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April 4, 2013

SIMMONS: How Taxpayer Money Gets Lost in the Wind

April 4, 2013
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WASHINGTON, D.C. – IER State and Regulatory Affairs Director Dan Simmons published an op-ed in U.S. News & World Report titled, How Taxpayer Money Gets Lost in the Wind. In the piece, Simmons dissects a recent study from the Government Accountability Office (GAO) that unearthed a trove of duplicative wind energy initiatives that costs taxpayers billions of dollars per year:

In his 2011 State of the Union address, President Obama pledged to eliminate federal programs that are “excess weight.” If the president still wants to keep this promise, he could start by tackling federal subsidies for wind energy, which a new report by the Government Accountability Office (GAO) says are rife with wasteful spending.

The GAO report finds substantial overlap in federal wind initiatives. This duplication allows some applicants to receive multiple sources of financial support for deployment of a single project. Moreover, the report reveals a lack of transparency at the Department of Energy (DOE) and the Department of Agriculture (USDA) over whether the agencies consider applicant need when making funding decisions.

According to the GAO, in FY 2011, nine separate federal agencies implemented 82 wind-related initiatives, at a cost of $4 billion to taxpayers. More than three quarters of the initiatives (68) supported strikingly similar wind issues, including deployment of wind facilities on land and offshore. To make matters worse, GAO discovered seven initiatives that were combined with other initiatives to provide duplicative financial support. GAO also unearthed three initiatives that did not fund any wind projects in FY 2011, but could have been combined to supply redundant benefits.

This labyrinth of overlapping programs has spawned a system in which a single wind project could have siphoned public funds from numerous federal and state programs. These include a Section 1603 grant, accelerated depreciation, a DOE loan guarantee, state tax incentives, and indirect subsidies from a state Renewable Portfolio Standard. Adding to the waste, GAO reports that states often design their initiatives to skirt double-dipping laws.

If frittering away taxpayer dollars on duplicative programs isn’t bad enough, the lack of transparency compounds the problem. GAO tried but failed to ascertain whether DOE and USDA consider if an applicant actually needs federal funds to make a project economically viable. Although agency officials say they take need into account, GAO found no documented evidence to corroborate these claims.

DOE and USDA are important to highlight because they were responsible for almost half of the initiatives (36 of 82) in FY 2011, while DOE led all agencies with 22 initiatives. Additionally, these agencies have more discretion than other agencies to decide which projects to support.

As such, GAO recommends DOE and USDA formally assess and document whether the success of a project depends on federal support. That would be a start, but ultimately the federal government should get out of the business of betting taxpayer dollars on energy projects and instead let the American themselves people vote with their pocketbook on which projects should succeed.

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