Senate: If Wind Power Is Already Competitive Why Does It Need More Subsidies?
Smart unsubsidized private investments in renewable power resources might increase the energy independence of the United States
Ronald Bailey | 1.28.2015 12:21 PM
cleantechnica
Today, the U.S. Senate is supposed to vote on an amendment proposed by Sen. Heidi Heitkamp (D-N.D.) that would extend the wind power production tax credit for five years until 2020. Her amendment reads:
SEC. X. SENSE OF CONGRESS REGARDING 5-YEAR EXTENSION OF CREDITS WITH RESPECT TO FACILITIES PRODUCING ENERGY FROM CERTAIN RENEWABLE RESOURCES.
(a) Findings.–Congress finds that–
(1) the energy policy of the United States is based on an all-of-the-above approach to production sources;
(2) an all-of-the-above approach reduces dependence on foreign oil, increases national security and creates jobs;
(3) smart investments in renewable resources are critical to increase the energy independence of the United States, reduce emissions, and create jobs;
(4) wind energy is a critical component of an all-of-the-above energy policy and has a proven track record of creating jobs, reducing emissions, and provides an alternative and compatible energy resource to the existing generation infrastructure of the United States;
(5) the wind energy industry and utilities require long-term certainty regarding the Production Tax Credit for project planning in order to continue build out of this valuable natural resource; and
(6) the stop-start unpredictability of short-term Production Tax Credit extensions should be avoided, as short-term extensions have disrupted the wind industry, slowing the ability of the wind industry to cut costs, as compared to what would have occurred with a long-term, predictable policy in place.
Last year the investment firm Lazard calculated that the unsubsidized levelized cost of on-shore wind power is between $37 and $81 per megawatt-hour. The Energy Information Administration estimates that the levelized costs of wind power is between $71 and $90 per megwatt-hour. This compares to levelized costs for conventional coal power generation between $87 and $114 per megawatt-hour and conventional combined cycle natural gas generation between $61 and $76 per megawatt-hour.
The folks over at the American Energy Alliance, the advocacy arm of the Institute for Energy Research, are against it and claim:
Congress enacted the PTC in 1992 as a temporary kick-start for an infant industry. More than two decades and multiple extensions later, wind lobbyists are still pushing for more handouts.
Unfortunately, this all comes at the detriment of the American taxpayer. The wind PTC amounts to a massive wealth transfer from American taxpayers to multinational wind companies. The one-year retroactive extension of the wind PTC passed at the end of 2014 is estimated to cost the American people $6.4 billion.
If wind power in many cases now costs less than electricity generated using conventional fossil fuels, what is the justification for continuing subsidies to that industry?
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Wind Power Renewable energy Subsidies Energy Subsidies Clean Energy Electricity Natural Gas Coal Taxes
Brian D
January.28.2015 at 12:22 pm
Because greenies will probably vote for me next election?
CatoTheElder
January.28.2015 at 1:41 pm
Because cronies will donate to my campaign before the next election?
sarcasmic
That's easy. Cronies.
Agammamon
Votes and the 5% of the money that goes to the subsidees finding its way into the pols pocket.
Invisible Finger
Yep. It's called "public funding of election campaigns for incumbents."
some guy
Hey! That money is going to my re-election campaign and my political action committee. Almost none of it will end up in my pocket until I retire and take a consulting job.
Because the claim that it is competitive is demonstrably false.
KDN
While it's my sense that this is the case, the two studies suggest otherwise.
I'm betting that the cost is competitive when the wind is blowing above X knots, and if you don't account for the land value being used to generate each source.
X as in "unknown variable," not ten.
It probably also omits the cost of running stand by fossil fuel plants to take over during times of high winds when the generators have to be shut down.
OldMexican
Because it was never about energy independence but about bilking the taxpayer?
And the Laws of Physics might be repealed tomorrow.
By the way, the Lazard study treats the power generation of solar and wind (which is intermittent) the same as coal, gas and nuclear, which delivery electricity 24/7. Thus the comparison suffers as the reliability of these "alternative" sources is not taken into account, especially their sensitivity to power demand increases.
See: http://www.forbes.com/sites/wi…..me-bomb/2/
Per Joskow:
This paper makes a very simple point regarding the proper methods for comparing the economic value of intermittent generating technologies (e.g. wind and solar) with the economic value of traditional dispatchable generating technologies (e.g. CCGT, coal, nuclear). I show that the prevailing approach that relies on comparisons of the 'levelized cost' per MWh supplied by different generating technologies, or any other measure of total life-cycle production costs per MWh supplied, is seriously flawed. It is flawed because it effectively treats all MWhs supplied as a homogeneous product governed by the law of one price. Specifically, traditional levelized cost comparisons fail to take account of the fact that the value (wholesale market price) of electricity supplied varies widely over the course of a typical year.
Specifically, traditional levelized cost comparisons fail to take account of the fact that the value (wholesale market price) of electricity supplied varies widely over the course of a typical year.
This is also very important.
Re: KDN,
Indeed. The moment I read that the initial and operating costs of non-subsidized solar and wind power generation systems were lower than that of coal-fired plants, I told myself "This doesn't sound right." If those operating costs were indeed lower, then power companies would make a killing if they invested in solar and wind farms instead of coal plants, at current electricity prices.
Since they aren't, there are other costs that are NOT being taken into account, one of them being the unreliability of supply inherent in these systems. The other is the VERY POOR energy density of solar and wind, requiring – unavoidably – HUGE tracts of land to replace the installed capacity of a single coal-fired plant which occupies a comparatively small extension of land.
Investors are not stupid. If it were true that solar and wind was that profitable, the world would be covered with giant pinwheels and solar panels already.
Pl?ya Manhattan.
She wants to create jobs, eh?
I hear there is some interest in building a pipeline. Those jobs?
Those are temporary jobs, Pl?ya. Pipelines rust; the wind is *forever*.
Good to know libertarians can get behind eminent domain, large infrastructure projects, and government creating jobs.
Will you also support Obamacare if we start giving Big Oil a cut of the premiums?
Scarecrow Repair
I wonder what Tony's real name is. I mean the one on his birth certificate, not the one the orphanage told him.
Birth certificate? I bacteria reproduced by fission.
I *believe*
Re: Tony,
Now that you're here: why is AGW a bad thing, again?
I don't know OM, I can't tell what your ethical system is. Do you consider it a bad thing if the human species went extinct? Or would it just be a neutral outcome of a free market?
Do you consider it a bad thing if the human species went extinct?
HAHAHAHAHAHAHAHAHA!!!!!!
Not even the most wild-eyed doompocalypse scenarios that have been proposed suggest this as even a remote possibility.
We can simultaneously support the construction of a pipeline, and reject the cronyist methods used to acquire the land to do so. The two are not mutually exclusive. Also, support for the construction of a pipeline should not be taken as support for the government creating jobs. Just because it has to go through the governments approval process does not mean it is the government that creates jobs if it is approved.
Words mean things.
NSmallz13
government does not create jobs
Chad gets his electricity from 100% wind power for only 5 dollars a month! It says so right on his bill!
Solanum
Don't forget about his delicious grass-fed bison jerky. Gaia approved!
And growing tomatoes in your window boxes might increase NYC's 'food independence'!
If enough people started growing their own tomatoes to the point where commercial growers connections suffered losses, you can bet that it would be outlawed.
isn't that what happened with the landmark farmer during the depression where we got interstate commerce to include inaction?
You got it!
but weren't they willfully choosing to NOT participate? 😉
I keep hitting these dead horses.
Ron, sometimes your headlines crack me up!
I would love to see Stephanopolous lead a segment by asking this question before turning to his panel of "experts".
philomenaw
Up to I looked at the check for $4922 , I didnt believe that…my… friend was truly bringing in money parttime from there pretty old laptop. . there great aunt haz done this for under thirteen months and a short time ago paid for the dept on there cottage and bought a gorgeous Honda .
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Lord Humungus
I once worked for a company that had a division that made resident wind power generators.
After two or three years of that, they closed that division down since it wasn't making any money. At ~$10k for each unit, the ROI for a consumer was terrible for only 20% electrical bill reduction. (Note – numbers off the top of my head here -it's been a few years) Of course to be fair, the competing products from Honeywell – for example – looked better made and had the backing of a big company instead of a start up.
Re: Lord Humungus,
At ~$10k for each [wind power] unit, the ROI for a consumer was terrible for only 20% electrical bill reduction.
Considering that in many instances such a reduction amounts to no more than $500 per year (and maybe much less in those parts of the country where the weather is much nicer), it was indeed a very bad investment. Even those lower-cost units that one can find in outdoor equipment catalogs deliver a very small amount of power for their price. In those cases, solar panels are much more reliable as off-the-grid power sources than the pinwheels.
Those alt-energy systems are more tailored for off-the-grid houses and cabins where laying electrical lines is expensive. But as power-saving devices they're simply too expensive. You can put a dent on your power bill by making the investment in lower-power lights and keeping your home well insulated.
H.I.: Well, this whole thing is just who knows who. Then over here you have favoritism.
Captain, Road Prison 36: What we've got here … is the way he wants it… well, he gets it.
Charlie Wilson: Well, tradition mostly.
Bluto: [belches] Why not?
"Why Does It Need More Subsidies?"
Isn't this the "why does a dog lick its balls"-question?
because they CAN. As long as 'wind' is politically popular, then giving free money away is seen as 'sensible politics'.
Also – are these 'tax breaks' in any way comparable to the tax breaks handed out to oil & gas explorers/producers that Progs are always moaning about as "subsidies"?
(*I tend to dislike the 'not taxing' thing being described as 'subsidy'; yes, I know in effect that they can be the same, but i still prefer actual handouts to be distinguished from 'not-taking')
Jackand Ace
Compared to oil? Yeah, quite a bit different…see my post down below…oil is more than 3X greater.
I love the fact that AEA is so concerned about subsidies to energy companies. Do they have a similar concern about subsidies to oil? They don't…here is just one example of AEA's take on paying royalty fees on drilling in the Gulf. They pay none, and suddenly for AEA its all about encouraging new energy sources that increase our energy security.
"If the royalty relief program did not exist, the technology would not have been developed to produce oil and natural gas in the deep water Gulf of Mexico and domestic oil production would be much lower?clearly reducing America's energy security and making the United States more dependent on foreign imports."
http://americanenergyalliance……-security/
And how much do oil companies get in subsidies from the federal government? Here is one source:
"In 2013, the U.S. federal and state governments gave away $21.6 billion in subsidies for oil, gas, and coal exploration and production." And under Obama, that guy who wants to destroy oil production.
http://priceofoil.org/2014/07/…..der-obama/
Just a tad bit selective in their outrage, don't you think Ronald?
Oh, and before anyone starts to quibble about the difference between royalty fees and tax breaks (I know that is coming), here is AEA arguing that tax reform should not include the repeal of tax deductions…but I guess only when it comes to oil.
http://americanenergyalliance.org/2011/07/12/tax/
$21.6B for oil, but they're all worked up over $6.4B to renewables.
So then, you're arguing that subsidies should be removed from both?
Welcome to the party pal, libertarians have been saying that for decades.
January.29.2015 at 11:12 am
I could not have said it clearer…the organization Ronald uses to buttress a call to end subsidies to wind energy cares little for what you say Libertarians stand for, if its an end to all subsidies. That is a fair stance. AEA is far from fair…they are selective in their outrage, as I made clear. Surprising that a Libertarian would use them as a source for anything regarding subsidies.
Richard Rider
The left's version of "oil subsidies" wanders off into the fever swamp. Being able to deduct business expenses is a "subsidy"? "Not charging more" for federal oil leases is a subsidy? Which liberal wing nut gets to decide how much the lease should be?
When you actually look into the claimed oil subsidies, it just shows the left thinks a business should not make a profit, as expenses should not be deductible.
Jackand Ace doesn't care about pesky things like facts, just keep that in mind.
And you are exactly why I cited another source from AEA that doesn't want tax breaks taken away from oil companies…I just knew someone would say that is different from royalties. By the way, its not. But if you want it to be, have at it.
But if you want to be consistent, at least be outraged at the tax breaks oil gets. If not, save your outrage at wind tax breaks.
Good to see all the Libertarian apologists for oil show up…I knew they would. Hardly are you men of your convictions when it comes to the evil of any subsidy.
Canman
Comparing intermittent wind costs to coal or gas is comparing apples to oranges. Additions to small percentages of intermittent sources are more valuable than additions to large percentages, where they can become a burden to dispatchable and baseload sources.
Another problem with these wind subsidies is that it encourages wind power even when the conditions are considerably less than optimal. A large percentage (but not all) wind power projects produce more expensive power than natural gas — not to mention nuclear power (see article), yet these inefficient bird-killing windmills are great investments, thanks to taxpayer subsidies.
Then we as CONSUMERS pay again when these higher energy costs show up on our electricity bills — which is why on average CA has by far the most expensive electricity of all the states.
FACT: California residential electricity costs an average of 35.4% more per kWh than the national average. CA commercial rates are 60.3% higher. For industrial use, CA electricity is 85.4% higher than the national average (July, 2014).
http://www.eia.gov/electricity…..pmt_5_06_a