Coalition to Congress: Support PTC Elimination Act

The American Energy Alliance joined last week with 19 other organizations in opposition to the wasteful wind Production Tax Credit (PTC). In a letter to the House of Representatives, the coalition urges Members to support H.R. 1901, a bill introduced by Congressmen Marchant and Pompeo earlier this year to eliminate the wind PTC. Below is an excerpt from the letter:

Ending the wind PTC is an important initiative for several reasons. First, it is pro-taxpayer. Since it was created in 1992 taxpayers have sent billions of dollars to large multinational corporations in the wind industry. The last extension alone is estimated to cost taxpayers over $6 billion over the next ten years. Secondly, it is pro-consumer. Since wind is an unreliable source of energy it is often more expensive than other sources of energy. Eliminating the PTC allows the market to decide when wind power makes sense for consumers, and when it doesn’t.

The subsidy also kills jobs and stifles innovation. The PTC leads to net destruction of jobs by diverting capital away from projects that make the most financial sense and because wind is a more expensive form of electricity. For example, one study of Spain’s green energy subsidies found that for every 1 green job created, 2.2 jobs were eliminated elsewhere.

Finally, the wind PTC is an essential component of EPA’s regulatory agenda, including the looming carbon rule. EPA regulations are projected to shutter 90 GW of reliable energy by 2020. The EPA is pursuing aggressive regulations of existing power plants that amount to a federal takeover of the electricity system. One of the goals of this regulation is to shift electricity from reliable, low-cost sources like coal toward renewable energy like wind. Without the wind PTC, mandating renewables is a much more difficult task because the true cost of wind is not obscured by a large subsidy. Extending the wind PTC helps enable this federal takeover by the EPA.

The coalition letter will remain open for additional signers.

Click here to read the full coalition letter.

ICYMI: Mississippi Gov. Rejects EPA Rule

WASHINGTON–Yesterday, Mississippi Governor Phil Bryant joined a growing list of Governors who are exercising their right to reject the EPA’s carbon regulations, which would cripple America’s existing fleet of coal-fired power plants. In a letter to EPA Administrator McCarthy, Governor Bryant cited cost increases for his citizens and threats to grid reliability among his chief concerns with the sweeping regulation. The governor stated, “we do not see how it will be possible to reasonably develop a State Implementation Plan, given the burdensome requirements of EPA’s proposal in its current form.”
AEA President Thomas Pyle issued the following statement:

“We commend Governor Bryant for his bold stand to protect Mississippians. EPA’s carbon regulation will saddle Americans with higher energy costs by unnecessarily shutting down existing power plants only to be replaced with more expensive sources. State leaders should recognize that it is their right under the Clean Air Act to not submit a state plan and that the costs of doing EPA’s dirty work far outweigh any benefits. We encourage other governors to join the ranks of Governors Bryant, Pence, Walker, Abbott, and Fallin by opposing the EPA’s carbon regulation.”

Click here to read E&E Daily reporter Jean Chemnick’s story on the governor’s letter (subscription required). Click here to read 10 reasons why states should not submit a plan.

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10 Reasons States Should Not Submit a State Plan

The EPA is set to finalize its “Clean Power Plan”, or Climate Rule, in the next few months. The proposed rule will dramatically harm American families and businesses with little to no benefits to show for it—environmental or otherwise. Many also consider the proposed rule to be a federal takeover of the electricity system, traditionally an area left to the states to regulate. Now, states must decide how they should respond to best defend their sovereignty and protect their residents. Primarily, states are deciding whether to submit a state plan or exercise their rights under the Clean Air Act. We want to be clear: we are not urging states to do something illegal. It is perfectly legal and contemplated by the Clean Air Act that states are not required to submit state plans. States should not submit a plan—they have nothing to gain, but much to lose.

Before we explain the 10 reasons why states should not submit a plan, we first need to explain that these regulations are designed to drive up the cost of electricity. That is the point. Closing low-cost, reliable coal-fired power plants and replacing them with anything—even low-cost combined cycle natural gas plants—will still drive up electricity rates. The rates impact gets much worse when trying to replace coal with wind, because wind plus the necessary natural gas backup will produce electricity that is, on average, three times as expensive as the average existing coal-fired power plants.[1] We believe that policies designed to drive up electricity rates are incredibly harmful to America, and that’s why we advocate for not submitting a state plan.

  1. State resistance is the best chance to either delay or force the rule to be withdrawn –The EPA does not have the resources to administer federal plans for several states. If a handful of states opt to not submit a state plan, this will put the EPA in a tenuous position. Moreover, without states being complicit in the federal takeover, the EPA will have to determine how to reach their desired emission goals within the confines of existing power plants. This means removing substantial available baseload power that keeps the lights on for most families and businesses. If EPA were to do this, it would threaten the reliability of the electric grid and could impose rolling blackouts or brownouts across large swaths of the country. This is not politically viable. Instead, if enough states do not submit plans, the EPA will be forced to reconsider their emission targets and possibly withdraw the rule. Worst case, this gives the legal challenge a chance to play out while the EPA determines how to proceed.
  1. State plans undermine state authority with no actual flexibility – Traditional state prerogatives over power production, distribution, and consumption within the state could be permanently transferred to the federal government if state plans are submitted and approved by the EPA. As former EPA General Counsel Roger Martella has noted in legal analyses, this extends beyond “core compliance responsibilities of State air regulators and utility commissions” and includes “details as minor as emissions monitoring and verifications systems.” This is accompanied with virtually no flexibility to adjust energy policy in response to the changing needs of a state. Throwing all appearance of cooperative federalism out the window, the EPA made this point clear several times in its notes associated with the proposed rule.[2]
  1. Submitting a state plan is not the end of the story; you could still end up with a federal plan – Some say submitting a state plan will keep the power at the state level and minimize the pain. EPA likes to make the same argument, often talking about “state flexibility.” But the history of the Obama Administration has made it clear that submission of a state plan is not the end of the story. On 52 occasions, the Obama administration has taken state plans and turned them into federal plans.[3] During the two Bush administrations and the Clinton administration, this only happened 7 times. The EPA will get the outcome they want no matter what a state does.
  1. State plans undermine legal challenges and open the door for future federal takeovers – EPA has the authority under the Clean Air Act to regulate pollution emissions. This regulation goes far beyond regulating actual emissions of carbon dioxide, but into the use of electricity and which power plants should be turned on to meet demand. The EPA is making a big leap in its regulatory authority by going beyond the power plant (“outside the fence”) and claiming it can regulate any entity that emits carbon dioxide under this rule on carbon dioxide emissions for power plants. States who submit plans outlining emission cuts beyond the fence line arguably consent to this transfer of power. If successful at using this framework to take over the electricity system, EPA will then have precedent to use this new regulatory authority in other sectors of the economy traditionally left to states (i.e. refining, manufacturing). This concession runs counter to many states’ anticipated lawsuit challenging this federal overreach. If history is any guide, once power is transferred, it rarely returns to the state.
  1. Your state plan will quickly become the “Sierra Club Plan” – It is interesting that anti-energy special interests want states to submit plans. Groups like Sierra Club and NRDC believe state plans will help environmental groups achieve their goals. Unless the utilities and environmental groups have the same goals, both the utilities and environmental groups cannot be right. Environmental special interest groups like state plans because it will give them leverage through legal action against the states. According to Dan Byers at the Chamber of Commerce, “The Sierra Club caught EPA’s hint, and has made realization of [state implementation plan] lawsuit exposure a priority.” They have openly advocated for state plans, indicating they will bring citizen suits to enforce state plans as they see fit with little to no flexibility or consideration of unique state needs. Under this scenario, state plans lose all semblance of state control and become beholden to anti-energy special interests.
  1. A state plan will expose businesses and private actors in your state to legal action –Upon submission of a state plan, citizen suits are likely to be brought to compel enforcement of carbon dioxide emission reductions promised by the state. Litigious environmental groups routinely exploit the “sue and settle” process to compel enforcement on a wide range of issues. Since most state plans will seek to count reductions from a combination of sources, including private offices, residences, and government buildings, many private parties could find themselves subject to enforcement actions brought by the EPA and anti-energy special interests. As Martella explains, a state plan “could expose States and these third parties to legal action under the citizen suit provisions of the [Clean Air Act].”[4] Even worse, states and private parties who find themselves in the EPA or Sierra Club’s crosshairs have no flexibility to deviate from EPA’s emission limits even if they become “unworkable, ineffective, or too costly,” according to Martella.[5]
  1. State plans lock states into the EPA’s current approach and the imposition of a federal plan does not foreclose states from later submitting a state plan – Implementation of the rule is almost assured if state plans are submitted. Citizen suits and EPA enforcement actions noted above will guarantee the state is locked into compliance. Contrarily, exercising the option afforded to states under the Clean Air Act to not submit a state plan does not prevent a state from submitting one down the road if circumstances change, legal challenges are resolved, or even the reception of a federal plan appears imminent, certain, and more painful. None of these factors will be at play until mid-2017 at the earliest. With enough opposition, the next Administration will be forced to dramatically alter or withdraw the rule entirely.
  1. EPA needs states to be complicit – The regulatory framework is intentionally designed to get states to take the lead so the EPA’s hands do not get as dirty. The Climate Rule will make energy more expensive, harm economic growth, and destabilize the power grid.[6] The less blame that can be placed at the EPA’s doorstep, the more likely this federal takeover is to succeed. This is similar to Obamacare, where the feds wanted states to set up their own health insurance exchanges so they would own some of the fallout for the failure.
  1. A state plan will render a legal victory irrelevant – Lawsuits against the EPA regarding this rule are expected, but as we recently witnessed with the Supreme Court’s ruling on the Mercury rule, we can win the legal battle and lose the policy war. Moving forward with implementation before full legal resolution all but guarantees that the damage will be done by the time the Supreme Court hears the case. Sadly, this plays right into EPA’s “regulate-now-determine-authority-later” approach. Just days before the Mercury decision, EPA Administrator Gina McCarthy reinforced this point while on the Bill Maher show: “We think we’re going to win because we did a great job on it. But even if we don’t, it was three years ago. Most of them are already in compliance, investments have been made, and we’ll catch up.”[7] About 40 gigawatts of generating capacity closed because of the Mercury rule that the Supreme Court shot down.[8] We should not repeat that.
  1. States can choose not to submit a state plan when a rule is too costly, complex, and ambiguous – As we’ve witnessed with previous rules out of the EPA, states can and do refuse to submit state plans when the rule presents serious technical and economic challenges. For example, 24 states refused to submit Good Neighbor SIPs (State Implementation Plans) under the Cross-State Air Pollution Rule (CSAPR). Missouri DNR’s justification for not submitting a SIP captures the reasoning well: “Typically we’ve relied on a FIP [Federal Implementation Plan] to address Missouri’s interstate transport obligations for ozone and particulate matter (e.g., CAIR & CSAPR). It’s challenging to rely on options other than a FIP because two years to complete the extensive technical evaluation, develop a SIP and get EPA approval is very aggressive.”  This is on a two-year timeline for a SIP, as compared to a one-year timeline for state plans under the Climate Rule, which have a broader scope. Given the legal uncertainty around the Climate Rule and the change in Administrations in 2017, it would be wise for states to exercise their legal right and refuse to submit a state plan.

Once EPA finalizes its rule this summer, states will face huge pressure to submit plans. States should keep three things in mind: 1) not submitting a state plan is your right and has historical precedent, 2) there is no benefit to submitting a state plan now because EPA can override state plans it does not approve of and 3) it is never too late to submit a state plan (states have a right to submit a plan even after a federal plan is imposed). If enough states resist, the current administration will run out of time to impose federal plans and the task will fall to the next administration. In short, waiting costs you nothing, but there are certain costs to moving forward.


 

[1] See Tom Stacy and George Taylor, “What is the True Cost of Electricity?,” Institute for Energy Research, June 30, 2015, http://instituteforenergyresearch.org/analysis/what-is-the-true-cost-of-electricity/

[2] See Sidley Austin LLP, “Potential Enforcement Implications and Liabilities Associated with EPA’s Proposed Greenhouse Gas ESPS Rule,”

[3] See William Yeatman, “EPA’s 52nd Takeover of State Regulatory Program Provides Perfect Segue to New Paper on Cooperative Federalism in the Obama Age,” September 4, 2014, http://www.globalwarming.org/2014/09/04/epas-52nd-takeover-of-state-regulatory-program-provides-perfect-segue-to-new-paper-on-cooperative-federalism-in-the-obama-age/

[4] Roger Martella, “Potential Enforcement Implications and Liabilities Associated withEPA’s Proposed Greenhouse Gas ESPS Rule,” p. 1, http://www.energyxxi.org/sites/default/files/ESPS%20white%20paper%206.17.15.pdf

[5] Martella, p. 3.

[6] See IER, “EPA’s Power Plant Rule to Cost At Least $366 Billion,” October 23, 2014, http://instituteforenergyresearch.org/analysis/epas-power-plant-rule-cost-least-366-billion/

[7] See Timothy Cama and Lydia Wheeler, “Supreme Court overturns landmark EPA air pollution rule,” June 29, 2015, http://thehill.com/policy/energy-environment/246423-supreme-court-overturns-epa-air-pollution-rule

[8] See Energy Information Administration, Analysis of the Impacts of the Clean Power Plan, May 22, 2015, http://www.eia.gov/analysis/requests/powerplants/cleanplan/

 

Senate Tax Extenders Nightmare

With little debate and no opportunity for amendments, the “world’s greatest deliberative body” this week rushed a package of tax breaks through the Senate Finance Committee. The bill, called a tax extenders package, is an affront to the American taxpayer. Only Senators Toomey (R-PA), Coats (R-IN), and Enzi (R-WY) opposed the package. They should be commended for their bold leadership, especially in light of the failure of so many of their colleagues.

In an unfortunate sign of business as usual in Washington, the energy section is loaded with special interest giveaways to large corporations. Here is a list of the most objectionable energy related giveaways:

  • Two year extension of credits to facilities producing energy from certain renewable resources including the Wind Production Tax Credit ($10.49 billion)
  • Two year extension of biodiesel and renewable diesel credits ($2.56 billion)
  • Two year extension of credit for nonbusiness energy property ($1.387 billion)
  • Two year extension of excise tax credits and payment provisions for alternative fuels ($918 million)
  • Three year extension of credits for energy-efficient new homes ($760 million)
  • Two year extension of energy efficient commercial buildings deduction ($315 million)
  • Two year extension of credits for alternative fuel vehicle refueling property ($112 million)
  • Two year extension of second generation biofuel producer credits ($45 million)
  • Two year extension of credits for fuel cell vehicles ($6 million)
  • One year extension of credits for electric motorcycles ($4 million)
  • Three year extension of special allowance for second generation biofuel plant property ($2 million)

These provisions alone will cost the American taxpayer an estimated $16.5 billion over the next ten years, which is 17.33% of the entire tax package. More importantly, these tax subsidies will benefit a narrow set of special interests at the expense of the average American.

The biggest chunk of this energy section ($10.49 billion or 11% of the entire package) includes the wind Production Tax Credit (PTC). The PTC is an important component of President Obama’s carbon regulations for existing power plants, which would effectively lead to a federal takeover of the electricity system. While President Obama occupies the White House, it has proved difficult for the Republican-led Congress to pass meaningful legislation to stop his regulatory agenda. Ending the wind PTC is one way that Congress can fight back.

The good news is that since the PTC is currently expired, Congress can strike an important blow against the implementation of the Obama administration’s carbon regulations by simply doing nothing. Disappointingly, instead of working to stop the president’s carbon agenda, the Senate Finance Committee just advanced it. Their vote for the PTC was essentially a vote for the President’s carbon regulations, which each Republican on the committee has expressed opposition to in the past. Because–as even the White House acknowledges–the PTC is critical to implementing the President’s agenda, the American Energy Alliance will key vote against this tax extenders package if it reaches the Senate floor.

The Senate Finance Committee’s abject failure stands in stark contrast to the leadership on display from a number of their colleagues in the previous week. Senators Flake, Manchin, Alexander, McCain, Capito, Lee, Risch, and Lankford wrote to Chairman Hatch and Ranking Member Wyden asking them to “refrain from resuscitating the expired wind production tax credit (PTC) or modifying the planned phase out of the renewable energy investment tax credit (ITC) in 2016.” The American Energy Alliance applauds these Senators for fighting to protect their constituents from the harmful effects of these subsidies. We especially applaud Senators Toomey, Enzi, and Coats for standing up for the taxpayers in their states by voting against the bill in committee.

Bradley Op-Ed: Obama Goes Scorched Earth on Oil and Gas

In a piece for Real Clear Energy, Dr. Robert Bradley, the founder and CEO of the Institute for Energy Research, examined the Obama administration’s misguided energy and climate policy. As the clock runs out on President Obama’s term, administration officials are rushing to impose additional rules on the oil and natural gas industry.

As global demand for fossil fuels grows, the U.S. has become the world leader in oil and natural gas production. In spite of federal policies, oil and natural gas have been boons to the U.S. economy, and advanced technologies have spurred expanding production on private and state lands. Increased oil production has coincided with high levels of economic growth and job creation in states with favorable environments for drilling, such as North Dakota, Pennsylvania, and Colorado.

Nevertheless, the administration is ramming through a climate agenda that is imposing “counterproductive, top-down rules” on these affordable and reliable energy sources, according to Dr. Bradley. Below is an excerpt from the article where Dr. Bradley details the accumulation of these harmful regulations:

By proposing new methane emission regulations, for example, the administration will hike drilling costs for natural gas. Even the EPA’s own data shows that methane emissions already have fallen dramatically due to the industry’s voluntary actions and rules already on the books. 

The administration also has finalized new hydraulic fracturing regulations for wells drilled on public lands despite a new EPA report that found “no widespread, systemic impacts to drinking water sources.” 

Of course, the administration’s fracking rules will not apply to this White House’s new prohibitions on nearly 300 million acres of federal land. The Arctic National Wildlife Refuge, portions of the Arctic Ocean, and large tracts of several Western states are among the parcels the White House is preserving “for future generations.” 

Moreover, the offshore leasing plan for 2017–2022, which the Interior Department hopes to complete soon, does not include leases in the energy-rich eastern Gulf of Mexico or along the Pacific Coast. Instead it proposes to allow the industry to pick over bones in the previously explored and developed western Gulf and possibly in a small portion of the Atlantic Outer Continental Shelf.

There also are new offshore drilling rules, including a regulation requiring Arctic drillers to have two rigs on hand—one to drill the well and a backup rig in case a relief well is needed. This, despite a National Petroleum Council report calling on the administration to encourage Alaskan offshore drilling now or become more dependent on foreign oil in the future.

All of these regulations, including tougher ground-level ozone standards, are moving forward in lock-step with the regulations on carbon dioxide from power plants. This drastic, controversial proposal combined with other regulations will shutter scores of coal-fired power plants and reduce electrical power by as much as 130 gigawatts, enough to serve the residential needs of more than 100 million Americans.

All of these separate actions contribute to a climate agenda that will make energy more expensive and life harder for millions of American families.

Click here to read the rest of Dr. Bradley’s article.

 

AEA Releases Congressional Energy Scores

New Platform Ranks Members on Support for Free Market Policies 

WASHINGTON – Today, the American Energy Alliance launched a new interactive website for the American Energy Scorecard—the first and only free-market energy legislative scorecard. This new interactive platform educates lawmakers about the most important energy votes in each Congressional session and empowers the American people to hold their elected officials accountable for their actions.

The website catalogues key energy votes and co-sponsorships, displays overall scores, and ranks members based on their support for free market policies. These policies give consumers, not Washington, more control over their energy choices and keeps energy affordable and reliable. For example, AEA is encouraging lawmakers to endorse measures that would end market-distorting policies like the Renewable Fuel Standard and the wind Production Tax Credit.

“This scorecard allows the public to see, in real time, whether the votes their elected leaders cast match their rhetoric. It is integral to our efforts to hold lawmakers accountable,” said AEA President Tom Pyle.

“We’re devoted to educating the American people and lawmakers about the benefits of pro-growth and free-market energy policies.”

Click here to view the American Energy Scorecard.

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Lessons for Congress from the Land Down Under

Congress may soon consider legislation retroactively extending a raft of expired tax subsidies, known as “tax extenders.” One of those is the wind Production Tax Credit, a multi-billion dollar tax credit that subsidizes wind developers for the electricity they generate. This costly handout raises energy prices, destabilizes the electric grid, and benefits wealthy wind lobbyists at the expense of American taxpayers.

The rest of the developed world has learned this lesson the hard way: decades of wind energy subsidies have wreaked havoc on the economies and budgets of Australia and several European countries. Some of these countries have seen the error of their ways and are now curtailing subsidies. This month, Australia Prime Minister Tony Abbott announced that “mature technologies like wind” will no longer qualify for renewable energy subsidies.

As Congress debates tax extenders, lawmakers should learn from Australia’s and Europe’s failed wind subsidy experiment and reject any attempt to revive the wind PTC.

Background

Wind energy is an old, mature technology. It is much older than most people realize: people have used wind power to generate electricity since at least 1887. Despite the wind lobby’s claims, wind power is more expensive and less reliable than traditional energy sources: a new report from the Institute for Energy Research shows that new wind facilities are three times more expensive than existing coal and four times more costly than existing nuclear power plants. This helps explain why governments in the United States and Europe have continually relied on subsidies to prop up their wind industries at the expense of taxpayers and more affordable energy sources.

Even the European Union, which has been dealing with the self-inflicted wounds of subsidized wind for decades, agrees that wind is a “mature” industry. Last year, EU Climate Action Commissioner Connie Hedegaard said “my view is that if you have mature technologies, renewables or not, they should not have state aid. If they can manage themselves why have state aid?” In other words, mature industries like wind power should not require government subsidies to survive.

In the United States, wind energy has received $30 billion in federal subsidies and grants over the last three decades while supplying less than 5 percent of U.S. electricity, according to a report from the Mercatus Center. The wind PTC is one of the most costly federal subsidies for wind power—the one-year extension Congress passed last year will cost $6.4 billion over the next decade. First enacted in 1992, the PTC was meant as a temporary means of propelling the wind industry to make wind competitive with other electricity sources. In 2003, Sen. Chuck Grassley, author of the PTC, said wind would only need the PTC “maybe for 10 years.” Twelve years later, Grassley and the wind industry are asking Congress for yet another PTC extension.

Europe’s wind subsidies are even more expensive and extensive than ours. Countries across the EU—including the United Kingdom, Germany, Spain, and Italy—have worked for decades to promote wind energy and were once proud of their record as “green energy” champions. Recently, many Europeans are having buyer’s remorse. Faced with runaway costs, stagnant economies, and destabilized electric grids, Europe is freezing, trimming, and repealing many of its subsidies and mandates. Outside of Europe, the Australian government recently announced that “mature technologies like wind” will no longer qualify for renewable energy subsidies.

President Obama has hailed Europe as a model for a renewable energy future. Instead, wind subsidies should be cut to lower energy prices and ease the economic burden placed on families. A good place to start is for Congress to let the PTC remain expired.

Below are a few examples from Europe and Australia that demonstrate the damaging effects of wind power subsidies.

United Kingdom

Although the United Kingdom is one of the leading countries in subsidized wind energy production, the government has decided to cut back on its wind subsidies. Last month, the government announced a key subsidy scheme, the Renewables Obligation (RO), will be closed a year earlier than planned in the hopes of bringing down high electricity costs and protecting the “beautiful countryside of the United Kingdom” from wind turbines. Last year, $1.3 billion of government subsidies propped up onshore wind that generated only five percent of Britain’s total electricity supply. (The UK heavily subsidizes offshore wind, and the government is being criticized for “needlessly high energy bill levies.”)

The cost of subsidizing new wind facilities in the United Kingdom is spiraling out of control and crippling an already stagnant economy. These green energy schemes will require 9 billion pounds ($14 billion) a year in subsidies by 2020 and will cost households about 170 pounds ($265) annually by the end of the decade. The UK’s subsidy problem has been described as creating a “black hole in [the] budget.” These staggering costs have prompted over 100 Members of Parliament from across the political spectrum to request that Prime Minister David Cameron rethink the government’s support for on-shore wind energy production.

The U.K is also concerned about losing businesses to countries where energy costs are lower. According to Chancellor of the Exchequer George Osborne, “if we burden [British businesses] with endless social and environmental goals—however worthy in their own right—then not only will we not achieve those goals, but the businesses will fail, jobs will be lost, and our country will be poorer.”

Despite the looming UN climate talks in Paris, the UK is taking steps to cut back on expensive renewable energy policies in the hope of easing the economic burden they have placed on energy consumers throughout the country.

Germany

Germany passed its first renewable law in 1991 and has since spent $440 billion on its “energy transition.” Germany’s costly energy crusade has raised renewable production from 4.3 percent in 1990 to almost 24 percent in 2012 with the goal of reaching 80 percent of total energy production by 2050. Germany has paid for this ambitious plan through taxes and dramatically higher energy prices. Today, electricity rates in Germany are about 30 U.S. cents a kilowatt hour compared to an average of less than 13 cents a kilowatt hour in the U.S.

The devastating effects of these subsidies have rippled throughout Germany’s economy, resulting in a flight of German companies overseas where energy costs are lower. According to a report from IER, Germany’s renewable energy subsidies are driving up energy prices and forcing hundreds of thousands of people into energy poverty. The study found:

  • Residential German electricity prices are nearly three times higher than electricity prices in the U.S. and among the highest in the industrialized world.
  • As many as 800,000 Germans have had their power cut off because of an inability to pay for rising energy costs.
  • On-shore wind has required feed-in tariffs that are in excess of 300 percent higher than market prices.
  • Germany’s Renewable Energy Levy, which subsidizes renewable energy production, cost German households €7.2 billion ($9.6 billion) in 2013.
  • The cost to expand transmission networks to integrate renewables stands at $33.6 billion, which grid operators say accounts “for only a fraction of the cost of the energy transition.”

Germany’s green energy experiment has not only cost families and businesses, but it has also failed to reduce greenhouse gas emissions —the entire point of subsidizing low-carbon energy sources. As IER’s report explained, after the Fukushima nuclear disaster the German government hastily scaled back nuclear energy development. Since wind and solar are too scarce and intermittent to fill in the gap, coal stepped up to replace the lost nuclear output. This central planning has resulted in higher greenhouse gas emissions even as the government pours subsidies into renewables at huge expense to German families.

Unsurprisingly, this economic burden, in the midst of an already tight economy, has led the German government to re-evaluate their costly policies. The Commission for Research and Innovation, a group of experts appointed by the German parliament, found that Germany’s subsidies have not had a positive effect on the environment or innovation, and has recommended that they be abolished.

Spain

Once hailed by President Obama as a poster-child for green energy development, Spain has been forced to rethink green energy subsidies. In 1994, Spain implemented feed-in-tariffs to help bolster their renewable industry and help renewables like wind and solar penetrate the energy market. Now, realizing the economic burdens of these inefficient policies, Spain has capped green companies’ profits at a 7.4 percent return, while eliminating all subsidies to wind projects built before 2005.

According to Industry Minister Jose Manuel Soria, these renewable energy subsidies or the power system would have gone bankrupt. Spain had already paid about 56 billion euros ($76.5 billion) to clean energy generators since 1998 and will pay another 142 billion euros over their lifetimes. In 2013 alone, subsidies totaled 9 billion euros. The costs of these subsidies put further burdens on the country as Spain took on huge amounts of energy debt to fund their policies, cumulatively reaching $35 billion in 2013.

Spaniards have suffered greatly under the government’s subsidy scheme. The country has chronically stagnant economic growth, high unemployment (23 percent), and expensive electricity. Indeed, a study conducted by Dr. Gabriel Calzada found that Spain’s subsidies destroyed 2 jobs for every 1 job created. This is because subsidies do not create wealth on net. By shifting resources from the most economical to most politically favored, subsidies destroy more jobs than they create.

Now, the Spanish government has joined the ranks of its European neighbors in working to reverse these detrimental subsidy policies. The country has now ended subsidies to nearly 40 percent of its wind energy capacity in the hope that lowered electricity costs will ease the burden placed on consumers and fuel economic growth.

Italy

Italy pursued similar wind-promoting policies in the form of a feed-in-tariff and ultimately came to the same conclusions found by European neighbors: wind and other green-energy subsidies are too costly and deter growth. According to Carlo Stagnaro, a senior fellow at a Milan-based think tank, as “subsidies were added to subsidies were added to subsidies,” Italy saw electricity prices skyrocket, causing them to soar to 35 percent above the EU average, which is already more than double the U.S. average.

As a result, Federica Guidi, Italy’s minister for economic development, promoted a reform package last year that reduced the amount of subsidies by about 1.6 billion euros per year (about ten percent of the overall subsidy bill) with the goal of lowering electricity prices for consumers. Although there is continued pressure from interest groups for continued support of green energy technologies, Italy is cutting back on subsidies to spare consumers.

Australia

Outside of Europe, Prime Minister Tony Abbott is making headlines in Australia as his government has recently banned its renewable energy fund from investing in “mature technologies like wind” energy. Abbott has said that the government’s policy is to eventually abolish the fund altogether.

Abbott’s hope is that by ending costly subsidies to the wind industry, Australia’s energy sector will become more economical. “We want to keep power prices as low as possible,” the prime minister said. As in Europe, green-energy subsidies have resulted in an upward trend in energy prices in the country, primarily borne by consumers. According to the Australian Financial Review, in many states wind facilities require three times the price at which Australian coal generators can supply electricity.

The Australian government’s order to the renewable energy fund is just another step in Abbott’s drive to put an end to damaging wind energy subsidies. Additionally, in the face of upcoming UN climate talks, Abbott has shown limited enthusiasm to join the U.S. and EU, as he has become increasingly aware of the economic consequences of doing so.

Lessons for America

As Congress considers yet another PTC extension, the United States should learn from Europe’s failed subsidy experiment. Wind subsidies like the PTC have the dual problem of driving up energy costs for families while burdening taxpayers with the bill. But while Europe and Australia begin to recognize the error of their ways, the president and some in Congress continue to push for perpetual subsidies for the large, mature wind industry.

If lawmakers want to protect their constituents from higher electricity costs, lost jobs, and sluggish economic growth, then they should follow Europe’s and Australia’s lead and eliminate wind energy subsidies–especially the PTC.

Wind Fail: 20 Quotes for 30 Years of False Hopes

Last week, news reports indicated the Senate Finance Committee will soon mark up legislation to retroactively extend a number of tax provisions that expired at the end of last year. Of note in this package is the wind Production Tax Credit (PTC). This would be the 10th extension of the PTC since it became law in 1992.

Senator Charles Grassley of Iowa, one of the original authors of the wind PTC, made clear last week in a letter to Chairman Hatch that despite his past statements, he wants yet another extension of this damaging provision. He stated:

“But, I also know this credit won’t go on forever. It was never meant to, and it shouldn’t. In 2012, the wind industry was the only industry to put forward a phase out plan. I have expressed support in the past for a responsible, multi-year phase out of the wind tax credit. But, I believe any phase out should be done in the context of comprehensive tax reform, where all energy tax provisions are on the table.” Senator Grassley letter to Chairman Hatch, 7/7/15

Sen. Grassley admits the wind PTC should not last forever and indicated he supports a phase out. It is clear that today Sen. Grassley does not want to see the wind PTC expire on his watch. Of course, this is significantly different than what he said 12 years ago:

“I’d say we’re going to have to do it [keep the PTC] for at least another five years, maybe for 10 years. Sometime we’re going to reach that point where it’s competitive (with other forms of energy). I think the argument for any tax credit is to make the new source of energy economically competitive.” (“Wind Energy Rides Roller Coaster Year.” Electrical Wholesaling, 4/1/03)

Sen. Grassley now appears not to believe what he said in 2003. Not only have more than 10 years passed, but the American Wind Energy Association claims that wind is not only competitive, but cheaper than other sources. In fact, AWEA claims that “the current cost of wind energy of under $50/MWh.” To put that in perspective, the Energy Information Administration explains that new combined cycle natural gas plants will produce electricity for $72/MWh. It appears that Sen. Grassley either does not believe the wind lobbyists or he was not being truthful in 2003 when he spoke about the PTC.

It turns out that wind promoters like Sen. Grassley and AWEA have long made claims that wind would soon be cost competitive and that the PTC would not be needed forever. Here are of some of their claims over the years:

1983 – Booz, Allen & Hamilton did a study for the Solar Energy Industries Association, American Wind Energy Association, and Renewable Energy Institute. It stated: “The private sector can be expected to develop improved solar and wind technologies which will begin to become competitive and self-supporting on a national level by the end of the decade [i.e. by 1990] if assisted by tax credits and augmented by federally sponsored R&D.”(Renewable Energy Industry, Joint Hearing before the Subcommittees of the Committee on Energy and Commerce et al., House of Representatives, 98th Cong., 1st sess. 1983)

1984 – Christopher Flavin of the Worldwatch Institute: “Tax credits have been essential to the economic viability of wind farms so far, but will not be needed within a few years.” (Christopher Flavin, “Electricity’s Future: The Shift to Efficiency and Small-Scale Power,” Worldwatch Paper 61, Worldwatch Institute, 11/84)

1985 – Christopher Flavin of the Worldwatch Institute: “Although wind farms still depend on tax credits, they are likely to be economical without this support within a few years.” (Christopher Flavin and Cynthia Pollock, “Harnessing Renewable Energy,” in Worldwatch Institute, State of the World 1985)

1985 – “Wind Energy Cannot Only Become Competitive, But Will In The 1990’s Be One Of The Cheapest Sources Of New Power.” “While wind power cannot yet deliver electricity at costs competitive with other energy sources – some experts estimate that it may cost anywhere from 9 to 12 cents a kilowatt-hour, as opposed to the 7-cents-a-kilowatt-hour cost of oil and gas -proponents point to a recent study by the Electric Power Research Institute of Palo Alto, Calif., a research group financed by electric utilities. That study indicated that wind energy cannot only become competitive, but will in the 1990’s be one of the cheapest sources of new power.” (Barry Fisher, “The Threat To Wind Energy,” The New York Times, 10/26/85)

1986 – Christopher Flavin of the Worldwatch Institute: “Early evidence indicates that wind power will soon take its place as a decentralized power source that is economical in many areas…. Utility-sponsored studies show that the better wind farms can produce power at a cost of about 7¢ per kilowatt-hour, which is competitive with conventional power sources in the United States.” (Christopher Flavin, “Electricity for a Developing World: New Directions,”Worldwatch Paper 70, Worldwatch Institute, 6/86)

1986 – Amory Lovins of the Rocky Mountain Institute lamented the untimely scale-back of tax breaks for renewable energy, since the competitive viability of wind and solar technologies was “one to three years away.” (Lovins, K. Wells, “As a National Goal, Renewable Energy Has An Uncertain Future.” Wall Street Journal, 2/13/86)

1986 – A representative of the American Wind Energy Association testified: “The U.S. wind industry has … demonstrated reliability and performance levels that make them very competitive. It has come to the point that the California Energy Commission has predicted windpower will be that State’s lowest cost source of energy in the 1990s, beating out even large-scale hydro.”(Statement of Michael L.S. Bergey, American Wind Energy Association in Renewable Energy Industries, Hearing before the Subcommittee on Energy Conservation and Power of the Committee on Energy and Commerce, House of Representatives, 99th Cong., 2nd sess. 1986)

1990 – In 1990, two energy analysts at the Worldwatch Institute predicted an almost complete displacement of fossil fuels in the electric generation market within a couple decades [i.e. 2010]: “Within a few decades, a geographically diverse country such as the United States might get 30 percent of its electricity from sunshine, 20 percent from hydropower, 20 percent from wind power, 10 percent from biomass, 10 percent from geothermal energy, and 10 percent from natural-gas-fired cogeneration.” (Christopher Flavin and Nicholas Lenssen, Beyond the Petroleum Age: Designing a Solar Economy, Worldwatch Institute, 1990)

1991 – Dale Osborn, Former AWEA President: “The Wind Industry Could Produce, At Competitive Prices, Up To One-Third Of The Nation’s Electricity Needs Within The Next 30 Years.” “‘Here we go again. Nuclear, coal and oil appear to be receiving all the benefits, while clean, proven energy technologies like wind are receiving little serious attention,’ said Dale Osborn, president of the California-based company, U.S. Windpower, and president of the American Wind Energy Association. ‘Given an equal opportunity to compete fairly, the wind industry could produce, at competitive prices, up to one-third of the nation’s electricity needs within the next 30 years.’” (“Bush Administration’s Energy Plan Represents Another Missed Opportunity For America, Says U.S. Windpower,” PR Newswire, 2/20/91)

1991 – “Wind Power Will Be Cheaper Than Conventional Power By 2000.” “’Wind power will be cheaper than conventional power by 2000 when strides in engineering will have made windmills even more economically competitive,’ said Paulus Soullie, a windmills engineer at Holland’s Energy Research Centre in Petten. A windmill with a record 1.3Mw output will be built later this year in Holland.” (Peter Spinks, “Charm Of The Farm Goes With The Wind,” The Observer, 1/13/91)

1996 – Christopher Flavin, President of WorldWatch Institute. “Following the laws of technological progress and large-scale manufacturing, the cost of wind-generated electricity has fallen by more than two-thirds over the past decade, to the point where it is lower than that of new coal plants in many regions. Within the next decade, it is projected to fall to 3 to 4 cents per kilowatt-hour, making wind the least expensive power source that can be developed on a large scale worldwide.” (“Power Shock: The Next Energy Revolution.” WorldWatch, January/February 1996)

1998 – Ken Lay, former CEO of Enron, to Gov. Bush in 1998. “The bill, H.R. 1401 (Thomas R-CA), extends for five years the existing wind production tax credit (PTC), which was passed by the Bush Administration in the Energy Policy Act of 1992. Wind is the fastest growing new electrical generation technology in the world today and has rapidly decreased its production costs until it is close to being competitive with conventional generation technologies.” (“Enron’s Ken Lay asks for Texas Gov. Bush’s help in securing tax credits for wind.” National Wind Watch, 9/10/2008)

1999 – A DOE Assistant Secretary Said Wind Power Is Getting Close To Being Competitive With Wholesale Power. ‘”Although wind power is not yet competitive with wholesale power, it’s getting close… ‘Of all the renewable technologies, wind power is the closest to market competitiveness today. When you consider the improved technology the opportunity for consumers to choose green power, and the concerns over climate change, it all adds up to a strong potential for wind to really take off over the next 20 years.’” (Taylor Moore, “Wind Power: Gaining Momentum,” EPRI Journal, 12/22/99)

2001 – Robert Boyd, Enron Wind Corp. VP: “With Additional R & D Funding And The Continuation Of The Production Tax Credit For The Next Five Years Wind Should Become Price Competitive With Conventional Generation Technologies.” “Wind energy is close to becoming competitive with conventional fuels. With additional R & D funding and the continuation of the Production Tax Credit for the next five years wind should become price competitive with conventional generation technologies.” (Robert T. Boyd, Committee On Finance, U.S. Senate, Testimony, 7/19/01)

2003 – Senator Chuck Grassley (R-IA) on the PTC. “I’d say we’re going to have to do it for at least another five years, maybe for 10 years. Sometime we’re going to reach that point where it’s competitive (with other forms of energy). I think the argument for any tax credit is to make the new source of energy economically competitive.” (“Wind Energy Rides Roller Coaster Year.” Electrical Wholesaling, 4/1/03)

2004 – Experts Said in 2004 Wind Was “Getting Close” To Viability And “Very Nearly Competitive.” “Not long ago wind power was the domain of fringe scientists and environmentalists…. But the industry is maturing and growing quickly–and is beginning to find its place as one viable element in the energy puzzle. … Still, says Bob Thresher of the Department of Energy’s National Renewable Energy Lab, ‘wind is the first renewable technology that is very nearly competitive in the market for bulk power generation.’ … [Wind pioneer Jim] Dehlsen says the cost of wind needs to fall below three cents per kilowatt hour–without tax credits–to truly break society’s addiction to fossil fuels. “It’s still not there, but we’re getting close,” he says.” (Brad Stone, “The Master of Wind,” Newsweek, 9/20/2004)

2004 – Edward Berkel, Senior VP Shell WindEnergy: “Cost Reductions Will Eventually Make Wind Fully Competitive With CCTG Power.” “Cost reductions will eventually make wind fully competitive with CCTG power. If PTCs are not replaced other mechanism might be used, i.e. green certificates. Driven by customer needs, overall world pressure to reduce GGEs.” (“Where’s The Bill?” Project Finance, 3/2004)

2006 – A Former FERC Chairman Said The Wind Industry Will Be Eventually Be Able To Survive Without Subsidies. “[Pat Wood, former chairman of the Federal Energy Regulatory Commission (FERC)] said that the high price of fossil fuels make it a ‘pretty safe bet’ that the wind energy industry will eventually be able to survive without government subsidies in the form of the wind production tax credit.” (Suzanna Strangmeier, “Former FERC Chairman Pat Wood Sees Bright Future for Wind Power,” Oil Daily, 5/2/06)

2012 – Denise Bode, Former AWEA CEO on PTC Phase-out. “In coordination with any phase down of the credit, we would urge Congress to consider additional policy mechanisms to encourage a diverse portfolio that includes renewable energy. With the policy certainty that accompanies a stable extension, the industry believes it can achieve the greater economies of scale and technology improvements that it needs to become cost competitive without the PTC.” (AWEA letter to Congress. 12/12/12)

2012 – Secretary of Energy Steven Chu: “I think it’s something the wind industry sees: “As the technology gets better, there’s no need to be subsidizing a competitive industry once it’s competitive.” “So over a period of time, especially as — and no dates were discussed — but over a period of time, a road map of phasing out, you see where the prices are going and you can see” how to eliminate the credit…. Just as eventually VEETC and other things were eventually phased out, I think it’s something the wind industry sees: As the technology gets better, there’s no need to be subsidizing a competitive industry once it’s competitive,” (“Chu opens the door to phaseout of wind incentive.” Governors’ Wind Energy Coalition, 3/15/12)

2014 – Warren Buffett on how wind isn’t profitable without subsidies. “I will do anything that is basically covered by the law to reduce Berkshire’s tax rate,” Buffet told an audience in Omaha, Nebraska recently. “For example, on wind energy, we get a tax credit if we build a lot of wind farms. That’s the only reason to build them. They don’t make sense without the tax credit.” (U.S. News & World Report, 5/12/14)

2015 – Senator Chuck Grassley on (yet another) PTC extension. “But, I also know this credit won’t go on forever. It was never meant to, and it shouldn’t. In 2012, the wind industry was the only industry to put forward a phase out plan. I have expressed support in the past for a responsible, multi-year phase out of the wind tax credit. But, I believe any phase out should be done in the context of comprehensive tax reform, where all energy tax provisions are on the table.” (Senator Grassley letter to Chairman Hatch, 7/7/15)

The definition of insanity is doing the same thing over and over again and expecting a different result. For more than 30 years, wind promoters have claimed that wind would soon not need subsidies because it would be cost-competitive. But here we are in 2015, and despite claims from AWEA that wind is cost competitive, their actions suggest they don’t believe their own talking points. After all, if wind were competitive, the wind lobby would be greedy to insist on $6 billion from the taxpayer for the PTC.

AWEA certainly knows that their claims about wind truly being cost competitive are not true. New research by the Institute for Energy Research found that electricity from new wind is three times as expensive as electricity for the existing fleet of coal units. This is the real reason wind supporters need the wind PTC to be continually extended. Without the PTC, no one would build wind turbines. As Warren Buffet said, “On wind energy, we get a tax credit if we build a lot of wind farms. That’s the only reason to build them. They don’t make sense without the tax credit.”

Instead of looking towards Senator Grassley, Congress should heed the advice of another author of the wind PTC, former Rep. Phil Sharp from Indiana. He said in 2013 that the tax credit should have “a sunset provision to ensure that the temporary incentive does not become a permanent subsidy.”  (“Extending the wind tax credit.” Washington Times, 12/5/13)

Members like Senator Grassley want the wind PTC to be a permanent subsidy. It is time to break this cycle and allow this subsidy to phase out. Congress should embrace HR 1901, the PTC Elimination Act by Reps. Marchant and Pompeo, to accomplish this goal.

ICYMI: Gov. Pence Encourages States to Reject EPA’s Climate Rule

WASHINGTON — Yesterday, the American Energy Alliance held a press conference call with Indiana Governor Mike Pence regarding the EPA’s Climate Rule regulating carbon dioxide from power plants. On the call, Gov. Pence explained how states are well within their rights to not submit a plan to the EPA. Below is some of the media coverage of yesterday’s call:

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“Pence encourages states to fight greenhouse gas rules”
By Maureen Groppe
7/9/15

Fighting the federal government over proposed greenhouse gas rules for power plants is worth the legal costs, Gov. Mike Pence said Thursday in a news conference with an industry advocacy group aimed at encouraging more states to follow his lead.

“We do have a choice,” Pence said. “You can refuse to submit a state plan. You can challenge the EPA’s ability to impose a federal plan. There’s nothing illegal about saying ‘no’ on behalf of ratepayers and businesses in your state.”

If enough states do that, the Environmental Protection Agency will be forced to capitulate, said Tom Pyle, president of the American Energy Alliance.

“The sheer enormity of having to potentially deal with a dozen or so federal implementation plans would overwhelm the EPA to the point where they would probably have to throw up their hands,” Pyle said.

Pence informed President Barack Obama in a letter last month that he would refuse to comply with the pending rules, unless they were substantially changed.

The rules, which are expected to be finalized this summer, are the cornerstone of the administration’s plan to curb climate change.

If states refuse to comply, the EPA has said, it will impose its own plan. But that would delay implementation, even without the legal challenge Pence says he’s committed to make.

“We think we’ve got a strong opportunity to defend ratepayers, and I think it would be worth the fight,” he said about the cost of litigation.

Click here to read the full article.
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“Coal industry has new litmus test for Republican governors”
By James Hohmann and Elise Viebeck
7/10/15

Refusing to implement standards being unveiled next month by the Environmental Protection Agency is the fossil fuel industry’s biggest new ask of Republican governors, especially the four running for president. The Obama administration is putting the finishing touches on far-reaching rules to cut power plant emissions. Recognizing he will not have the votes to override a presidential veto, Senate Majority Leader Mitch McConnell told governors in February that they should decline to respond to federal requests for state-issued plans on how they would meet lower emission targets.
Indiana Gov. Mike Pence, a Republican who retains national ambitions despite passing on a 2016 presidential run, has been the most vocal about his plan to ignore federal orders. Pence said Thursday that he will “refuse to comply” unless a previously issued draft is massively watered down. “The best way for this rule to be improved is for it to be withdrawn completely,” he told reporters on a 40-minute conference call, which was organized by a leading energy industry association. “No state is obligated to adopt the president’s climate change agenda as their own … We’ve drawn a line in the sand and made it clear that the state of Indiana will not comply … We’ll avail ourselves of all legal remedies.”
The American Energy Alliance is pushing governors to “embrace a Just-Say-No approach,” President Tom Pyle said yesterday after a friendly Q&A with Pence. He praised Texas’ Greg Abbott, Oklahoma’s Mary Fallin, Louisiana’s Bobby Jindal and Wisconsin’s Scott Walker — all Republicans — for threatening to defy the feds.

Click here to read the full article.

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“Ind. governor sees mercury ruling fueling ‘just say no’ push”
By Jean Chemnick
7/9/15

Indiana Gov. Mike Pence (R) said today that states weighing a “just say no” stance on U.S. EPA’s Clean Power Plan should take heart from last week’s Supreme Court ruling on the Mercury and Air Toxics Standards (MATS).

One of four state governors who have said they won’t implement EPA’s carbon rule for power plants, Pence said in an American Energy Alliance call today the ruling shows the high court will be an ally against economically harmful environmental mandates if governors allow judicial review to proceed.

“There is a majority on the court that recognizes the importance of some common-sense cost-benefit analyses by the EPA in the rulemaking process,” Pence said. “We think we’ve got a strong opportunity here to defend ratepayers, and I think it’s worth the fight.”

Click here to read the full article (subscription required).

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Opponents of EPA Climate Regulations Should Reject the Wind PTC

This summer, the Environmental Protection Agency (EPA) will finalize its Climate Rule regulating carbon dioxide emissions from power plants—what EPA euphemistically calls its “Clean Power Plan.” The Climate Rule is the foundation of President Obama’s broader agenda to restrict the use of America’s natural energy resources. Also central to the president’s climate agenda is the Production Tax Credit (PTC), a federal tax subsidy for wind energy producers.

These two policies—the wind PTC and the Climate Rule—not only independently support the administration’s climate agenda, but also reinforce each other in important ways. Lawmakers who are critical of the Climate Rule should likewise reject the PTC as part of the same climate agenda behind both policies.

Consider recent comments by White House climate change adviser Brian Deese. During a conference call with reporters, Deese admitted the EPA’s regulation of carbon dioxide from power plants is designed to create “strong, long-term incentives for investments in renewables” such as wind and solar. At the same time, the PTC, a multi-billion dollar subsidy, artificially hides the costs of wind generation. As we have written before, the incentives offered by the PTC and the Climate Rule reinforce each other and magnify their benefits, creating a lucrative and artificial market for wind energy while masking the true expense of both policies.

Anyone interested in affordable energy should understand the inextricable link between the EPA’s Climate Rule and the wind PTC.

White House Admits Climate Rule is Wind Subsidy

The so-called “Clean Power Plan,” or Climate Rule, is the focal point of the administration’s climate agenda, requiring a 30 percent reduction in carbon dioxide emissions from power plants by 2030. The Climate Rule will more than double closures of coal-fired generators, with a total of coal generating capacity projected to retire by 2040 due to EPA rules and market factors—the equivalent of shutting down every power plant in the United Kingdom. The economic cost is enormous, and it buys us virtually no environmental benefit: the plan will result in a global temperature reduction of a mere 0.018 degrees Celsius by 2100, for a price of at least $366 billion.

Instead of an emission reduction plan, the Climate Rule functions primarily as a one-way handout to the wind industry. Deese said as much on the conference call, explaining that the plan creates “strong, long-term incentives,” or subsidies, for wind and solar. In fact, installed wind generating capacity is projected to triple under the plan. That is because EPA’s regulation sets a carbon dioxide emission target for states and makes it their responsibility to develop an implementation plan using four “building blocks” stipulated by the EPA. Building block 3 mandates increased use of renewable energy sources, primarily wind and solar, to replace closed coal plants.

By acting as a long-term subsidy for renewables, the Climate Rule does nothing to help the climate and everything to help wind producers and their powerful lobbyists at the American Wind Energy Association.

Production Tax Credit

“Strong incentives”—or massive subsidies—already exist for the wind industry, primarily through the PTC, a multi-billion dollar subsidy that artificially drives down the cost of wind energy by driving up Americans’ tax bills. The success of the Climate Rule hinges on the continuation of the PTC, which is why President Obama has repeatedly asked Congress to make the corporate handout permanent. As states are forced to install expensive renewable generators under the Climate Rule, the PTC will artificially depress prices and hide rate increases, creating an illusion of equitable pricing between conventional fuels and renewables, while taxpayers finance the difference.

In reality, electricity from wind facilities is far more expensive than electricity from existing conventional resources: a recent study by the Institute for Energy Research found that electricity from new wind resources is nearly four times more expensive than from existing nuclear and nearly three times more expensive than from existing coal. Not to mention the inescapable fact that wind power simply does not turn on and off the way conventional plants do, meaning wind facilities have a parasitic effect on the reliable generators that back them up when the wind doesn’t blow. These costs, like the PTC, are hidden and make wind appear to be an attractive option for complying with the Climate Rule. In reality, subsidized wind energy is more like a Trojan Horse.

Conclusion

The EPA’s “Clean Power Plan,” or Climate Rule, will cost Americans hundreds of billions of dollars, drive up electricity rates across the country, and plunge millions of people into poverty—especially the poor and minorities—while the rule’s effect on the climate is virtually non-existent. The only true beneficiaries are members of the wind and solar industry, as states are forced to install renewables while companies pocket billions in subsidies through the PTC. While the PTC expired at the end of last year, the wind lobby is pushing Congress to renew the handout, which is essential to the president’s Climate Rule and broader climate change agenda. Understanding the connection between the EPA’s Climate Rule and the wind PTC is crucial to protecting the American people from the Obama administration’s costly climate agenda. Wise lawmakers should reject both.