Time to blow off 20 years of wind tax credits
After 20 years of taxpayer subsidies and unrealized benefits, Congress should allow tax credits for wind energy to expire Dec. 31. The credits, created in 1992, were supposed to jump-start a nascent wind industry, but have only propped up an uneconomical, inefficient sector at great cost by diverting taxes to subsidize jobs that wouldn’t exist otherwise. Congress can save $12 billion next year alone by defeating efforts to extend the tax credits.
This doesn’t even consider the annual 440,000 shredding deaths from spinning windmill blades of eagles, hawks, geese, bats and other birds, many protected under the Migratory Bird Treaty. Then there is the vast expanse of land denied for crops, scenic enjoyment and wildlife habitat in remote locales, which is where gigantic windmills must be located to protect people from their noise and vibration.
The tax credits, monumental compared with those for fossil fuels, have not produced affordable, clean energy to any significant degree, maybe 3 percent of the nation’s output. But they have cost taxpayers billions over the span of two decades, diverting money from wiser uses, like reducing the deficit.
A dark irony of the inherently unreliable energy created only when wind blows is that it requires reliable fossil-fuel backups for when the turbines don’t spin. That is counterproductive to windmills’ ostensible purpose of reducing greenhouse gas emissions. Moreover, turbines operate at about 30 percent of capacity, and as low as 5 percent on hot and cold days, when energy demand is highest.
The cost of wind subsidies is extraordinarily high, $52.48 per 1 million watt hours, compared with $3.10 for nuclear power, 84 cents for hydropower, 64 cents for coal and 63 cents for natural gas, according to Phil Gramm of the American Enterprise Institute.
The subsidies illustrate government meddling at its worst. Not only are competing energy producers placed at a government-created disadvantage because of wind’s lower tax rate, but federal mandates and many state tax breaks and mandates add to perverse economic distortions, squeezing more affordable competing sources of power out of the market.
Wind producers also can sell power when demand is low and still profit because the pretax subsidy is higher than the average price for electricity, recently wrote Lamar Alexander, Republican senator from Tennessee, and Mike Pompeo, Republican congressman from Kansas, in the Wall Street Journal.
The argument that wind energy creates new jobs falls apart, too. The claimed 37,000 wind-related jobs will exist only with extension of the industry’s Production Tax Credit through 2022, at a subsidized cost of $329,000 per job. That is 15 times more per job than it cost taxpayers for 1.2 million petroleum industry jobs. Without tax subsidies, wind’s unreliability alone makes it anathema to private investment, which means taxpayers also are underwriting crony capitalists’ speculative investments.
When electricity demand peaked in Chicago in July, wind providers supplied only four megawatts of electricity, “a stunning 99.8 percent failure rate” of their capacity, wrote Gramm. “The net result is that federal subsidies are triggering an inefficient and costly transformation of grid resources from low-cost megawatts to high-cost ‘maybe’ watts -- electricity generated only when the wind blows.”
As coal, oil and natural gas prices decline, it is past time to stop spending taxes to jump-start such unfeasible alternative energy. All energy producers should operate self-sufficiently, without government trying to pick winners with favorable tax treatments, which necessarily creates losers among competitors. This is particularly true when subsidies are grossly ineffective and inefficient as with wind.