Battle for wind subsidies looming

With a year-end deadline looming, critics of federal subsidies for wind power are stepping up their arguments that taxpayer support for the industry is economically unsustainable while making it difficult for other, more viable energy sources to compete.

“I think natural gas developers are being harmed significantly by wind, and will be far less likely to enter the market,” Jonathan Lesser, president of Continental Economics, said during a forum at the Heritage Foundation.

The tax credits are so generous, critics say, that they are inducing negative market trends. In some cases, wind-power producers are paying utility companies to take their energy, so they qualify for the government subsidies.

“This isn’t the long-term solution for the wind energy industry,” said David Brown, senior vice president of federal government affairs and public policy at Exelon Corp., who also spoke at a Heritage Foundation forum on wind energy Tuesday.

Wind industry backers are making a strong pitch to renew the 20-year-old production tax credit, backed by the White House and by lawmakers of both parties on Capitol Hill and in the states where wind-generated energy has soared in recent years. Loss of the federal tax break, which can cut the cost of wind energy projects by as much as a third, could cost 37,000 jobs, according to the American Wind Energy Association — half of the American industry’s job force.

Wind companies can collect as much as $34 per megawatt hour in subsidies from the government, but only on the energy that they sell. So to get that refund, rather than simply discounting the price of wind energy, some wind companies actually pay utilities up to $25 per megawatt hour to take their supply. That still leaves $9 for profit.

“They have an incentive to bid negative because they can be reimbursed by the government,” Mr. Brown said. “You can teach a man to fish, or you can feed him for the rest of his life. Well, they’re interested in feeding him for the rest of his life.”

Wind power is generated most at times when energy is facing low demand, such as during the night, while it is generated least when energy is in high demand, such as in the summer, said Mr. Lesser. “You’re subsidizing a resource that is least available when electricity is needed most,” he said.

Still, wind energy advocates say they were heartened by the results of the Nov. 6 election, and cautiously optimistic the tax credit could be extended before the current lame-duck session of Congress leaves town. The bipartisan nature of the coalition favoring extension of the subsidy was underscored when Iowa GOP Gov. Terry Branstad penned a recent editorial in The Hill newspaper.

With the country lacking a comprehensive energy policy, Mr. Branstad wrote, killing the tax credit would leave wind as “the only energy source without federal tax support.”

“By providing wind energy companies with the financial certainty necessary to secure the required private capital to begin developing projects, the [production tax credit] has been an important part of the growth in America’s wind energy sector.”