Energy Secretary Ernest Moniz recently praised the growth occurring in the wind industry in his remarks on the release of two Department of Energy (DOE) reports on wind energy. But in the same breath, Moniz stated the future of the U.S. wind industry depends on Congress.
This defies logic anywhere else except in government. How is it that an industry can be called a success if it’s dependent not on customers but on Congress?
On and off since 1992, the American taxpayers have subsidized wind energy with a production tax credit (PTC) so generous that wind generators can paydistributers to take their power and still make a profit. American ratepayers end up paying for it twice: once for their electricity and once as taxpayers. The subsidy also distorts energy markets by removing opportunities for other market participants.
The PTC was extended for one year in 2013 as part of the fiscal cliff deal. In doing so, Congress elected to divert $12 billion in taxpayer dollars to the wind industry. Now that the extension has expired, many in the wind industry are lobbying Congress to renew it permanently.
Imagine if the fate of every industry product was in the hands of Congress rather than what the consumer wanted: We’d be watching the XFL while listening to our Microsoft Zune and drinking Crystal Pepsi. Products succeed and fail in the market all the time. The companies that innovate and make products that consumers want reap tremendous benefits, and the resources used for failed products are reallocated toward more productive use.
This process guides the market and makes us all better off. Whether it is beverages, entertainment, or energy, the industries that can provide what customers want should be the ones to succeed, and those decisions should rest with consumers, not bureaucrats in Washington.
According to the new DOE reports, nearly 4.5 percent of U.S. electricity demand in 2013 was met by wind, and wind-powered electricity prices were the lowest they’ve ever been. The reports also attribute $500 million to the wind industry in exports. But it is impossible to know how much of the success the reports announced are due to customers valuing a good product and service and how much Congress has engineered through the PTC.
To top it off, the wind industry has claimed 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 “on its way to taking the title as the most affordable source as well.” It made no mention of the wind PTC subsidizing 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.” If this is so, then it shouldn’t need the help of the taxpayer to succeed.
The wind PTC is not an economic driver. It’s a handout, plain and simple. Congress should refrain from extending it and work to remove all preferential treatment for all energy sources.
