A new report from the Department of Energy projects slower growth and a “direct and negative” impact on U.S. wind manufacturers if a $22-per-megawatt-hour (after tax) production tax credit (PTC) is not extended.
A projected drop in new installation is not surprising. You get more of something when you subsidize it and less of it when you don’t. What is surprising, however, is the anticipated gloom and doom from an industry that claims that it is cost-competitive as a result of innovation and lower costs.
Last August, the American Wind Energy Association boasted that wind energy is the cleanest form of energy and “on its way to taking the title as the most affordable source as well.” It made no mention of the wind PTC helping to achieve cost competitiveness but instead argued that the “cost savings have occurred due to the continual hard work and innovations of our industry. Wind turbine costs have dropped by 90 percent since 1980, and as the industry matures, production costs will likely continue their current downward trend.”
Further, The New York Times recently ran a piece entitled “Wind Industry’s New Technologies Are Helping It Compete on Price”—although the Times also ran an article 22 years ago in which the industry made similar arguments.
But the reality is it doesn’t matter if wind is dependent on the taxpayer for production or cost-competitive without the PTC. In either case, there’s no need for a generous subsidy. If any energy source is not economically competitive, then the government should not artificially prop up the technology to create a market that wouldn’t exist without the subsidy. And if producers do have an economically viable idea, then they shouldn’t need the handouts from Washington in the first place.
If Congress elects not to extend the PTC, a near-term decrease in new installation clearly won’t be the desired outcome the wind industry wants, but it will do much more for the industry’s viability in the long run. The wind manufacturers that concentrate on innovating and lowering costs, not securing the next handout, will have a better chance of being competitive with other energy sources. And this is true of all energy sources, not just wind.
Congress should prevent any new targeted tax credits and force the sunset of those already on the books to make all American companies more competitive by lowering rates across the board.