Wind Industry Admits It Needs Handout to Compete

by Nicolas Loris, Heritage Foundation Daily Signal, October 08, 2014

One of the world’s largest wind turbine manufacturers let loose a bit of truth and self-admission to the Financial Times: We still need help, and that help must come from taxpayers.

The wind production tax credit, a generous $23 per-megawatt-hour tax credit the producer receives for 10 years, expired last year. At that rate, taxpayers are effectively covering half the wholesale price of electricity and, in some areas of the country, the entire wholesale price. The PTC expired at the end of 2013, but several policymakers are pushing for an extension.

Lisa Davis, who leads the global energy business at Siemens, told the Financial Times the wind industry was close to grid parity with conventional sources of electricity such as coal and natural gas, but “we’re not there yet.”

“We’ve not yet got to the point where it’s truly self-sustaining,” she said. “We’ve got to focus on cost competitiveness.”

So the way to become self-sustaining and cost-competitive is to plead for extended reliance on the taxpayer? That is exactly why Congress needs to cut the cord on wind energy subsidies from the federal government. The wind industry cannot focus on lowering costs while it is so heavily subsidized because subsidies enable them to ignore costs. So, rather than trying to achieve the true price point necessary for cost-competitiveness, the wind industry concentrates on securing more subsidies. Eliminating the PTC for good will allow wind producers to become self-sustaining if the technology truly can compete with other sources of energy.

If wind cannot compete, then it doesn’t belong in our energy mix. America has a robust and diverse supply of electricity generation where our energy demands are met through coal, natural gas, nuclear, hydropower and other renewable sources. We don’t need the federal government to create artificial diversity that wastes taxpayer dollars and promotes stagnation. This holds true for all energy sources.

The reality is startups and new ideas and technologies succeed and fail all of the time. Failure should not be a signal for the federal government to come to the rescue; it’s a signal those resources can be put to more productive use in the economy. But the wind industry is no start-up. It’s been more than 22 years since Matthew Wald of the New York Times wrote, “Because of striking improvements in technology, the commercial use of these windmills, or wind turbines as the builders call them, has shown that in addition to being pollution free, they can now compete with fossil fuels in the cost of producing electricity.”

There is no justification for propping up established companies, either. If Chi Chi’s pleaded for handouts to stay competitive with the likes of Applebees, or Microsoft told America it needed support from the taxpayer to sell more Zunes, policymakers rightfully would scoff. Those companies didn’t fail because they weren’t cost competitive; they simply offered a product consumers didn’t want to buy.

Rather than creating a sustainable industry, the PTC artificially propped up an industry, advanced special interests and allocated labor and capital away from more competitive uses in the marketplace. Extending the credit would only exacerbate those problems and complicate opportunities for real tax reform. Congress should hold its ground and keep the sun set on the wind PTC.

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