AEA Study: Removing Big Wind’s ‘Training Wheels’

New Study Finds Federal Wind Production Tax Credit (PTC) No Longer Needed to Drive Wind Generation Development
Mature Wind Industry Can Compete On Its Own; Taxpayer-funded Welfare-For-Wind Must End

WASHINGTON D.C. – A new report released today by the American Energy Alliance (AEA) concludes that wind energy is a mature industry whose growth has rendered the federal wind Production Tax Credit (PTC) an obsolete government hand-out that should be allowed to expire.

The AEA-commissioned study, “Removing Big Wind’s Training Wheels: The Case for Ending the Federal Production Tax Credit,” documents the explosive growth of wind generation as well as the favorable outlook for future wind generation development as a result of Renewable Portfolio Standards (RPS) – not the PTC. Conducted by David Dismukes, associate director and professor at the Louisiana State University Center for Energy Studies, the study finds that wind generation now comprises 50,000 megawatts (MW) of electricity capacity in the United States — a five-fold increase since 2006 — and will continue to grow even without the renewal of the PTC.  The PTC therefore only serves to tip the scale in favor of a well-established industry, giving wind an politically-determined advantage over other types of generation.

Background

The PTC was first enacted in 1992 and currently provides wind producers a subsidy of $22 per megawatt-hour (MWh) of energy generated.  It has been extended seven times and is scheduled to expire under current law on December 31, 2012.  Congress is now debating another extension of the credit.  The Joint Committee on Taxation estimates that a one-year extension would cost taxpayers $12.1 billion.

“When you strip away all the rhetoric, the real issue is that wind is a mature industry whose growth is being fueled by aggressive RPS standards and is no longer in need of training wheels,” said Dr. Dismukes. “The PTC is a costly and inefficient subsidy that is clearly no longer necessary.”

“The government needs to stop caving to powerful wind lobbyists and establishing policies that pick winners and losers in the energy marketplace. The wind PTC has run its course, and taxpayers must no longer be forced to subsidize a well-established wind industry that offers no substantive proposal for a phase-out of decades-old energy welfare,” said AEA President Thomas Pyle.

Findings

The Dismukes study finds that widespread adoption of state RPS mandates established a substantial guaranteed market for wind; one that did not exist when the PTC was enacted in 1992.  Although a few states adopted RPS policies as early as the mid to late 1990s, most states enacted them between 2004 and 2007, which is when a substantial increase in wind energy capacity development occurred, as documented in the report. To date, wind generation accounts for 90% of all new renewable resources developed under these non-federal programs.

Additionally, RPS requirements are expected to grow from about 50,000 MW in 2010 to almost 200,000 MW by 2030, according to the report.  If wind maintains the same 90% market share it holds in today’s renewable energy generation mix, merely fulfilling future RPS requirements guarantees wind producers a market for almost 130 GW of additional capacity through 2030.  As such, even post-federal PTC expiration, the outlook for future wind generation development continues to be exceptionally favorable.

The report also highlights forecasts from the U.S. Energy Information Administration which find that even if the PTC and other incentives are eliminated, renewable generation will still be on track to rise from 500 billion kilowatt hours in 2011 to approximately 750 billion kilowatt hours by 2035, amounting to a 50% increase in wind generation.

Additional key findings include:

• Standards & Poor’s recently estimated as much as $150 billion in new renewable energy investment opportunities over the next 10 years even if the PTC is not renewed, driven in large part by opportunities in wind energy development.  Thus, offering billions of dollars in federal tax subsidies to wind generation, in addition to mandated state renewable subsidies, allows wind generators to “double dip,” and reflects a gross waste of limited fiscal resources.

• Over 50% of wind capacity is located in only five states; over 75% is located in just 11 states. The federal PTC, however, unfairly shifts wind energy development costs from taxpayers in the RPS states to those with little or no wind development, forcing taxpayers across the country to support an industry concentrated in only a few states.  In fact, under the PTC, taxpayers in the states without RPS mandates pay approximately 24% of the PTC funding, even though they receive no direct benefit.

• The “one-size-fits-all” PTC is an inefficient and expensive means of supporting wind generation that fails to recognize the industry’s heterogeneity and operational differences, and grossly wastes limited fiscal resources by over-subsidizing many projects and driving over-development.

To download a copy of the full report, click here.

About The American Energy Alliance

Founded in May, 2008, The American Energy Alliance (AEA) is a not-for-profit organization that engages in grassroots public policy advocacy and debate concerning energy and environmental policies. AEA believes that freely-functioning energy markets provide the most efficient and effective solutions to today’s global energy and environmental challenges and, as such, are critical to the well-being of individuals and society. AEA believes that government policies should be predictable, simple and technology neutral.