The meal provided by the taxpayer is over.
When pigs finish eating the slop that a farmer put in the trough, they’ll hang around the trough waiting for more food, but the farmer doesn’t cave. That meal is over, and the farmer promised no more food than what he put in the trough. Congress needs to do the same with respect to the wind production tax credit (PTC).
A common complaint from the wind industry is that there’s no business certainty. While there may be uncertainty as to whether politicians cave and extend the PTC another year or two, the wind industry cannot make such a claim. They knew the expiration was coming for years. As determined by the American Recovery and Reinvestment Act of 2009, eligibility for the wind PTC is no longer available beginning January 1, 2013. Wind generation installed before that date will receive the PTC for a decade.
These dates have been known for a long time now. If the wind industry atrophies because of the PTC’s expiration, it’s a clear indicator that the market was oversupplied as a result of the subsidy and was propping up uncompetitive technologies, which isn’t all too surprising.
When the government subsidizes an industry or a product, you’re bound to get more of it. When the wind PTC has been allowed to expire before, turbine installations decreased dramatically. In fact, the American Wind Energy Association uses this as a reason to extend the tax credit, arguing, “The wind industry is facing the recurrence of the boom-bust cycle it has seen in previous years when the PTC was allowed to expire. In the years following expiration, installations dropped between 73 and 93%, with corresponding job losses.”
The fact that the industry experiences significant declines is not a good reason to continue to subsidize it; it’s a clear indication that wind is largely dependent on the government’s dime. The part of the wind industry that doesn’t depend on the PTC will be the more robust, competitive part.
Furthermore, the subsidy is far from free and is a net economic drag, not a jobs creator. Those taxpayer dollars that support the wind PTC (12 billion of them, according to the Senate Finance Committee), as well as the labor and capital investments, could have gone to more productive use and thus shifted production to a technology that’s politically preferred.
The cement used and people hired to build windmills cannot simultaneously be used to make sidewalks, and the government should not be using taxpayer dollars to steer those investments—they are much better determined by the private sector.
Congress should remove all energy subsidies, not just those for wind, and broadly lower tax rates to prevent tax increases. Energy companies should rely on innovation and efficiency—not American taxpayers—to thrive in a system of free enterprise.
