Two decades is long enough for wind tax credit
If we had our way, there would be no tax subsidies of any kind for any energy resource. Since the wind production tax credit (PTC) is what’s currently being debated in Congress and on editorial pages across Colorado, we’ll address it. Below is our column that appeared originally in the Pueblo Chieftain on Sunday, March 4. We thank the Chieftain for publishing our opinion.
Time to retire the wind PTC
By Amy Oliver Cooke and Michael Sandoval
Colorado’s newspapers are loaded with pleas to extend the current 2.2 cents per kilowatt-hour Production Tax Credit (PTC) for wind energy. With the exception of Republican Representative Doug Lamborn, the entire Colorado congressional delegation signed a letter urging Congress to continue the PTC at a cost of $3.5 billion annually.
We disagree with the majority and wonder why Americans should subsidize Colorado’s green fantasy and a resource that is neither practical nor economically viable.
Former Xcel Energy CEO Wayne Brunetti outlined the real limits of wind power production when he told an audience in 2004 that at the utility company “we’re a big supporter of wind.”
“But at the time when customers have the greatest needs, it’s typically not available,” he lamented, acknowledging the most critical shortcoming of the alternative energy source.
Plus, he added, the intermittency of wind drastically reduced a given installation’s capacity by a factor of 10-to-1, making fossil power plants a necessity for backup.
Of course, this was before environmental activist turned former Public Utilities Commissioner Chairman Ron Binz convinced Colorado voters to mandate a Renewable Portfolio Standard (RPS) that Binz estimated would be 96 percent wind.
Binz actually wrote that the impact of the then 10 percent proposed RPS on ratepayers’ bill would “vary by utility, but the most likely outcome is that state-wide electric rates will be virtually unchanged,” thanks in part to the PTC.
During the 2004 RPS campaign, Binz reported that Colorado retail residential electric rates were 7.37 cents per KWh in 2002. Fast forward a decade with a 30 percent renewable mandate that is heavily weighted towards wind, Colorado’s residential electric rates have skyrocketed 50 percent to 11.04 per KWh. Based on Department of Energy statistics, states with an RPS endure 30 percent higher electric rates, and the rest of the country pays as well through the PTC.
On the practical side, available wind is never near load centers—where the people actually live—and, as Brunetti told the U.S. Senate Energy & Natural Resources committee in 2005, transmission costs from remote areas often exceeded the price tag of the wind project itself.
But the RPS and PTC made Brunetti a proponent of wind in less than a year.
In the same Senate committee testimony, Brunetti called for a “wide diversity of power generation resources” supported by mandatory RPS programs at the state level. In order to ensure that wind retained “economic viability compared to fossil or nuclear generation,” he called for an extension of the Production Tax Credit. While wind was the most competitive renewable resource, according to Brunetti, “even that would not be true without the Production Tax Credit.”
Xcel concedes this point today in its current Renewable Energy Resource Compliance Plan. As does physicist Dr. Kelvin Kemm who wrote, “The problem is that large-scale wind power fed into a national grid is just not viable – either economically or practically – from an engineering stand point.”
But perverse tax incentives such as the PTC serve only as an encouragement for Colorado’s green fantasies and wind profiteers.
Vestas, with a substantial presence in Colorado, stands to benefit greatly from the PTC extension. Marth Wyrsch, president of Vestas-American Wind Technology, told the U.S. Senate Finance Subcommittee, “An extension of the PTC is necessary for the continued employment of 80,000 people working in the U.S. wind industry.” The impact in Colorado has been estimated at 1,600 jobs.
Vestas is no stranger to other recent Federal tax credits and incentives. As part of the $2.3 billion Advanced Energy Manufacturing Tax Credit (aka 48C), Vestas received $21.6 million for its Pueblo plant, and $30.2 million for its facility in Brighton in 2010.
Colorado officials also eagerly incentivized Vestas. The Pueblo and Windsor plants received roughly $34 million in various state and local tax incentives and rebates. Taxpayer dependent Vestas claims the PTC is necessary to maintain the 1,600 jobs taxpayers “created” in the first place.
But two decades of the PTC is long enough.
Even Colorado Democrat Senator Michael Bennet argues in a Chieftain guest column that the PTC “should not go on forever. At a certain point every business has to sink or swim based on its merits.”
But then he claims wind energy needs more, “we are incredibly close to the tipping point with wind energy, and pulling the rug out from under it now would deal the industry and our economy and enormous blow.”
We disagree. It’s time to retire the PTC. The choice of energy resources should come from the demands of the free market, and not from the preferences of policymakers, lobbyists, or wind profiteers.