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Thursday, August 16, 2012
Windfarms Set to Lose 50% Federal Subsidy
By Heritage Foundation @ 2:28 PM :: 4452 Views :: National News, Ethics

Wind Energy Subsidies Are As Useful As VHS Tape Subsidies

www.Heritage.org

The wind production tax credit is set to expire at the end of this year, which has the industry crying out for continued subsidies.

Heritage's Nicolas Loris has made the case that the wind energy tax credit makes as much sense as a VHS production tax credit. Can you imagine the logic: "We can't afford to lose our VHS tape manufacturing plants. They provide valuable jobs. Americans need a variety of ways to watch recorded entertainment."

Loris says this is what proponents of wind energy tax credits sound like.

Wasting taxpayer dollars on different but similar programs—claiming that these subsidies really are necessary to create jobs or prevent layoffs—simply creates a "subsidies for me but not for thee" mentality in Washington….Renewable energy production tax credits have received support from Democrats, Republicans, and industry groups, but that doesn't make it good policy.

The credit is a huge handout to wind producers, allowing them to sell their electricity for less than market price. They would profit even if they offered it for free—because they would still pocket the subsidy.

The subsidy is already equivalent to 50 percent to 70 percent of the wholesale price of electricity. And that isn't the only special-interest treatment wind producers receive, as Heritage's David Kreutzer explains:

Though you would not know it from wailing and gnashing of teeth over the expiration of the [production tax credit, or] PTC, many states also have renewable energy standards that force ratepayers to buy wind, solar, and biomass produced electricity regardless of how much it costs. These renewable standards are separate from—and, for wind-power producers, in addition to—the PTC.

A business that cannot survive without taxpayers paying 50 percent of the costs does not help the economy. Instead, it eats up more value than it produces.

Policies like the production tax credit concentrate benefits on a few recipients and spread the costs among the rest of us through higher taxes and energy costs. They hurt the economy by making production more expensive, which puts U.S.-based products at a competitive disadvantage. This means fewer jobs for American workers. Those production expenses also make necessities more expensive for consumers, who are already hurting from the higher energy costs. Higher prices across the board hit lower-income Americans the hardest.

Congress should let the wind production tax credit expire as scheduled and offset the resulting tax hike with broad tax reductions elsewhere. And this should be only the first step toward eliminating energy subsidies—and seeing which energy producers can provide the best service at the most affordable prices for Americans.

President Obama often refers to an "all of the above" energy strategy when he advocates for taxpayer funding of energy production like wind and solar. Heritage's Loris puts it succinctly: "The only 'all of the above' strategy America should embrace is the answer to this question: Which of these energy sources should we not subsidize? A.) Fossil Fuels B.) Nuclear C.) Renewables D.) All of the Above."

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