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.