Today, the EPA announced new limits on greenhouse gas emissions from power plants. For once, industry and environmental groups are in agreement: these new limits, they say, will effectively ban the construction of new coal plants. As Michael Brune, executive director of the Sierra Club, put it, the new limits mark the “end of an era.”
The new regulations are, essentially, a way to achieve the same goals that were sought by the cap-and-trade bills proposed in 2009. While these bills failed in Congress, the EPA can now set limits on greenhouse gases without Congressional approval, thanks to a 2007 Supreme Court Decision (Massachusetts v. EPA).
As with any regulation, the new EPA limits will have various costs and benefits. The primary benefit, of course, will be a reduction in greenhouse gas emissions, and presumably, a reduction in global temperature increases over the course of the next century. Assuming the CO2 reductions will be comparable to those projected in the bills that failed to pass Congress in 2009, those reductions will result in a whopping 0.1ºC reduction in temperature increases over the next century (i.e. a predicted rise of 2.85ºC instead of 2.96ºC).
What will consumers pay for this potential reduction in the global temperature? In the recent past, the cost increases in power plant construction due to increased regulations have been offset by operational improvements at existing power plants. Instead of building new plants, utilities have opted to improve their existing facilities. For instance, in the mid-1980s, nuclear power plants operated at only 55% of their capacity, due to outages and routine maintenance. Today, they operate at more than 90% of their rated capacity. So while no new nuclear power plants have been built since the 1980s, the amount of energy we get from nuclear has nearly doubled over that same period. Unfortunately, however, there’s little room for improvement above the 90% mark. This means that increasingly, as we switch to more expensive alternatives, such as wind and solar, consumers will be forced to bear the full brunt of the cost.
One hope for consumers lies in the incredibly low natural gas prices resulting from the U.S. shale gas bonanza—made possible by hydraulic fracturing (“fracking”). But, while shale gas has been a wonderful development for the U.S. economy, it still pales in comparison to the abundance and affordability of coal. Also, unlike coal, natural gas has many alternative uses, such as use in plastics manufacturing, fertilizer production, and home heating. This is why, in 1978, Congress actually banned the use of natural gas for electric generation—at the time it was deemed too precious for electric generation. So, while natural gas is affordable today, that does not mean that dramatic increases in demand, due to a ban on coal, will not drive up prices in the future.
On the bright side, if coal and nuclear power remain effectively banned through regulation, and the new abundance of natural gas is unable to singlehandedly power every sector of the national economy, at least then we will know concretely, inescapably, the true cost of going green.
The Colorado School of Public Health (CSPH) at the University of Colorado recently announced an article that will be published this month in the journal Science of the Total Environment. The article is based on a study of air pollution resulting from oil and gas development (including hydraulic fracturing or “fracking”) in Garfield County. According to the announcement, the article will reveal findings of benzene and other “potentially toxic petroleum hydrocarbons” at concentrations potentially hazardous to human health. But before this study, or any similar study, can be taken as a basis for alarm, several questions need to be answered: What are these “potentially toxic” chemicals? Where do they come from? And how dangerous are they really?
To answer these questions, it will be helpful to focus on just one chemical: in this case, benzene—the chemical most often associated oil and gas development. Focusing on benzene will also be helpful in evaluating the CSPH study, because, according to the announcement, benzene was the “the major contributor to lifetime excess cancer risk” found in the study.
One reason benzene is so often associated with oil and gas development is that it’s a natural hydrocarbon—like methane, propane, octane, and the hundreds of other chemicals in the mixtures we call “crude oil” and “natural gas.” Consequently, benzene is also found in gasoline, diesel fuel, and engine exhaust, which further increases the presence of benzene near oil and gas development. Lastly, because benzene has desirable chemical properties, it is also separated from crude oil for use in industrial applications, including—among many other things—use as an additive in fracking fluids.
Given the uses above, it should not be surprising that benzene can be found everywhere, not just near oil and gas development. According to the toxicology profile provided by the US Department of Health and Human Services, “Benzene is ubiquitous in the atmosphere.” Not only does it come from tailpipes, but also cigarettes, volcanoes, forest fires, and even camp fires. Government agencies, however, are usually not alarmed by the benzene levels found in our daily lives, because they recognize that the mere presence of a toxin (the fact that a laboratory can physically detect it) does not automatically pose a threat to public health: It is equally important to determine what concentrations can actually do harm.
At what level, then, does benzene become a problem? The truth is, we don’t know. With limited data, the EPA does the best it can to estimate relative risks at various levels of exposure. In the case of benzene, the EPA uses a 25-year-old study (published in 1987), in which workers were exposed to concentrations of benzene measured in parts per million (ppm)—concentrations literally thousands of times higher than the levels the EPA ultimately tries to estimate. The EPA then performs a linear extrapolation (i.e. draws a best-fit line through the data) to estimate a concentration of benzene that will result in 10 additional cancer cases (not to be confused with cancer deaths) per million people exposed. This is essentially the same as determining a level at which the cancer risk for an individual increases by one-thousandth of a percent (0.001%). When considering studies like the CSPH study, it can be more useful to think of the increased cancer risks on the individual level because the exposures in such studies are localized and rarely affect more than a million people—typically they affect a few hundred or less.
For benzene, the EPA estimates that a 0.001% increase in cancer risk corresponds to exposures of 0.4 parts per billion (ppb) in the air and 10 ppb in drinking water. For even greater caution, the EPA set the actual limit on drinking water, enforceable under the Safe Drinking Water Act, at 5 ppb.
While a 0.001% risk may seem small to begin with, there is one critical assumption that needs to be remembered when using these EPA estimates: the calculated risks assume a person will continue to be exposed to the same level of a toxin or carcinogen for their entire lifetime. This is especially unlikely in the case chemicals like benzene, because it is a biodegradable substance—and, in the case of the CSPH study, it is produced by temporary activities.
Also worth considering is the fact that a wide range of uncertainty results from the process used to generate the EPA estimates. Within the range of uncertainty, the EPA selects the most conservative (i.e. the most protective) estimate to establish as the official estimate. Thus, as explained in the EPA calculations, there is an “equal scientific plausibility” that the real levels of benzene corresponding to a 0.001% increase in cancer risk could actually be more than 3-times higher than the current estimates (1.4 ppb in the air and 35 ppb in the water).
These are important considerations when evaluating studies like the CSPH study, since these studies often express their findings in relation these EPA estimates. Without a proper understanding of what these estimates represent, they can give an exaggerated perception of the relative risks involved. Consider, for example, the EPA report that found benzene contamination in Pavillion, Wyoming. In press releases, it was announced that benzene was found at levels 49 times higher than the EPA limit. This, no doubt, caused considerable alarm for the public—but few realized that this represented a 0.02% increase in cancer risk, again, assuming a lifetime of exposure at that level. However, just six months later, the benzene level had fallen 40%. Adjusting for this rate of biodegradation, the total increased cancer risk would have been only 0.0005%. And while this level represents a very low risk, it’s also worth mentioning that this level was found in a deep monitoring well, specifically used to detect contamination—in other words, not a single person was ever actually exposed to this level of benzene. Unfortunately, none of these considerations, are quite as attention-grabbing as the statement: “Benzene found at levels 49-times above Safe Drinking Water Limit!”
Just as it is important to understand what EPA limits represent, it is also important to consider how the increased risks from a particular activity relate to increased risks from air pollution in general. The CSPH study calculated an increased cancer risk of 10 cases per million people living near oil and gas development. But, when compared to the average increased cancer risk nationwide—due to factors such as automobile emissions and industrial activity—the numbers are not quite as alarming. According to the EPA’s most recent National-Scale Air Toxics Assessment, the average increased cancer risk nationwide due to air pollution is 50 cases per million. The risk in Denver is even higher (almost 80 per million) simply because it is an urban environment. Garfield County, on the other hand, has a risk of only 20 per million. Thus, a person living near oil and gas development in Garfield County will experience a cancer risk of roughly 30 per million, far below the national average, and less than half the risk that results from living in an urban environment.
Benzene and other air pollutants should not be ignored when discussing oil and gas development. But it is important for the public to realize that the limits set by the EPA reflect concentrations that present very small—though perhaps not insignificant—risks, and that these risks are comparable to the risks associated with automobile emissions, urban living, and industrial activities in general.
It should also be remembered that, for the purposes of this post, benzene was used as an example because it is one of the most dangerous and most common chemicals associated with oil and gas development; however, the same considerations and relative risks apply the many other chemicals associated with oil and gas development—including xylenes, trimethylbenzenes, aliphatic hydrocarbons, and other compounds that will likely to receive attention in the CSPH study.
Senator Betty Boyd, a democrat member of the State, Veterans, and Military Affairs Committee, was not present in the committee hearing for any of the testimony either for or against HB 1172, the carbon tax repeal. Yet she knew exactly how to vote — against electricity ratepayers, against the environment, and for Xcel Energy.
According to lobbying disclosure reports available on the Secretary of State’s Web site, Xcel spent $64,243.38 in January and February to lobby lawmakers in the Colorado state legislature. Today it paid off when HB 1172 was killed in the Senate committee on a party line vote. After not ever making it out of committee last year, this year the “phantom carbon tax” repeal actually passed the House and made it all the way to committee in the Senate.
No worries for Xcel, all three Democrat Senators — Rollie Heath, Bob Bacon, and Betty Boyd — were there to stop any further progress on the bill sponsored by RepublicanTed Harvey. Boyd was in another committee hearing during testimony on HB 1172. After testimony was complete, she was called back for the vote. Committee Chair Rollie Heath asked her if she had any questions. She answered, “No,” and was pretty sure that she understood what was being proposed.
Boyd missed powerful testimony from Syndi Nettles Anderson, an engineer and NREL employee who is getting her PhD in biofuels. Anderson, who is also looking to replace Bob Bacon once he is term limited in SD 14, said that the imputed carbon tax on coal actually harms the environment because it incentivizes other technologies that have not yet been fully tested for their environmental impact. Some of these technology may do more harm than carbon emissions.
The results of today’s committee hearing does lend some credibility to a saying that is whispered in the halls of the capitol: “Xcel owns this place.”
Full Disclosure: I testified today on behalf of HB 1172. My full testimony is below.
Testimony on behalf of
HB 1172 No Imputed Carbon Tax
March 21, 2012
Senate State, Veterans, and Military Affairs Committee
Mr. Chairman and Members of the Committee
My name is Amy Oliver Cooke. I write on and direct the energy policy center for the Independence Institute, 727 E. 16th Ave, Denver, CO 80203
Thank you for allowing me the opportunity to testify today on behalf of HB 1172.
At the Independence Institute, we are agnostic on energy resources. It is our strong belief that the choice of energy resources should come from the demands of the free market, and not from the preferences of policymakers, lobbyists, or special interest groups.
HB 1172 is simple in nature, unless a carbon tax is passed at the federal level, ratepayers should not be disadvantaged financially by paying the phantom carbon tax to an Investor Owned Utility such as Xcel Energy.
We haven’t been able to find any other state that has a carbon tax in statute. Colorado’s is based in HB08-1164, which says the Public Utilities Commission “may give consideration to the likelihood of new environmental regulation and the risk of higher future costs associated with the emission of greenhouse gases such as carbon dioxide when it considers utility proposals to acquire resources.”
HB 1172 would change the wording ever so slightly to the PUC “may give consideration to the existence of new environmental regulation and the costs imposed by current federal law or regulation on the emission of greenhouse gases such as carbon dioxide when it considers utility proposals to acquire resources.”
When the 2008 bill passed, Colorado Conservation Voters explained the passage of HB 1164 this way: “By giving the PUC the ability to use carbon as a value in resource planning decisions, HB 1164 represented the first time that the Colorado General Assembly took a substantive step forwards in giving regulators the tools they need to explicitly address global warming.”
It is a selective, regressive tax – selective on resource fossil fuels and selective on customers (Xcel Energy), although pass through costs affect almost everyone in the state.
To tax or not to tax?
While it’s prudent for the PUC to consider the risks of Congress passing a cap-and-trade scheme that would put a price on carbon, it is, in equal measure, rash to include the cost of a federal carbon tax in resource planning that covers a time frame in which these costs don’t exist.
Ratepayers already are saddled with costs that do exist — $1.1 million for Xcel executives to travel via private jet. Or just in the last two months, $64,243.38 to lobby the Colorado state legislature, part of which is to kill this bill. Have you ever wondered where the “carbon tax” goes? Does Xcel cut a check to the state of Colorado or to the federal government? No. It doesn’t.
To its credit, the PUC staff registered second thoughts about the application of a carbon tax. Alluding to the $20 ton carbon tax during hearings for Xcel’s 2010 renewable energy compliance plan, PUC staff witness William Dalton expressed concern about “including costs that do not exist.”
But even Xcel Energy doesn’t believe that a carbon tax will be passed at the federal level any time soon.
As early as June 2010, Xcel petitioned the PUC for permission to renege on a commitment to build a 250 megawatt solar thermal power plant due to “changed circumstances,” among which the utility cited “the expectation that carbon legislation won’t be enacted for several years,” which would, “erode the economics of solar thermal” [Direct Testimony James F Hill, Xcel Witness, 4 June 2010, Docket 10A-377E]
In the 2012 Renewable Energy Compliance Plan, In Section 7 — Retail Rate Impact and Budget, Xcel acknowledges that the Independence Institute was correct in February 2011 when we predicted that there would be no national carbon tax in the near future with this statement:
“The carbon assumptions approved by the Commission in Docket No. 07A-447E assumed carbon regulation would be enacted in 2010; such regulation was not enacted and the prospects for near term carbon regulation appear to be slim.”
Because Xcel assumes there will be no carbon tax in the near future, it presents a cost model that excludes the carbon tax and another model that does include the tax but not until 2014:
“Due to the uncertainties related to the timing associated with possible carbon emission regulation, the Company did not include any carbon cost imputations in the model runs and other calculations set forth on Table 7-3. However, as discussed later, Public Service also presents with this Compliance Plan, as Table 7-4, a sensitivity case that assumes the same carbon imputation costs ($20 per ton, escalating at 7% annually) as approved in the 2007 Colorado Resource Plan but on a delayed implementation schedule of 2014.”
The cost difference between a carbon and non-carbon compliance plan is substantial – roughly $584 million between 2014-2021. That’s over $400 per Colorado ratepayer for a tax that doesn’t exist.
Colorado Legislative Council Staff wrote in the fiscal note for HB 1164, “the bill will not affect state or local revenue or expenditures, and is assessed as having no fiscal impact.” But including a non-existent $20 per ton carbon tax that adds millions of dollars to the cost of otherwise inexpensive fuels such as coal, has an impact on ratepayers. Currently, according to DOE statistics Colorado has the highest electric costs of any neighboring state, second highest in the Rocky Mountain West,
It’s true that the carbon tax is not a line item on a ratepayer’s bill, but is in included in the modeling of costs for resource acquisition. Costs dictate rates. The higher the costs, the higher the rates. The higher the rates, the more Xcel Energy makes. The “phantom carbon tax,” as we call it, increases costs and therefore rates. Xcel customers pay Xcel for a tax that doesn’t exist. It is a redistribution of wealth from ratepayers to shareholders.
If the state legislature wants to tax Coloradans to pay for global warming, they should make their case to voters — all voters – and not just penalize Xcel Energy ratepayers, who have no other place to go, no recourse.
As I stated at the beginning it is the strong belief of the Independence Institute that the choice of energy resources should come from the demands of the free market, and not from the preferences of policymakers, lobbyists, or special interest groups and we believe that HB 1172 is consistent with that principle.
This post will be the first in series on hydraulic fracturing (”fracking”), in which Independence Institute research associate, Donovan Schafer, will take on specific issues related to fracking. In this post he focuses on the claim that fracking will deplete Colorado’s water resources. Enjoy!
Two recent articles—one in the Denver Post and another in the Huffington Post—present the issue of water depletion as it is commonly presented by those who oppose fracking. Wendell G. Bradley, in the Denver Post, urges lawmakers to “cut off fracking’s unconscionable amounts of water use,” while Gary Wockner, in the Huffington Post, warns that fracking would use up the “last drop in the bucket of Colorado’s rivers.”
These views simply do not reflect reality. In January, the Colorado Division of Water Resources, the Colorado Water Conservation Board, and the Colorado Oil and Gas Conservation Commission issued a joint report estimating that fracking would account for just eight-hundredths of a percent (0.08%) of Colorado’s annual water usage—far less than what we use for recreational purposes (5.64%) and slightly more than what we use to make fake snow (0.03%).
But fracking is different—these authors claim—because the water is left in “deep subterranean cavities,” and thus fracking “permanently remove[s] billions of gallons of water from the hydrologic cycle.” This statement gives the false impression that fracking can significantly affect the hydrologic cycle. It cannot. The hydrologic cycle is not a fixed supply of freshwater, but rather a constantly recharging system that begins with the nearly infinite expanse of the oceans.
Just for fun, let’s accept the Intergovernmental Panel on Climate Change prediction that sea levels will rise by one foot during the next century. A few simple calculations show that it would take one hundred million (100,000,000) frack-jobs, each using 5 million gallons of water, to counteract the predicted one-foot rise in sea level. In other words, the oceans which serve as the starting point for the hydrologic cycle cannot possibly be affected by hydraulic fracturing in any significant way—and even if they could be affected, the general effect would be to counteract the threat of rising sea levels, which we are constantly warned about.
Some of the fracking nay-sayers, seem to concede these points, but then they go on to assert that there is still a problem. They warn that even a small additional use of water will be enough to completely dry up the system. Consider Gary Wockner’s line of reasoning:
It is true that the state of Colorado contains millions of acre feet of water, and that fracking may only need a small percentage of it. But more importantly and to the point, it is also true that fracking is a brand new use of water . . . . Fracking would certainly contribute to being the last drop in the bucket of Colorado’s rivers.
But this, too, is misleading. Every drop of water withdrawn requires, by law, approval from water permitting authorities. Furthermore, these permitting authorities cannot simply give away the proverbial “last drop.” Currently, by law, all new water uses must be balanced against current water uses. To quote the CDWR Report, “water cannot be simply diverted from a stream/reservoir or pumped out of the ground for hydraulic fracturing without reconciling that diversion with the prior appropriation system.” Claims that fracking will gobble up the last drop are just plain nonsense.
In the face of claims like those presented in this post, remember these three points:
- Fracking would present a mere 0.08% of Colorado’s annual water usage;
- Even though some water is left underground, the amounts of water involved cannot possibly have an appreciable effect on the hydrologic cycle, because that cycle is fueled by our massive oceans;
- And, lastly, the added water uses from fracking will not suck the system dry, because current laws require that new uses be reconciled and balanced with current appropriations.
Stay tuned for more coverage of the specific fracking issues that you need to know about.
Leftist billionaire heiress Pat Stryker is waiting to see if taxpayers via the Department of Energy (DOE) will throw another $10 million at Stryker’s failed thin-filmed solar panel manufacturer Abound Solar before she puts any more of her own money into the Colorado-based company reports Eric Wesoff of GreenTech Media:
The firm awaits $10 million from the DOE and $10 million from its investors but has a bit of a chicken-and-egg problem. Our sources inform us that the DOE is waiting for the investors and the investors are waiting for the DOE. Abound’s venture investors include DCM, Technology Partners, GLG Partners, Bohemian Companies, and Invus.
The pay-to-play connection between Abound and Stryker’s Bohemian Companies was first exposed by Todd Shepherd of Complete Colorado. Shortly after the Solyndra scandal, the Energy Policy Center provided more details about Abound’s financially incestuous relationship with Stryker, Colorado State University (CSU), and former Governor Bill Ritter, now the head of the Center for the New Energy Economy at CSU.
Abound already has drawn down $70 million of its $400 million taxpayer-guaranteed loan, but it is still in a world of hurt. At current spending levels, Abound has less than four weeks of cash flow left according to Wesoff:
The firm is looking to lower its burn rate from $2 million per week to $2 million per month, according to sources close to the firm. The sources have indicated that there is roughly $7 million in the bank, a painfully short runway, and that vendors are being paid in a very selective manner.
Obviously the mass layoffs of nearly 70 percent of its Colorado workforce were a drastic cost cutting measure rather than a “retooling” of the production line as so many other media outlets have reported.
Stryker’s reluctance to provide more capital for Abound speaks volumes. If she won’t dump just a fraction of another $10 million, little more than pocket change for her Bohemian Companies, down the Abound rabbit hole, then why should taxpayers? As we reported last week, taxpayers may be on the hook for more than just the loan guarantee. They could be paying out more than $2 million in unemployment benefits for layoffs from jobs that taxpayers paid to create in the first place.
Buy a $40,000 Chevy Volt and taxpayers in Colorado and across the country will pick up nearly one third of the cost plus provide a permit to use Colorado’s HOV lanes free. Chevy blasted a “radio advisory,” which I received for my show on News Talk 1310, bragging about taxpayers footing the bill:
Colorado residents who purchase or lease a new Chevrolet Volt electric vehicle with extended range are eligible for a state tax credit of up to $6,000 in addition to a federal tax credit of up to $7,500 for a total price reduction of as much as $15,500.
Colorado is one of a number of states that is offering a state tax credit in addition to the federal tax credit, which is subject to the customer’s eligibility. For example, Volt customers who purchase a low-emission model of the 2012 Chevrolet Volt, which is standard in California, will qualify for a $1,500 state rebate and will be eligible to drive solo in the state’s carpool lanes. (FULL PRESS RELEASE BELOW)
According to the language of the fiscal note of the enabling legislation (HB11-1081) for the $6,000 state tax credit, because the incentive is a tax credit it “is refundable, meaning that any credit amount that exceeds a taxpayer’s income tax liability is refunded to the taxpayer.”
The average Chevy Volt buyer doesn’t need taxpayer help so says General Motors CEO Dan Akerson who recently told the Associated Press that “the average purchaser of a Volt is earning $170,000 a year.” In other words, less wealthy Coloradans subsidize elitists who want an electric car that is likely a second or third vehicle.
Despite the heavy subsidies, Chevy can’t unload the Volts they already have. Selling only 7,671 Volts last year, Chevy fell woefully short of its 10,000 vehicles sold goal. On March 19, GM will halt production for five weeks in an attempt to move through the current inventory. It doesn’t help that the Volt’s battery would unexpectedly combust. In the meantime, Chevy will continue its campaign of instructing wealthy green elitists on how to gouge taxpayers.
Are taxpayers still paying for Abound Solar employees despite the company’s cost saving measure of laying off 70 percent of its work force? Could be, and the figure could be more than $2 million.
Late last month Colorado-based Abound Solar announced layoffs of 180 full-time and another 100 part-time employees so the thin-filmed photovoltaic manufacturer could “re-tool” to produce its “next generation” of solar panels.
The company, which has drawn down $70 million of a $400 million taxpayer-guaranteed loan, claims it will rehire the laid off employees in the next six to nine months. Wink, wink. Imagine if Apple announced it was laying off 70 percent of its work force to prepare for the manufacturing of its updated iPad. No one would believe it. No one should believe Abound either. If there existed a market for their solar panels, employees would be working.
The problem for taxpayers is Abound employees aren’t working. Taxpayers paid $70 million to create the 280 jobs ($250,000 per job) and now they could be on the hook for unemployment benefits while those employees are out of work.
Doing the Math
According to Career Bliss, an online career search Web site, the average Abound Solar annual salary is $57,000 or $14,250 per quarter. Using the quarterly figure on the Colorado Department of Labor and Employment’s (CDLE) unemployment benefits estimator, a laid off full-time employee could receive $500 per week in taxpayer-funded unemployment benefits. Assuming Abound’s six-month estimate until the company is ready to resume production is correct, an employee could receive a total of $10,500. With 180 full time employees now out of a job, 180 x $10,500 equates to $1,890,000 in taxpayer-funded unemployment benefits for laid off full-time Abound employees.
That figure is just for the full-time employees. Another 100 part-time employees were laid off as well. An email was sent to CDLE about whether or not part-time employees are eligible for unemployment benefits. No response has been received as of this posting.
The hemorrhaging of taxpayer dollars continues courtesy of Abound Solar.
Greeley Tribune reporter Nate Miller interviewed me as the voice of opposition about the wind “Production Tax Credit” (PTC). Miller does a good job of presenting both sides of the argument:
Supporters of the wind production tax credit, which began in 1992, contend failure to extend it will result in layoffs for workers from good, high-paying manufacturing jobs, many of which are located in northern Colorado. It will also make the country more dependent on foreign oil, they say. Those opposed to the credit say wind energy is inefficient and the government shouldn’t subsidize it. It’s simply wrong, they say, to believe there would be no jobs without the tax credit.
“If you look at economic modeling in the dynamic sense, the private sector would spend that money in a much more cost-effective way and those people would likely be employed,” said Amy Oliver Cooke, director of the energy policy center at the Denver-based Independence Institute, a free-market think tank “Maybe not in the wind industry, but in some other industry.”
Shocking that Big Wind and its green enablers want to extend the $3.5 billion annual tax credit. My question to them is why should the rest of the country have to pay for Colorado to indulge its green fantasies? Read the rest of the story here.
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.
A “Yes” vote on HB 1172 “No imputed carbon tax” is also yes to ratepayers and “No” to Xcel Energy and global warming alarmists for whom cost of electricity is of no concern: