If Wind Energy is “Strong” Why Does it Need Subsidies?

Last week, the American Wind Energy Association (AWEA) released its second quarter 2015 U.S. wind energy market report. In a press release, AWEA CEO Tom Kiernan hails the report as indicative of a vibrant wind energy industry: “With a near-record amount of wind capacity under construction, this looks to be a strong year for American wind power.” However, Kiernan quickly changes tone, stating that “…to create longer term stability for the industry the full Senate and the House of Representatives must move quickly to extend the PTC,” or wind Production Tax Credit.

If the wind industry is “strong,” then why does it need subsidies for “stability”? This doublespeak is a favorite tactic of AWEA, who continues to boast about how vibrant the wind industry is while also lobbying for more subsidies that they supposedly need to survive. AWEA and wind advocates can’t have it both ways: if they expect Americans to believe their claims that wind energy is booming, then the industry should give up the PTC and stand on its own two feet.

AWEA’s quarterly report shows growth in subsidized wind

According to AWEA’s report, subsidized wind energy experienced quite the bump in installation and capacity numbers. AWEA claims that “the U.S. wind industry installed 845 turbines totaling 1,661 MW, a record for wind installations in the second quarter.” Further, AWEA claims that the 1,994 megawatts installed in the first half of 2015 more than doubles the amount installed during the same period in 2014.

In addition to those numbers, AWEA shows yearly increases in overall capacity since 2001, and shows a positive trend in wind capacity under construction since 2011. However, this growth is not organic, but dependent on taxpayer subsidies. According to EIA, in 2013 federal wind subsidies totaled $5.9 billion. Wind energy is inextricably tied to government subsidies, including the PTC, and claims of wind energy growth should take these massive government handouts into account.

The wind industry’s broken record

For decades, wind advocates have claimed that wind will be cost competitive in the near future, thereby negating the need for the PTC. Below are some examples from AWEA officials:

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, 99^th Cong., 2^nd sess. 1986)

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)

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)”

Despite claims that wind will soon no longer need subsidies to compete, year in and year out AWEA spends millions of dollars lobbying Congress to extend the wind PTC. While AWEA has supported the idea of a phase out in the past, the industry now seems more interested in perpetual subsidies than keeping its word.

Note about “capacity” versus generation

Wind lobbyists love to tout growth in installed wind capacity. AWEA points out that last year wind capacity installations eclipsed those of any other energy source, including natural gas. But electrical capacity isn’t the same as electricity generation. According to EIA, capacity is the maximum amount of electricity an energy source can produce. Generation is the amount of electricity an energy source actually produces. It is the difference between potential and reality.

This key difference underscores one of wind energy’s big weaknesses: it isn’t good at turning potential energy into real energy. EIA gives wind a “capacity factor” of 34 percent, which means wind reaches its maximum output (capacity) just one-third of the time. By contrast, nuclear has an average capacity factor of 92 percent and coal 61 percent, according to EIA.[i] Because of these varying capacity factors, capacity additions bear little resemblance to electrical generation. For example, 1 gigawatt of nuclear capacity will produce over 3 times the amount of generation that 1 gigawatt of wind capacity can produce.

Wind energy isn’t good at converting capacity into generation because the wind cannot be controlled. When the wind isn’t blowing, wind installations aren’t producing. More reliable energy sources like nuclear, coal, and natural gas can produce energy at any time precisely when it is needed. For this reason, reliable sources like nuclear and coal “generally have more value to a system than less flexible units” like wind, according to EIA.

Conclusion

Congress is currently debating whether to revive the wind PTC in a tax extenders package. Sadly, the Senate Finance Committee rushed through the package with little debate and no opportunity for amendments, in a business-as-usual mentality too common in Washington. Congress should reject the PTC for a host of reasons: it raises Americans’ electric rates, destabilizes the power grid, enriches wealthy investors at the expense of taxpayers, and is central to President Obama’s EPA carbon regulations. Lawmakers that want to stand up for their constituents can co-sponsor H. R. 1901, the PTC Elimination Act, which AEA is including in the American Energy Scorecard.

One of the most compelling reasons to end this corporate welfare is because even the wind industry claims the industry is “strong”—taxpayers shouldn’t have to subsidize an industry that can compete on its own. If AWEA truly believes wind energy is a “success story,” then the industry should back up its words by letting go of the wind PTC.

[i] See Energy Information Administration, Electric Power Monthly, May 2015, Table 6.7.A. and 6.7.B., http://www.eia.gov/electricity/monthly/current_year/may2015.pdf