITC enables developers to obtain direct cash outlays from the government for up to 30 percent of their costs. According to Greenwire (October 14). The qualification criteria are not onerous, the grant amounts are unlimited, and the Treasury Department in charge of doling out the cash is prohibited by law from ranking the projects.

Between direct cash payouts, federal loan guarantees, existing state tax credits, and State RPS policies that assure a premium for renewable energy, wind developers cannot fail. Is this the American way? Should AWEA have “American” in their name.

Spanish energy giant Iberdrola Renewables, Inc., which received nearly a billion dollars in cash grants alone, argued that the money helped create more economic development (jobs, opportunity), but according to Tufts University professor Gilbert Metcalf who teaches energy economics and tax policy: “Any time you use subsidies to encourage new investment, you’re always going to end up giving money to people who would have done the project anyway.” (Greenwire October 14) And that appears to be exactly what happened.

A preliminary evaluation of the ITC grant outlays published earlier this year by the Lawrence Berkeley National Laboratory found that 61% of the grant money distributed through to March 2010 “likely would have deployed under the PTC [production tax credit] if the grant did not exist.” In many cases, money went to projects that were already under construction and, in others the wind facilities were already producing electricity.

The Summers Memo

So what did the public receive in return for all the money spent? High risk and overpriced carbon reduction benefits according to an October 25 White House memo penned by chief economic aide Larry Summers and senior policy aides Carol Browner and Ron Klain. The memo uses the 845-megawatt Shepherds Flat wind energy facility in Oregon to illustrate the problem.

Shepherds Flat will be the largest wind plant in the country consisting of 338 GE wind turbines. According to Summers, the $1.2 billion in governmental subsidies covered 65% of the cost and the risk for the project while the equity sponsors incurred only about 11% with an estimated return on equity of  30%. That’s a hefty return for a project where the American public is absorbing the bulk of the risk!

Summers makes clear in the memo that the project would have likely “moved without the loan guarantee” since the “economics are favorable for wind investment given the tax credits and state renewable energy standards”. Examining the carbon reduction benefits, the memo concludes that the reductions “would have to be valued at nearly $130 per ton CO2 for the climate benefits to equal the subsidies (more than six times the primary estimate used by the government in evaluating rules)”.

The Wall Street Journal published an informative editorial on the memo that’s well-worth reading.

In sum, the White House memo enumerates several options for reining in the free flowing spending to wind while shifting risk back to the developers. They offer a start, but tweaks are not the answer.


It is time for Capitol Hill took to take a hard look at the renewables feeding frenzy underway and adopt policies that better suit the public’s needs. For starters, let the funding programs set to expire this year do just that — expire! Remaining programs (PTC) should be adjusted to reward projects that can deliver energy according to time of day or seasonal demand requirements and that are built close to load centers. There are cheaper and much more effective opportunities for achieving clear energy goals without coddling the wind industry — an industry that peddles a low-value electricity product and which, after decades of public handouts, has yet to show it can survive on its own.


  1. Donald Hertzmark  

    Good summary of the trough and its feeders. Readers might want to know that the Oregon wind farm was looked at in a previous post (http://www.masterresource.org/2010/01/how-many-households-can-a-large-wind-project-serve-lessons-from-texas-and-the-uk-part-2-of-2/) that provides strong evidence that while the wind farm is attractive due to subsidies, it is not likely to save either fuel or CO2.


  2. Breaking Wind – Quick hits from the industry for November 15, 2010 « Allegheny Treasures  

    […] Government Gluttony at the American Wind Energy Association (Summers/Browner/Klain memo indicates gr… – MasterResource […]


  3. Charles Battig  

    The “Wind Jammers at the White House,” WSJ November 11, 2010, saga of federal corporate energy welfare has parallels at the state level. Here in Virginia, the 2007 “Virginia Re-regulation” legislation created a similar culture of utility corporate welfare at the cost of the consumer.
    The particular state favoritism showered on renewables lives on in the “2010 Virginia Energy Plan.” These state funded incentives are justified with the lure of green job creation and non-defined “environmental benefits.” There is no scientific justification offered for promoting these inherently more expensive and less reliable energy sources. The documented failure of renewable energy projects to accomplish either objective in other countries, in particular Spain and Denmark, continues to be ignored.
    Virginia offers a renewable portfolio standard of 15 per cent of 2007 base-line production from renewables coupled with an enhanced rate-of-return for meeting the standard. An enhanced rate of return is offered for utility investments in renewable electric generating facilities. There is no mention of any standard of cost effectiveness on the part of the utility. State legislators even provided electric utilities the ability to collect a profit on operating costs paid to third-party entities operating an energy efficiency program on behalf of the utility. This allows the utility to profit on such ventures, without the need to make capital investments.
    As part of this legislation, the “just and reasonable” standard formerly used by the State Corporation Commission (SCC) was effectively thwarted by new mandates effectively guaranteeing artificially high profit levels to the utilities, and by limiting the rate-setting discretion of the SCC to consider the consumer.
    At the moment, Virginia seems to lack a Larry Summers to tilt against the windmills on behalf of taxpayers.
    Charles Battig, M.D.
    Virginia Scientists and Engineers for Energy and Environment
    Charlottesville, VA


  4. Donald Hertzmark  

    Dr. Battig,
    Thanks for your commentary. One of the arguments for reregulating and reintegrating the power sector was to prevent the price increases allegedly associated with competition at the generation end. However, competitive generators would fight against the RPS and it would be extremely difficult to impose the RPS and the wasteful pass-throughs of excess energy costs in a more competitive system without extremely cumbersome rules and regulations (so when has that ever stopped them? – ed.).


  5. Charles Battig  

    Thomas Farrell., CEO of Dominion Resources will be speaking at the Miller Center, here in Charlottesville tomorrow at 6:00PM. Title “Electricity- Invisible Threat to America’s Economic and National Security.” I plan to attend.


  6. Lisa Linowes  

    Thank you, Dr. Hertzmark and Master Resource, for publishing my piece. The White House is playing with fire by permitting its renewables agenda to override other national concerns. Earlier this year, Congress and the WH went to bat for Shepherds Flat (mentioned in the memo) by pressuring the military to drop its opposition to the project. (http://www.ktvz.com/news/25267157/detail.html ) The 338 turbines would interfere with radar and place our national security and military readiness at risk. The military is dead serious about this issue and contrary to AWEA’s claims, radar systems that are being impacted are state of the art — upgrades not needed — and there is NO technical mitigation for the problem. The radar experts we’ve consulted tell me the best they can do is de-tune the radar so that it operates below 100% effectiveness. At Travis AFB the radar was de-tuned to 75% effectiveness to permit a project to go through. The analogy I was given was that of driving down the highway and only being able to see 3 of the 4 cars on the road. When I mentioned to my contact that the public would not believe the US government might compromise our protections in the name of renewable energy, I was laughed at.



  7. Charles Sainte Claire  

    Free enterprise always masters the situation and almost always far faster than with government help. Government help usually steers you down a blind alley. We went from olive oil to whale oil to kerosene to natural gas to the light bulb with no help whatsoever from the government. And we have gone from steam power to the internal combustion machine to turbines without government help. And as soon as market forces make it marketable we will go to electric cars. We have developed nuclear energy. What we do not need is a nanny government who have shown themselves over and over again to guess wrong and be incompetent


  8. franktalk  

    It is not that simple.

    We need incentives to compete in a global market.

    Otherwise we will continue to lose manufacturing jobs to China Canada and Europe.

    Don’t throwh out the program. Fix it!

    Cause the developers who develop the energy projects to expand the US supply chain in exchange for the incentives.

    China, Canada, and every other global competitor is doing it so we have no choice. How do you monitor what country has invest in which manufacturer at whatever terms? It is impossible to enforce under a free trade policy or trade agreement.

    We are at war for manufacturing jobs; we just don’t know it!

    And we it does not appear we want to fight back!


  9. Tom Stacy: A top anti-wind activist got paid by a fossil fuel funded group  

    […] IER has for years promoted Stacy on its blog MasterResource.org, which the group has also used to publicize the work of other top anti-winders like Martis of the IICC, and the New Hampshire-based Lisa Linowes. […]


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    […] IER has for years promoted Stacy on its blog MasterResource.org, which the group has also used to publicize the work of other top anti-winders like Martis of the IICC, and the New Hampshire-based Lisa Linowes. […]


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