“The sheer ridiculousness of the [six-year, front loaded PTC extension] outraged Congressional members and may well have changed the debate. It’s NO coincidence that within 24-hours of AWEA’s poorly received proposal, Denise Bode bailed. A move that sudden suggests the industry thinks it’s better off without her and probably without AWEA’s inflexible, out-of-touch campaign.”
The American Wind Energy Association’s relentless, year-long lobbying campaign to secure extension of the wind production tax credit (“PTC”) hit major headwinds last week, which precipitated the abrupt resignation of its CEO, Denise Bode.
Branded the “Save USA Wind Jobs,” AWEA’s plan tried to stigmatize Congressional members from Red and windy states with the argument: oppose the PTC, and you oppose American jobs.
But rather than gaining support, resistance intensified to extending the PTC. With only two weeks remaining in 2012, it’s not certain what will happen with the subsidy, but one thing is clear: AWEA’s robotic jobs jab has chilled its effectiveness. Big Bucks cronyism does have its limits.
Changing Market; Inflexible Messaging
Prior to 2008, wind was still a niche resource. Under 15,000 megawatts of installed wind was eligible for the PTC and the price tag for the subsidy, in total for its first 15 years (1992–2007), was under $6 billion and less than $1 billion in any one year. Each time the PTC was up for renewal, Congress complied.
Since then, wind installations in the U.S. ballooned to over 50,000 megawatts, and the carrying cost for a 1-year extension is now projected to be $12 billion.
In today’s economic climate, AWEA’s campaign messaging is withering under challenge.
The promise of wind jobs never materialized at the scale touted by AWEA, calling into question the veracity of their models.
Claims that losing the PTC equated to a job-killing tax hike on the industry disregards the fact that the PTC, itself, is a tax borne by all Americans in an attempt to defray the high price of wind power where such capacity exists.
Assertions that the PTC “more than pays for itself in local, state and federal taxes over the life of the credits” ignores the fact that even after factoring in the PTC, localized economic benefits derived from operating wind projects are dwarfed by the significant above-market energy prices contracted for wind energy–particularly in this extended period of low natural-gas prices.
The size of the subsidy relative to wholesale prices is also distorting competitive wholesale energy markets and harming the financial integrity of other, more reliable generation.
The Wind Industry Leaves AWEA
As the year wore on, AWEA and its surrogates added urgency to their message but never deviated from it. The public was hammered with warnings that the multi-billion dollar wind industry would face collapse if the production tax credit expired, leading some to question whether wind could ever stand on its own.
And where did that leave shareholders of Vestas, GE or any of the high-profiled turbine manufacturers? An industry built on government handouts exists at the political whim of those in office.
The market needed assurances, and in June, eight of the largest turbine manufacturers admitted they will adapt and grow, without the PTC. Even Vestas, which threatened to close shop in Colorado if the PTC expired, joined the other turbine makers in stating “they would not pull out even if Congress abandoned all renewable energy subsidies.”
This story is much closer to the truth than AWEA’s messages and is consistent with what we are hearing in the market.
Unlike AWEA, companies in the wind industry have bottom-lines to worry about. Many, including Vestas and GE, are already preparing for a non-PTC business model. Layoffs have been scheduled, new markets in South American, Africa and elsewhere have been identified, and cash flow issues are being addressed through asset shedding and the possible partnering with other corporations.
Low natural gas prices and shrinking load demand will keep the industry focused on its bottom line for a while longer — and that’s a good thing.
We will also likely see the industry shift their business plans away from those based on tax avoidance to plans based on energy production – as they should be.
AWEA Misjudges
When Representative Pat Tiberi (R-OH), chairman of the House Select Revenue Measures Subcommittee asked AWEA in April to present a proposal for phasing-out the PTC, the trade group ignored the question. The idea of a phase-out fell outside the limits of their campaign messaging and thus, outside their ability to respond. Last week, the pressure for a proposal reached a peak and AWEA threw together a six-year, front-loaded extension with a price tag in the tens of billions of dollars.
The sheer ridiculousness of the proposal outraged Congressional members and may well have changed the debate. It’s NO coincidence that within 24-hours of AWEA’s poorly received proposal, Denise Bode bailed. A move that sudden suggests the industry thinks it’s better off without her and probably without AWEA’s inflexible, out-of-touch campaign.
As evidence of the changed game, the Washington Post two days ago gave AWEA’s signature proposal a big thumbs down:
Some of those who sympathize with the wind subsidy, known as the production tax credit (PTC), say that it represents a second-best approach to supporting green energy. In fact it is not even a third- or fourth-best alternative to a carbon tax. At a cost of $1 billion a year, it offers wind operators a flat tax credit for every kilowatt-hour of electricity they produce. No matter if the grid doesn’t need the electricity at any given moment or if the policy blunts the incentive to reduce costs.
Let the PTC Expire!
The letters, resolutions, and advocacy statements by Congressional members who are on record supporting an extension of the PTC all sound like they were written by AWEA. If congressional members like Senator Chuck Grassley and Representative Kevin McCarthy based their comments and support on AWEA’s lobbying campaign, this would be a good time to rethink their position. AWEA’s unyielding messages are dated, and clearly ‘stuck on stupid’.
It’s time for the 20-year old PTC handout to end. American taxpayers and ratepayers, and the wind industry itself, will be best served by a post-crony energy policy of fair field, no favor.
Thank you Lisa for making sense out of the wind subsidy business.
Several years ago there was discussion about a county, state, school local taxing jurisdiction PILOT award for a proposed project in my wind targeted town. Consider that the project would bring 8 jobs to the community, each job provided would have cost local taxpayers nearly 1.5 million per job in taxes and fees. Local, only, and does not include what the federal and state was going to cough up in TPC and state awards.
Welcome news, and well written Lisa. I do see one downside however; this’ll be traded for the even worse carbon tax…
Tom,
You might be correct about an eventual carbon tax, since it appears to me to be the worst possible way to accomplish any of the goals which might be alleged for it.
A carbon tax has allegedly been discussed for two primary purposes: discouraging fossil fuel consumption to reduce carbon emissions; and, raising tax revenue to fund the government’s efforts to fill every rat hole it can find with our money. Tax rates ranging from $20–300 per ton have been discussed in various forums, which suggests that those discussing such a tax have no idea how large it should / could be to accomplish the desired results.
One thing we do KNOW is that, while a carbon tax might encourage some users to reduce their fossil fuel consumption to some unpredictable degree, it would do nothing to fund the investments in facilities and equipment required to actually reduce carbon emissions. We also know that a carbon tax is indiscriminate, taxing all emissions regardless of the time and investment required to reduce emissions, or even the commercial unavailability of technology capable of reducing emissions (CCS).
The above characteristics should be enough to make it the “hands down” choice of our fe(de)ral government.
Wind turbine subsidies are the scam on the American people. The only green that comes out of them are the profits to investors and subsidizing of the super-rich like Warren Buffet, the 4th richest person on the planet. He doesn’t qualify for one nickel of money from the taxpayers. I call for the ban of this destructive design of open bladed propellered, habitat destroying monsters.
The most corrupt, rotten to the core companies are grabbing for subsidies. In California, the City of Vernon is preparing to apply to build over 100 turbines in a major California flyway. Google the City of Vernon to get a taste of their corruption, their city counsel using taxes as their personal piggy banks. They belong in jail with 30 year prison terms. Instead, Kern County Planning Director, Lorelei Oviatt is pandering to those perpetrators like a cheap prostitute.
ttanton,
I don’t see how a carbon tax could be remotely as bad as subsidies for wind turbines.
Since the problem is figuring out how to limit the global CO2 level to less than ~600 ppm of CO2, then policy-makers should focus on policy that directly addresses the global CO2 level, rather than giving subsidies to politically-connected renewable energy companies. Most free market economists (who want to limit CO2 emissions to less than 600 ppm) prefer cap&trade or direct Co2 taxes to subsidies of so called “sustainable energy.”
Nice article Lisa, let us hope the Congressional staffers and elected federal and state officials will read and share this story and past articles in Master Resources.
Twenty years is too long. If the PTC ends on this year, unfortunately the AWEA and developers with their wind projects have created environmental destruction spinning their marketing slogans wind is “free, clean and green”. What they have left behind will be broken turbines, units that fail to produce, communities that have no decommission requirements, the senseless slaughter of wildlife. Biological, ecological, historical, and scenic and geological unique landscapes have been destroyed. Individuals living near these wind projects have had their quality of life destroyed. Industrial wind turbines are directly and indirectly expensive.
The wind PTC is given for the first 10 years of operation.
If not extended the PTC will still be paid for the next ten years. If extended as AWEA wants for 6 years, remember 6 years is really 16 years.
A waste of billions for inefficient, environmentally destructive, property devaluing, divisive, useless, expensive generation that we don’t even need.
Rusting, oil leaking wind turbines will be symbols of gullibility, stupidity, corruption, and greed.
Use Less
Given that the production tax credit is for 10 years, what is the state wind turbines that are more than 10 years old? Has anybody done a study on that?
Well said Rob.
Obama provided, during his first term, “Green Jobs” subsizing this worthless junk. Ideally, during his next term, he will provide more “Green Jobs ” dismantling and as much as possible recycling the materials from these ugly monsters for use in the coming LNG export business (ya, right, fat chance).
Look at the construction site for hundreds of wind turbines in Imperial Valley – Ocotillo. Who would like to take a shot who can defend this as green. This is the Mojave Desert, the only desert in the U.S.
https://www.facebook.com/OcotilloWindTurbineDestruction/photos_stream
[…] (maybe, partially) phased out over the next five years. With combined subsidy and PTC price tag of $12 billion in 2013, this is utter […]
Do we really need to borrow billions more from China for unneeded overpriced wind energy?
It’s time for the wind market to be regulated like other energy producers.
[…] the PTC came with a $12 billion annual price tag. Lisa Linowes reports over on the indispensable Master Resource blog: When Representative Pat Tiberi (R-OH), chairman of the House Select Revenue Measures […]
[…] the PTC came with a $12 billion annual price tag. Lisa Linowes reports over on the indispensable Master Resource blog: When Representative Pat Tiberi (R-OH), chairman of the House Select Revenue Measures […]
[…] But the lobbying crusade isn’t going very well. In fact, the head of the wind rent-seeking lobby, Denise Bode of the American Wind Energy Association (AWEA), abruptly resigned recently when her most proposal to extend the PTC came with a $12 billion annual price tag. Lisa Linowes reports over on the indispensable Master Resource blog: […]
I have often wondered why provide backup for wind energy. Why not let the blackouts happen? I can’t think of a better way to educate the public about the unreliability of wind energy.
The utilities don’t hesitate to cut off service to people with disabilities that can’t pay for the inflated cost of their service. However they are not willing to do the same thing to people that can pay their bills even if its only when there isn’t enough wind power during a heat wave.
Incidentally I’m from Fullerton California, which is in Southern California Edison territory. I have experienced first hand what I mentioned in my posts above.