Congress may soon face a matter that has the potential to divide people across Maine and the country: whether to renew a federal tax credit that helps wind power compete with other sources of electricity. The tax break costs about $1 billion per year and is set to expire Dec. 31. Though it has historically been renewed with support from both parties, the credit this year became a point of political division in the presidential race and Maine’s U.S. Senate race.
Whether the tax credit is extended should come down to financial and societal considerations: whether the country can pay for it without going into debt and whether making the wind energy industry more competitive is worth the upfront costs.
Particular communities understandably feel strongly about the credit — which subsidizes wind power by 2.2 cents per kilowatt-hour — because they see it as helping developers to disrupt the environment and the aesthetics of their surroundings. But when discussing the credit it’s important to separate out its real effect. The credit may make it more affordable for a developer to install turbines, but state laws and local ordinances determine where a wind farm is located.
Here are some questions Congress should answer before deciding whether to extend the credit:
Should wind be a growing part of the country’s renewable energy mix? It already plays a significant role. In 2011 wind power represented 32 percent of all newly developed electric capacity. It’s estimated that the average wind farm worldwide will be fully competitive by 2016, according to Bloomberg New Energy Finance. In some cases, electricity generated by wind is already competitive with electricity produced by fossil fuels. The operations and maintenance of wind farms is becoming cheaper, and they are becoming more efficient in terms of their electricity output.
Has the tax credit been effective? The Renewable Energy Production Tax Credit’s goal is to keep electricity rates low and spur development of renewable energy projects. The credit has helped the wind energy industry lower costs; and 60 percent of a wind turbine’s value is now produced in the United States, compared with 25 percent prior to 2005, according to the American Wind Energy Association. The link between the credit and wind power development is clear: In the years it was allowed to expire, installations fell between 73 and 93 percent.
Is the tax credit still needed? It’s essential that the credit not become permanent. It was designed to be an incentive, not a reward. But there is great debate about when, exactly, it should end. Many people do not support having the credit end abruptly, however, and the idea of a phase-out schedule has been raised. If Congress decides to extend the credit in the coming weeks, its ultimate end date will likely depend on what happens with other government policies, such as renewable energy portfolio standards, which generate a market for renewable energy.
The wind industry as a whole is lobbying for the credit’s extension, but fiscal conservatives have opposed it, saying taxpayers’ investment so far has resulted in inadequate return. But several Republican governors and lawmakers from wind-rich states support it. The American Wind Energy Association reported that 81 percent of wind turbines are in districts represented by the GOP.
How should the credit be paid for? If the country is trying to seriously reduce the deficit but maintain some of the Bush-era tax cuts, this is not the time to go into debt to pay for the tax credit. It’s possible a carbon tax could pay for it. Or Congress could cut back on fossil fuel subsidies. Though it would be politically difficult to accomplish, the Obama administration has committed to phasing out inefficient fossil fuel subsidies, as discussed at the G20 meeting in Pittsburgh in 2009.
A decision about the credit’s extension should be made with consideration of how it’s paid for and to what extent it’s worth investing money. It’s a difficult topic, as an entire industry lies in the balance. Having the right questions, though, is a good place to start.
Wind power is the most expensive power produced but it is kept artificially low by tax credits that are not funded and that add to the deficit. If it were made to stand on its own, it would fail. The federal and State governments keep trying to fool us by leaving these inconvenient facts on the sidelines but that’s the truth. Some day, America must face its financial problems and that will be a sad day indeed. Any legislator that does not vote for a massive tax increase and an end to all entitlements see’s only the next election and does not see the future. Our deficit is the equivalent of 17 years of spending in advance and it only increases year after year after year after year.
Wind power is cheaper than the cost of our ensuring the continued uninterrupted flow of Middle East oil to the USA. Everyone looks at the pump price. Look further and you’ll double that pump price and you’ll easily get closer to what it really costs us in military and oil subsidy expenses today.
Last time I checked, we didn’t generate electricity on an industrial scale by burning gasoline.
so there’s absolutely no connection. is that what you’re saying?
2.8 percent of Maine’s electicity is generated by petroleum. Yes, I think that is what he is saying. The natural gas is coming from Canada.
http://www.instituteforenergyresearch.org/state-regs/pdf/Maine.pdf
USA and Canada have enough Natural Gas and oil to be independent. New Brunswick have Natural Gas and planning to drill.. Also NB is planning a pipeline from Alberta to Saint John so Irving can use Alberta oil and they do not have to depend over seas supply. Pipeline would be a private investment at 8 billion dollars… that can REALLY help boost the economy in there region. I live in an area where Oil and natural gas exist and it’s BOOMING out here and lumber industy is booming. My brother drives a logger truck. 8 days of work 4200 dollar pay. I make 35 an hour. At my local wal-mart employees make 18 per hour. Rent is high, but when you take your income then vs my rent, the percent is lower then what I was paying when I was living in Maine. Other items like food, heat, gas, tax, cigs is cheaper then in Maine. Wind Power simple doesn’t work, We need to stop thinking stupid and look into out ground.
You will never get the flaming liberals in this state to think this way. They just can’t wrap their heads around the thought of supporting big oil. It would mean the demise of their whole agenda.
Actually, “supporting big oil” means the demise of OUR wealth; our blood, our treasure and the Earth upon which we depend for survival.
……not a terrible “agenda”, at all…
Just so you know we get only 11% of our oil from the Middle East..There are no oil fired power plants..About 90% of U.S. electricity is generated by three fuels: coal, nuclear, and natural gas…
According to Global energy observatory there are at least 10 oil fired plants here in Maine, with hundreds more across the US. Many are smaller facilities but they do exist. I drive by one every day. Since gasoline is refined from the same crude oil that we get diesel and bunker oil from, they are closely related.
http://globalenergyobservatory.org/list.php?db=PowerPlants&type=Oil
Cousins Island in Casco Bay? I believe that one is oil.
It is imperative that we find energy solutions other than by mining fossil fuels. Of the latter gas is both the most promising as well as the cleanest but it only makes sense to rely on a variety of clean sources and a wide variety of (smaller) power-generation facilities to ensure reliability, competition and decreased vulnerability. Since Maine must import almost all of its energy, at great expense, it should look favorably upon any methods of generating power locally, especially if it leads to locally produced equipment. Wind energy subsidies should be continued for the foreseeable future and the experience in other states demonstrates that manufacturing and assembly jobs can be attracted in significant numbers now that turbine production is being shifted to the US. The off-shore opportunity is one that Maine should fully explore.
The principle cost of wind mills to generate power amounts to the initial cost of the turbines and the structures that support them. Those are not made in Maine, and the investors in these projects are principally out-of-state dwellers. So tell me, how does Maine benefit from these projects that can only survive with government subsidies and high costs of electricity Maine consumers are forced to assume? Continued subsidies and mandates for consumers to purchase uncompetitive higher costs of electricity must be brought to an end now.
According to ISO-NE Maine is a net electrical energy exporter, not importer. Our electric rates are artificially high due to subsidies of big wind and the $1.4 billion line upgrade undertaken for the transport of the electrical energy out-of-state at below-market prices (again, due to those big wind subsidies.) Any jobs “created” by big wind subsidies must be carefully analyzed on a cost-per-job-generated basis and weighed against the impact of higher electric rates discouraging the development of manufacturing and other electrical energy-intensive industries in our state.
Take a good look at the picture and the amount of environmental damage that is obvious. Wind power is destroying our landscape and no one seems to care!
It doesn’t have to, though, if done on a smaller, non-industrial scale. Wind is not inherently damaging, but OUR attempt to make it serve shareholders over the public good.
Entitled4life is correct! Wind power is s nothing more than an investment scheme providing the investors with subsidies, loan guarantees and tax credits – costing taax payers billions! Plus, the projects can be written off in 5 years – This provides serious tax avoidance for investors. Lets take Angus King’s Record Hill project for example – $142 million project paid for by grants and government guaranteed loans. Angus and his partner Rob Gardiner get to write off that $142 million over five years – So that is $142 million tax writeoffs they can use to reduce their tax burden – Wouldn’t any of us like that kind of sweet deal? And what happens after these sweet deal breaks are over? Will the projects just be abandoned? Here is the part no one tells us – Wind towers in Maine only work 11% of the time according to a study done at the University of Maine – probably not generating enough to pay off the loans on the towers! So do they just get abandoned?
So we as tax payers get to pay the highest avoided cost (oil) for this energy plus pay for the subsidies – That means we wind up paying somewhere around .135 cents a kilowatt hour! That’s a bad deal for all Mainers.
There is a reason why there are 22 more wind projects planned for Maine, some by foreign corporations who have nothing to do with Maine. Its not to be green – It’s to be greedy – And its a bad deal for all Mainers.
Electricity is a market where the lowest priced generators set the price. Wind is not driving the price of energy ANYWHERE. Natural gas is. Wind takes the price that natural gas sets. It’s no different than any other commodity market.
Is wind the answer? No. Is it part of the solution? Absolutely. Fossil fuels are finite and as it pertains to the health of our planet and future, anything that contributes to reducing the use of fossil fuels has to be a strong consideration. Money cannot always be the driving factor behind everything. We tend to want to avoid necessary things in order to buy luxuries. We have no problem spending $20 extra dollars on a brand name piece of clothing, but are not willing to invest in the future of the planet. Pure greed based ideology.
it is not the money…it is wild life
With all due respect, do you feel that fossil fuels, coal, natural gas, et al is better for the wildlife? Aside from the destruction of the land for drills and mines… the is a real problem with the emissions. Once wind farms are built, the habitat is restored and wildlife returns, all the while, the turbines are operating. Wildlife is displaced during the entire mining or drilling process, probably never to return.
The PTC’s purpose is to support development of the farms. As a matter of fact, the same mechanism is used to help exploration and drilling of new oil wells. The same mechanism is used to help us find a clean coal technology. Nuclear presently gets 1.8 cents per KWh for their first 8 years of production. People on this thread seem to think that wind should be able to survive on it’s own… or die. I say fine… but level the playing field. No incentives for anyone. Aside from the complete and utter halt of all research for new energy sources and efficiency your tax bill will most likely remain the same AND your light bill will go up.
VI. CONCLUSIONS
Wind generation has been actively subsidized for 35 years, first under PURPA and the ETA, both enacted in 1978, and then through the PTC under the 1992 EPAct. After over three decades of increasing subsidies and increasingly stringent environmental mandates for fossil-fuel resources, it is past time for the well-established wind industry to stand on its own two feet. As such, the federal PTC subsidy should be allowed to expire under current law.
The PTC represents bad energy policy and bad economics for at least three reasons. First and foremost, wind generation’s production pattern not only is volatile and unpredictable, but even more significantly, is “economically backward”: producing the least amount of energy when loads are highest and electricity is most valuable. Second, subsidized wind generation also exacerbates artificially low electric prices, thus imposing economic harm on competitive generators that are needed to maintain system reliability. Third, the inability to forecast actual wind generation accurately increases system reliability costs, which are borne by all customers.
Given these demonstrated adverse characteristics of wind power, there is no economic or policy justification for its continued subsidization through the PTC.
Wind generation has been actively subsidized for 35 years, first under PURPA and the ETA, both enacted in 1978, and then through the PTC under the 1992 EPAct. After over three decades of increasing subsidies and increasingly stringent environmental mandates for fossil-fuel resources, it is past time for the well-established wind industry to stand on its own two feet. As such, the federal PTC subsidy should be allowed to expire under current law.
The PTC represents bad energy policy and bad economics for at least three reasons. First and foremost, wind generation’s production pattern not only is volatile and unpredictable, but even more significantly, is “economically backward”: producing the least amount of energy when loads are highest and electricity is most valuable. Second, subsidized wind generation also exacerbates artificially low electric prices, thus imposing economic harm on competitive generators that are needed to maintain system reliability. Third, the inability to forecast actual wind generation accurately increases system reliability costs, which are borne by all customers.
Given these demonstrated adverse characteristics of wind power, there is no economic or policy justification for its continued subsidization through the PTC.
Very well written and excellent points but to me there is a difference between wind for Maine and federal tax incentives for wind in general in those places where wind may be the right answer and may be capable of making a meaningful contribution to totally renewable energy generation.
Also your point about the long term expereince of wind under federal incentves is an important one. It is time to evaluate whether where and how much wind works..how much return we can expect on our investment and what kind of deadline we’ll sett for that.
I agree with you completely that we can’t just throw money blindly at winnd without pausing to evaluate what’s working where and how much it costs us as U.S. tax payers.
Maybe this is an area where incentives should be local and regional in those areas where befits and real return is most likely.?
“How should the credit be paid for? If the country is trying to seriously reduce the deficit but maintain some of the Bush-era tax cuts, this is not the time to go into debt to pay for the tax credit.” Wait…. WAIT…” It’s possible a carbon tax could pay for it.”. Wow, who saw that coming from the BDN?
USA and Canada have enough Natural Gas and oil to be independent. New
Brunswick have Natural Gas and planning to drill.. Also NB is planning a
pipeline from Alberta to Saint John so Irving can use Alberta oil and
they do not have to depend over seas supply. Pipeline would be a private
investment at 8 billion dollars… that can REALLY help boost the
economy in there region. I live in an area where Oil and natural gas
exist and it’s BOOMING out here and lumber industy is booming. My
brother drives a logger truck. 8 days of work 4200 dollar pay. I make 35
an hour. At my local wal-mart employees make 18 per hour. Rent is high,
but when you take your income then vs my rent, the percent is lower
then what I was paying when I was living in Maine. Other items like
food, heat, gas, tax, cigs is cheaper then in Maine. Wind Power simple
doesn’t work, We need to stop thinking stupid and look into out ground and let big oil companys come in and hire our local folk, increase our standard of living and tax revenue
“The major problems in the world are the result of the difference between how nature works and the way people think.” – Gregory Bateson
Wind is very promising if we get serious and develop it in a way that honors the diffuse nature of the resource; small-scale generation at or near the point of use.
As long as we insist on our “shareholder centered” concentration of wealth generated by this diffuse resource, and passively await the permission of “markets”(actually, highly- subsidized monsters of our own creation) to utilize wind at all…… Wind will not realize its tremendous potential.