The Wind Industry says it's cheaper than fossil fuels, then cries for more subsidies
by Robert Bryce, Manhattan Institute, December 16, 2014
If anyone needed proof that subsidy-dependent businesses will always seek more subsidies, look no further than the U.S. wind industry. On Wednesday (Dec 14), the wind sector won a vote in the House on a tax bill that includes a one-year extension of the production tax credit (PTC), which gives wind companies 2.3 cents for every kilowatt-hour of electricity they produce. The companies can collect that subsidy for a decade after they are deemed eligible.
The extension of the PTC was part of a bill that contained more than 50 tax breaks and subsidies that will cost taxpayers more than $40 billion. The portion attributable to the wind industry: about $6.3 billion. It appears that the Senate will pass the bill and President Obama will sign it into law. Thus the wind industry, which has been getting subsidies (with a few short interruptions) since 1992, will continue feeding at the trough.
If there was any doubt that the wind industry needs subsidies, look at the statement put out on Tuesday by the American Wind Energy Association, the sector’s main lobbying group. AWEA said that after the PTC expired in 2013, “new wind installations came to a halt, resulting in a 92 percent drop in new wind projects.”
Of course, rent-seeking entities love to claim that their pet projects deserve subsidies because they will create jobs. Indeed, the phrase “create jobs” appears twice in a one-page letter that was sent to leaders of Congress last month imploring them to extend the PTC.
The letter was signed by AWEA and some 450 organizations, including the usual environmental groups — the Sierra Club, Clean Water Action, the National Wildlife Federation, and the Wilderness Society — as well as a host of major corporations. Among them: NextEra Energy, one of the world’s largest wind-energy producers. I wrote about NextEra last year in these pages after the company filed a SLAPP suit in Canada against Ontario anti-wind activist Esther Wrightman. (Here’s a link. Wrightman, by the way, has since moved out of Ontario, and the project she was fighting, NextEra’s Adelaide Wind Energy Centre, has gone forward.) Others that signed the subsidy-seeking letter included Siemens Corporation, E.On, and Nucor Corporation, which is one of America’s biggest steel producers.
AWEA claims that the wind industry supports 73,000 jobs. But how much do those jobs cost taxpayers?
Earlier this year, Susan Combs, the Texas comptroller of public accounts, came up with an estimate. She reported that each wind-related job in the Lone Star State (which has more wind-energy capacity than any other state) costs the state’s taxpayers about $1.7 million.
That’s an increase over what Combs found back in December 2010, when she reported that each wind-related job was costing taxpayers $1.6 million. In an August op-ed published at Economics21, Combs said that “instead of generating jobs and providing a reliable and consistent energy source, wind projects just generate higher costs.”
Perhaps more remarkable than the high cost of wind-energy jobs is the fact that the U.S. is continuing to subsidize wind energy at a time when AWEA itself is claiming major reductions in cost and European countries are slashing those very same subsidies.
In a press release issued last month, the lobby group declared that the cost of wind energy has “dropped by more than half in the last five years.” Furthermore, last month an AWEA spokesperson boasted to the New York Times that some wind projects are “coming in below the cost of even existing generation sources.” That same November 23 story, “Solar and Wind Energy Start to Win on Price vs. Conventional Fuels,” quoted Jonathan Mir, a managing director at the Wall Street firm Lazard, who said that the price of electricity that wind developers need to make money is now “essentially competitive with what would otherwise be had from newly constructed conventional generation.”
Mir and his colleagues at Lazard estimated that production of wind energy, without subsidies, now costs about 3.7 cents per kilowatt-hour, less than what they found for the same amount of electricity produced from natural gas (6.1 cents) and coal (6.6 cents). So if Lazard is correct and it’s cheaper to produce electricity from the wind than from other sources, why does the wind industry need subsidies?
That’s a particularly relevant question given that European countries are slashing subsidies for renewables. In July, Germany reduced subsidies for wind and solar by about 25 percent. On December 2, the Financial Times reported that an offshore wind farm planned for Northern Ireland has been “scrapped” owing to reductions in the subsidies paid for such projects.
To be sure, the ongoing battles over wind projects go far beyond the issue of subsidies. Citizens and environmental groups (commendably among them is the American Bird Conservancy) in the U.S. and Canada and across Europe are fighting wind-energy sprawl based on a variety of concerns, including destruction of scenic landscapes, the turbines’ deadly effect on bats and birds, and the irritating noise they produce.
But it’s the ongoing subsidies that really annoy Lisa Linowes, one of America’s most prominent critics of the wind industry. Linowes, who lives in Lyman, N.H., is the executive director of The WindAction Group as well as the publisher of the website windaction.org. Asked on Thursday about the vote to extend the PTC, she replied, “We thought the Republicans would have the stomach to stop this.”
— Robert Bryce is a senior fellow at the Manhattan Institute. His latest book, Smaller Faster Lighter Denser Cheaper: How Innovation Keeps Proving the Catastrophists Wrong, was published in May by PublicAffairs.