Speaking Truth to Wind Power (Recent IER Panel on the Hill)

“Here’s to a post-PTC world. One where, in Lisa Linowes words, ‘the industry shifts their business plans away from those based on tax avoidance to plans based on energy production’.”

Last month, the Institute for Energy Research (IER) held a policy luncheon on Capitol Hill to discuss the problems of wind power in light of the debate about whether to extend the long-standing (1992–) production tax credit (PTC). The event highlighted a new IER study calculating the “taker” and “payer” states from the PTC, Estimating the State-Level Impact of Federal Wind Energy.

I moderated the panel. Panelists included Travis Fisher (IER) and three leading grassroots activists: Lisa Linowes of New Hampshire, Tom Stacey from Ohio, and Kevon Martis of Michigan. Lisa, Tom, and Kevon are wind-power experts whose volunteer work is inspired by the economic waste and wholly unnecessary degradation of rural life.

I began by describing wind power as the perfect imperfect energy due to its economic and environmental drawbacks. Converting wind energy to electricity, indeed, has been a perennial folly since the 19th century for reasons explained in books of the day.

I identified industrial wind as a “crony industry,” given its tip-to-toe government dependence. Such is different from consumer-friendly industries that might be populated by some crony companies (firms desiring special government favor at the expense of competitors, ratepayers, or taxpayers).

Travis Fisher

Travis Fisher, coauthor of the new IER study, explained his methodology of comparing PTC tax receipts per state to tax payments from that state. The straightforward analysis found takers and payers in unusual places. Texas wind producers were the biggest takers, and California taxpayers the biggest payers, given where the wind turbines spin.

Fisher noted that the study is valuable because it actually puts a number on wind energy subsidy transfers between states and regions. Energy analysts have often discussed those transfers in general terms but never attempted to quantify them.

(Fisher elsewhere eviscerates the ‘job creation’ myth of windpower, invoking the classical economic wisdom of Frederick Bastiat in the 19th century and Henry Hazlitt in the mid-20th century.)

Lisa Linowes

Lisa Linowes, the founder and executive director of Industrial Wind Action Group, reviewed the economic distortions of volatile, and even negative, pricing from must-produce, must-take, wind-generated kilowatt-hours.

“The combination of the federal PTC and state RPS policies have shielded wind developers from the basic supply and demand forces present in a healthy competitive market,” she explained. “As a result, we are fast-tracking the construction of expensive renewable resources that are variable, operating largely off-peak, off-season and located long distances from where the energy is needed.”

Tom Stacy

Tom Stacy, Ohioan for Affordable Electricity, explained the characteristics of electricity (a unique product that must be consumed the instant it is generated, not stored). As such, wind power is a liability parading as an asset. Why? Because such electricity is not demand-responsive but a variable, unpredictable energy flow ill-timed to consumer needs (a fundamental characteristic of the perfect imperfect energy).

“The wind PTC is not a financial leg-up to an equivalent quality source to make it price competitive with conventional sources,” he explained. “The wind PTC rewards a misfit technology for its lack of control over its fuel source – a fuel that will continue to behave badly no matter how ‘price competitive’ our subsidies make it.”

Kevon Martis

Kevon Martis of the Interstate Informed Citizen’s Coalition then rebutted the typical arguments for government sponsorship of wind energy. Wind power does not displace oil, nor is it cheaper. Wind’s alleged fuel diversification is diluted by its required co-pairing with fossil-fuel generation to overcome intermittency.

Wind energy—a niche, problematic fuel source—is also irrelevant to the global warming/CO₂ emissions debate. Martis states: “It makes absolutely no sense to claim that we need an ‘all of the above’ energy policy to wean us from ‘climate damaging’ fossil fuel plants by subsidizing a source of energy that can only replace a small fraction of that fossil generation but at a snail’s pace and very high price.”

Conclusion

The unintended consequences and non-neutral effects of government intervention into energy markets were on full display during this policy luncheon at the Rayburn House Office Building last month.

Concentrated benefits to cronies and the political class; diffused costs to the rest of us…. Wrong place, wrong time, wrong type electricity ruining prices for right place-time-type generation …. The false arguments of climate-change benefits, diversification of risk, cheapness,  infant industry, and (net) job creation….

Friends and foes of Big Wind went away with a better understanding of a public policy whose time of shine on the taxpayer’s dime is in decline.

Here’s to a post-PTC world. One where, in Lisa Linowes words, “the industry shifts their business plans away from those based on tax avoidance to plans based on energy production.”