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Wind Power and the free market
Institute for Energy Research ^ | 1/4/2012 | Robert Murphy

Posted on 01/04/2012 10:50:23 AM PST by Recon Dad

The Institute for Energy Research (IER) is committed to free-market policy solutions for America’s energy needs. IER has repeatedly argued that reducing the federal government’s intervention in the energy sector would reduce prices for consumers and, especially in our current recession, would create thousands of good jobs for unemployed workers.

In this context, a recent opinion piece on FoxNews by Steve Lockard—CEO of a company making wind turbines and a board member of the American Wind Energy Association—was quite ironic. Lockard was trying to appeal to conservative readers by claiming that the Congress was threatening to destroy American jobs through tax hikes, and that even Ron Paul agreed this was a violation of the free market. Let’s go through Lockard’s claims to get the real scoop on the inefficiency of wind power.

Lockard on Wind Power and the Market

To set the stage, we’ll quote extensively from Lockard’s piece:

Our wind energy manufacturing company has created 700 new jobs in Newton, and a second wind energy company now employs over 100 people.

Our industry can do the same in hard-hit towns all across the U.S., if Congress will let us and doesn’t increase taxes on wind power in the New Year.

What is happening in Newton is happening all across the country, although many people don’t realize it. Wind energy is a market that the U.S. is winning.

These economics are driving a surge in wind manufacturing. Over the last six years, U.S. domestic production of wind turbine components has grown 12-fold, to more than 400 facilities in 43 states. This has helped shift manufacturing jobs from overseas back to the U.S.

All that is needed is Congressional action to keep the tax rate stable and low on this homegrown American energy source. That is why extending wind’s federal Production Tax Credit (PTC) is so important. If Congress raises taxes on wind energy by letting this tax rate expire in 2012, many of the good U.S. manufacturing jobs we’ve been able to create will evaporate.

Presidential candidate Ron Paul visited our factory himself in October. He told reporters in our conference room that, “As a believer in the free market, I don’t look at a tax credit as a subsidy.”

Now if Congress will let us finish the job, wind energy can do for America what we have already done for Newton, Iowa: Create U.S. manufacturing jobs right here at home.

Lockard’s piece is a great PR effort, making three basic claims that would appeal to Fox readers: (1) Wind power can fuel job growth out of the recession. (2) Congress is threatening to abort this recovery by raising taxes on wind power. (3) If Congress would just mind its own business, the free market would support a massive expansion of wind power.

Unfortunately for Lockard, these claims are either very misleading or downright false.

Wind Power Is a Tiny Fraction of the Energy Sector

Lockard’s talking points make it sound as if wind power is poised to take over the energy scene. But like Paul Krugman’s similar remarks about solar power, these too are unsubstantiated.

According to the Energy Information Administration, in 2010, wind power accounted for 0.9 percent of the energy used in the United States.

Yes, it’s easy to achieve large rates of growth in the wind sector, when starting from such a low baseline. The EIA projects that wind will only produce 3.1 percent of electricity by 2035, up from 2.3 percent in 2010. Because of higher costs and the tremendous problem of intermittency—the wind doesn’t always blow—wind power is nowhere near a position to fuel an economic recovery.

Wind Power Dependent on Tilted Playing Field Established by the Government

When Lockard speaks of “raising taxes” on wind power, it’s not the same thing (say) as proposals to raise marginal income tax rates on the rich. Rather, he refers to the expiration of the federal production tax credit (PTC) that wind currently enjoys.

The PTC for wind was first introduced as part of the Energy Policy Act of 1992. It was defined as a 1.5-cents-per-kilowatthour payment (adjusted annually for inflation), available for 10 years to investors for facilities placed in service between 1994 and June 30, 1999. The PTC for wind has expired and been reinstated several times since its origination. The Emergency Economic Stabilization Act of 2008 (Public Law 110-343) signed on October 3, 2008 extended the PTC to 2.1-cents-per-kilowatt-hour through 2012. The $787 billion economic stimulus President Obama signed into law in February 2009 made a 30 percent investment tax credit available in lieu of the production credit.[1] The Obama Administration also instituted the section 1603 grant program where the 30 percent investment tax credit could be taken as an immediate rebate rather than used against taxes, but that program expired in 2011.

Now it is true that other forms of energy receive federal tax preferences. However, when calculating the implicit “subsidy” in terms of dollars per unit of energy delivered, the relative advantage isn’t even close. For example, total federal subsidies in fiscal year 2007 were $23.37 per megawatt hour for wind, compared with $0.44 for conventional coal and $0.25 for natural gas and petroleum liquids.[2] In fiscal year 2010, they were even higher. Wind’s subsidies amounted to $56.29 per megawatt hour, while the figures for coal, and natural gas and petroleum liquids, were tied at a mere $0.64.[3]

In addition to the federal tax advantages, wind power also enjoys mandated usage in various’ states Renewable Portfolio Standard (RPS) frameworks. What happens here is that a given state will mandate that utilities must generate a certain percentage of electricity from “renewable” sources, and it is often cheapest to comply with the mandate by using wind power. (However, we note that many states are not in compliance with their own RPS.)

Tax Credits and the Free Market

By citing Ron Paul’s views on tax credits, Lockard tries to equate a blossoming wind sector with the “free market.” However, this is quite misleading. Ron Paul was making a principled distinction, based on libertarian views of property rights, between an actual government spending subsidy versus a tax credit (which simply subtracts from a company’s tax payment owed to the government). Paul’s point was that any revenues a wind company gets from its customers are the property of the company, and so it shouldn’t be considered a “government subsidy” if that company is allowed to retain more of its own money through a tax credit. (In contrast, a bona fide subsidy would involve a person or company receiving a net transfer of tax dollars to achieve some goal that the government wanted to promote.) This is what Ron Paul meant by saying that he supports the free market and therefore doesn’t consider a tax credit to be an actual government subsidy.

Yet Lockard shouldn’t leap to the conclusion that wind power is therefore a creature of the free market. Really what we’re seeing is that if the government mandates the use of wind power, and keeps taxes relatively low on wind power, while heaping much larger taxes on conventional energy sources, then wind power can survive, albeit still being confined to a small niche.

Lockard implicitly gives away the game when he says that removal of the tax credit would devastate the wind industry. By the same token, if the government kept the wind PTC, but extended the same credit to every other energy source, then the wind sector would also collapse. This is because—with current technologies and the state of our energy infrastructure—it is more efficient to have the vast bulk of US energy produced by conventional sources, rather than wind.

Conclusion

Although he made a clever effort to appeal to conservative readers through rhetoric of job creation and tax hikes, Steve Lockard hides the plain fact that in a level playing field—i.e. a true free market—wind power will only constitute a small niche for the foreseeable future. It is only growing at its current rate because of a massively unfair playing field of federal tax advantages, subsidies, and state mandates.


TOPICS: Business/Economy; Miscellaneous
KEYWORDS: boondoggle; credits; energy; mandates; subsidies; wind

1 posted on 01/04/2012 10:50:25 AM PST by Recon Dad
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To: steelyourfaith; thackney

Ping.


2 posted on 01/04/2012 10:56:04 AM PST by Army Air Corps (Four Fried Chickens and a Coke)
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To: Army Air Corps; ApplegateRanch; Whenifhow; WL-law; Berlin_Freeper; Horusra; Darnright; rdl6989; ...
Thanx for the ping Army Air Corps !

 


Beam me to Planet Gore !

3 posted on 01/04/2012 11:04:29 AM PST by steelyourfaith (If it's "green" ... it's crap !!!)
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To: Recon Dad
Other than for those who need intermittent power off the grid, until they figure out how to store energy from wind and solar, they are losers in the true energy market.

So far they can only make it via government mandates and subsidies.

4 posted on 01/04/2012 11:09:39 AM PST by Lakeshark
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To: Recon Dad
When wind can be made to blow on demand where, and when instantly necessary to full fill peak demand some of this may in fact turn out to be true. Until that ability arrives wind will never be dependable.
Any reasoning person should be able to see this fallacy. Ask some of the folks up on the Columbia river about wind and solar energy. When they had record rainfall last year and the water storage for hydro power was huge the power companies simply quit buying the solar and wind generated power. Bio fuels is also taking a huge dump right now. Although this fuel can be harvested and stored until the energy is needed it is now head to head with the super cheap and plentiful natural gas. Most bio fuels plants have already shut down or are about to. I wish these feel good stories were true and real, but they are not. Without government subsidies and laws that force the purchase of wind solar and bio fuel generated electrical power these sources of power can't exist. The market does not want them and is not well suited for the time limitations involved in their production. Electrical power has to be delivered on demand when demanded. Not just when the sun shines or the wind blows. Sorry.
5 posted on 01/04/2012 11:18:36 AM PST by oldenuff2no (Rangers lead the way...... Delta, the original European home land security)
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To: Lakeshark
ALL forms of energy receive government subsidies. Wind and solar receive less than some others:

This is 2007 data but I've seen newer charts and the relative subsidy amounts have not changed much.

6 posted on 01/04/2012 11:23:02 AM PST by bigbob
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To: Recon Dad
Here is Scituate MA, we have a wind turbine coming to town in mid January. The Tower is 263 feet high and the blades are 120 feet long.
It cost 6 million dollars of taxpayers money.

Here are some interesting points.
It was designed in --GERMANY.
It was built in -----CHINA.

It will come from China by ship and be offloaded in Providence RI, and in sections be trucked to Scituate,MA

I guess Americans can't competitively design or make wind turbines. - tom

7 posted on 01/04/2012 11:31:28 AM PST by Capt. Tom
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To: bigbob
Coal, gas, nuclear, hydro, and oil actually feed the grid and work.

Wind and solar have never truly been a genuine source for feeding the grid, and they can't unless an inexpensive way to store power is developed.

8 posted on 01/04/2012 11:50:41 AM PST by Lakeshark
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To: Recon Dad

I wonder how much money the commie ‘RAT elitists have made by outlawing oil and coal and investing their money in wind and solar. I think that I smell corruption here but I can’t be sure.


9 posted on 01/04/2012 11:59:53 AM PST by FlingWingFlyer (Stop BIG Government Greed!!!!!)
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To: bigbob

Considering wind represents less than 1% of energy produced in this country this chart is a joke. You have to base subsidies on a megawatt hour basis so everything is equal.

For example, total federal subsidies in fiscal year 2007 were $23.37 per megawatt hour for wind, compared with $0.44 for conventional coal and $0.25 for natural gas and petroleum liquids.[2] In fiscal year 2010, they were even higher. Wind’s subsidies amounted to $56.29 per megawatt hour, while the figures for coal, and natural gas and petroleum liquids, were tied at a mere $0.64.[3]


10 posted on 01/04/2012 12:05:32 PM PST by Recon Dad (Gas & Petroleum Junkie)
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To: Recon Dad

Didn’t I read that over 4,000 windmill have been abandoned in place, since the subsidies for them stopped?

Are you aware that States and Municipalities have “legislated” the % of “renewable” power some utilities MUST provide?
Here’s how they do it.
XCEL must provide 10% of its power from “renewable sources”.
When the wind doesn’t blow and the sun doesn’t shine, coal and gas fired plants make up the difference......BUT!!!
...they bookkeep and allocate that power to the “renewable” column....
How pitiful and corrupt is that?


11 posted on 01/04/2012 12:08:15 PM PST by G Larry ("I dream of a day when a man is judged by the content of his Character.")
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To: bigbob

Do the same chart in $/kWH


12 posted on 01/04/2012 12:10:06 PM PST by thackney (life is fragile, handle with prayer)
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To: bigbob

This data is meaningless with correlating dollars per kwh!!!


13 posted on 01/04/2012 12:15:58 PM PST by G Larry ("I dream of a day when a man is judged by the content of his Character.")
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To: G Larry

14,000 abandoned wind turbines

Minnesotans for Global Warming report that in the last 30 years, the United States has had 14,000 wind turbines abandoned. Apparently, once the subsidies and the wind run out, these 20-story high Cuisinarts are de-bladed and retired. This means more bats and migratory birds will live.
From Minnesotans for Global Warming: “The symbol of Green renewable energy, our savior from the non existent problem of Global Warming, abandoned wind farms are starting to litter the planet as globally governments cut the taxes that consumers pay for the privilege of having a very expensive power source that does not work every day for various reasons like it’s too cold or the wind speed is too high.”
Andrew Walden of American Thinker explored nearly 2 years ago the demise of the 37-turbine wind farm at Kamaoa Wind Farm in Hawaii: “Built in 1985, at the end of the boom, Kamaoa soon suffered from lack of maintenance. In 1994, the site lease was purchased by Redwood City, CA-based Apollo Energy. Cannibalizing parts from the original 37 turbines, Apollo personnel kept the declining facility going with outdated equipment. But even in a place where wind-shaped trees grow sideways, maintenance issues were overwhelming. By 2004 Kamaoa accounts began to show up on a Hawaii State Department of Finance list of unclaimed properties. In 2006, transmission was finally cut off by Hawaii Electric Company.California’s wind farms — then comprising about 80% of the world’s wind generation capacity — ceased to generate much more quickly than Kamaoa. In the best wind spots on earth, over 14,000 turbines were simply abandoned. Spinning, post-industrial junk which generates nothing but bird kills.”
When an honest history of this period in the United States is written, it will no be kind to the corporate cronyism that preyed upon public ignorance of earth science to create a crisis — global warming — to exploit and loot the Treasury.


14 posted on 01/04/2012 12:29:46 PM PST by Recon Dad (Gas & Petroleum Junkie)
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To: thackney

The costs per KWH were in the article I don’t think they fit Big Bob’s take on wind.


15 posted on 01/04/2012 12:34:19 PM PST by Recon Dad (Gas & Petroleum Junkie)
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To: bigbob

“ALL forms of energy receive government subsidies”

Yes, but only some of them would still exist as industries without them.

“Wind and solar receive less than some others”

Well, yeah, but that’s apples and oranges. Of course coal and nukes will get more Big Mother’s milk. Wind and solar are baby industries, and a baby can only suckle so much.


16 posted on 01/04/2012 12:38:21 PM PST by Tublecane
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To: bigbob

“Wind and solar are baby industries”

Oh, and in case this was unclear, they are baby industries because as energy producers they are losers and as investments they are sinkholes.


17 posted on 01/04/2012 12:42:00 PM PST by Tublecane
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To: Recon Dad
I know, I just wanted to see if I would get an honest response.

I also wish I could find one that didn't consider normal tax breaks applied to all domestic manuafacturing listed as a subsidy for oil and gas.

And while I'm wishing, I would like to find one that also credited in the taxes paid for the net.

18 posted on 01/04/2012 1:01:42 PM PST by thackney (life is fragile, handle with prayer)
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To: bigbob
Wind has continued to grow in their subsidies.

Now, not only a per energy unit basis is wind larger but even measured in dollars it is more than oil, gas and coal combined.

Subsidies for Energy Production in FY 2010

Source

Total Federal Expenditures ($ bn)

Energy Output (Qbtu)

Subsidy in $/mmbtu

Coal

1.358

23.940

0.057

Oil and gas

2.820

38.730

0.073

Solar

1.134

0.004

274.180

Wind

4.986

0.323

15.439

Hydro

0.216

2.920

0.074

Nuclear

2.499

8.770

0.285

Biofuels

7.761

4.700

1.651

Geothermal

0.273

0.052

5.260

All Renewables (except hydro)

14.154

5.079

2.787

Total

21.047

79.354

0.265

http://www.masterresource.org/2011/11/energy-subsidies-sense/
19 posted on 01/04/2012 1:14:10 PM PST by thackney (life is fragile, handle with prayer)
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To: Recon Dad

Here in Fairbanks Alaska, we are building a wind farm. The ONLY reason we can do it is because the cost of oil is so freaking high, wind is actually cheaper. Also the state and federal government has given money for the project. If it were not for government “free” money, and the high price of oil, this would be an idiotic investment.
As it is, it will actually produce power at a lesser cost that oil fired power plants. Sad, sad, sad.


20 posted on 01/04/2012 1:46:01 PM PST by vpintheak (Occupy your Brain!)
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To: vpintheak
It is insane that Golden Valley is not getting more power from coal, while at the same time, coal is exported from Alaska.

Alaska could see another record in coal exports
http://www.adn.com/2011/06/13/1914793/alaska-could-see-another-record.html

21 posted on 01/04/2012 1:55:38 PM PST by thackney (life is fragile, handle with prayer)
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To: Recon Dad

The wind: we know not whether it will blow, or when.


22 posted on 01/04/2012 2:37:35 PM PST by RoadTest (There is one god, and one mediator between God and men, the man Christ Jesus.)
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To: Recon Dad

Thank you for the clarification!
Knew I was low, but wanted to make the point.


23 posted on 01/04/2012 3:16:36 PM PST by G Larry ("I dream of a day when a man is judged by the content of his Character.")
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To: bigbob

I’d love to see that done in $/kWh placed on the grid.

Done like that it seems pretty misleading. Plus I’d be interested in knowing what they consider a “subsidy”. I operate on the assumption that these days, everyone in gov’t is favoring so-called “Green” energy.


24 posted on 01/04/2012 6:13:13 PM PST by FreedomPoster (Islam delenda est)
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