Production Tax Credit renewed in
"Fiscal Cliff" Budget Deal
The well-funded wind industry lobby, American Wind Energy Association (AWEA) tried but failed to slip a renewal of the Production Tax Credit for renewable energy generation into the Payroll Tax reduction renewal, the Jobs Bill and other federal legislation since last January. But they've succeeded in getting a one-year extension of the program (costing taxpayers $12 billion in 2013) in the Biden-McConnell budget deal approved by the U.S. Congress. PTCFacts.info opposed the credit, which amounts to a $220.00 per megawatt-hour of electricity generated. That, in turn, allows wind farms to get paid up to 20 times what other power plants get paid for the same electricity. Compare the tax credits we devoted to various energy sources in 2011: $13.9B for wind, $0.9B for nuclear, $1.5B for energy efficiency, and $2.5B for fossil fuels – oil, gas and coal.
The PTC renewal was part of a "Tax Extender" bill reported out of the Senate Finance Committee in September 2011, and incorporated whole into the the Biden-McConnell budget deal. The "Tax Extender" legislation enjoyed strong support from big players in Washington such as the U.S. Chamber of Commerce, National Association of Manufacturers (NAM), Business Roundtable, Edison Electric Institute (EEI), etc. In fact, some of these organizations appear to have become fronts for parasitical organizations such as GE whose business plans seem to favor milking federal and state tax breaks and subsidies rather than more risky and genuinely entrepreneurial, commercially viable, technology advancing, productive pursuits.
The case against renewing the 12-year-old "stimulus" credits was ably stated in the Buffalo News. Another recent analysis in U.S. News & World Report elaborates on this title: "Taxpayers Shouldn't Subsidize Wind Energy They Don't Want, Don't Use." Less intelligent comments have been made by supporters of the PTC in Congress. In June a coalition of freshman legislators (including Tom Reed, R-NY) wrote to congressional leaders: "More than half the jobs in the industry are expected to be gone by this time next year if the PTC is not extended. It would be a disservice to our country's energy security to let an industry that has come so far suffer such a setback." Reed voted for the new budget deal, including the PTC renewal.
The PTC has never been effective in recducing our reliance on foreign oil, or reducing greenhouse gas emissions from other power plants. First, oil is generally not burned to generate electricity in the U.S. Second, there is no evidence that any fossil-fuel-powered electric plant has been avoided, shut down or otherwise displaced by the existence of wind farms. That's principally because wind farms generate intermittently, and require other plants to be operating in the background--run on natural gas. So the more wind farms there are, the more natural gas needs to be burned to back them up.
And we get a tiny bit of electricity added to the grid. Building one or two moderate size gas-fired generators near New York City would produce more electricity when it is needed than all of New York's existing wind farms. So why are we giving away billions (and increasing the tax burden on those who do pay) for wind farms?
Section 1603 enacted under the 2009 Stimulus Bill triggered a wind bubble in the years 2009-2012. That's the provision that allowed wind developers to take a one-time cash grant in lieu of tax credits otherwise allowed under the PTC. Wind farms in New York during that period got checks from the U.S. Treasury for several tens of millions just for getting approvals lined up before the end of 2011, and commencing construction before the end of 2012. Nationally, about 90% of the wind installed in 2012 can be attributed to Section 1603, not the PTC.
The PTC by itself is not enough to support increased wind development. These projects also need state Renewable Portfolio Standards, which mandate that utilities purchase electricity generated by renewable energy. This is increasing electric bills for ratepayers because they are paying several times more for the wind power fraction added to the staste electricity grid, and bcause the grid is much more expensive to manage with substantial intermittent power.
Because wind farms generate mostly at night during low-load conditions, the actual market value of their electricity is a fraction of what they get paid under RPS mandates. Congress turns next to tax reform, and we should be telling our representatives that any project that's eligible for a State RPS should NOT receive the federal PTC. If a kilowatt-hour of generation arrives at night during low-load conditions, it gets no PTC. These changes in eligibility can be made this year as part of tax reform.
Another sign of the ineffectiveness of the PTC: it's been around for over 20 years and wind energy is still not able to stand on its own feet in the marketplace.
We can't afford the PTC any longer. If there's extra money for energy, give it to the people and their communities to reduce their energy use and consider local sources of energy. Industrial grid-connected solutions like wind farms (and solar farms) are a prescription for future massive expenditures on infrastructure.
The PTC is a direct subsidy: the producer gets roughly 25% of its revenue from the federal government from the PTC. State and local tax breaks and outright grants often provide another 25%. Most fossil fuel and nuclear energy tax credits are not direct hand-outs. For example, nuclear gets a decommissioning tax credit; that is, as the plant operates utilities are required to set money aside in a fund that will eventually pay for the plant’s decommissioning. The credit allows them to not pay taxes on the money set aside.
An accelerated depreciation is provided for fossil exploration, in order to encourage exploration and thus a reliable, long-term source of energy, e.g. gasoline, to run our economy. Thus, we get something tangible and beneficial from tax credits for non-renewable generators (who create lots of jobs), while the benefits of utility-scale renewables are dubious. We get very few jobs for all the public money devoted to renewables. For example, according to the Pittsburgh Tribune-Review (2/15/10), foreign turbine makers get about 80% of wind-power funding, creating 6,000 jobs overseas and "a few hundred here," at a cost to taxpayers of a third of a million dollars per job.
No matter how many tax credits and other benefits we heap upon intermittent power generators like wind and solar farms, they cannot provide reliable, long-term power. There will always be a need for backup power plants to step in when the sun goes down or the wind stops blowing.
Call or write your Congressperson demanding a PTC sunset!