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February 16, 2012

The Obama Budget and Wind Power

February 16, 2012
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In the 1970s and 1980s, the proponents of wind power claimed that renewables would be cost-competitive in a few years if they just received some subsidies for a few years. But thirty years later, renewables proponents are still clamoring for subsidies from U.S. taxpayers. Despite a trillion dollar deficit, President Obama is once again responding to the renewable promoters and asking Congress to approve his budget with billions of dollars in energy subsidies.

The President’s proposed budget would renew and extend a number of renewable subsidies including the 1603 program which pays for as much as much as 30 percent of development costs of renewable-energy projects.[i]  The budget also includes an extension of the production tax credit for the wind industry that is scheduled to expire this year.[ii] The production tax credit is worth 2.2 cents per kilowatt-hour of electricity produced during the first 10 years of a wind farm’s operation.   In addition, the budget request would provide $95 million for developing wind energy technology.[iii]

Budget experts indicate that the production tax credit to wind producers costs U.S. taxpayers roughly $1 billion a year. U.S. taxpayers are also loaning billions of dollars directly to renewable firms through the Federal Financing Bank (a part of the U.S. Treasury). According to a study of the industry’s top 20 lenders by Bloomberg New Energy Finance, the Federal Financing bank loaned more money to “clean energy” firms than any other bank in the world—a whopping $10.1 billion in 2011 alone.[iv]

If a 4-year production tax credit extension passes, as proposed in H. R. 3307, it would add another $6 billion to the $20 billion in taxpayer dollars the wind industry has received over the past 20 years. The United States borrows these funds (typically from China) and gives them, in part, to European companies that manufacture wind turbines.

The “Value” of Wind Power

Despite, the U.S. government giving billions in subsidies and loans to wind and other “clean energy” firms, there are important questions we should be asking—“just how valuable are these sources of energy?” As Irish journalist Kevin Myers writes in his blog, wind power in Ireland produces electricity from only 22 percent of its capacity. So, he asks, would you spend $100,000 on a car if it meant that $78,000 of the purchase price was wasted? But, it gets worse since the car may not operate when it is needed. On a really cold day when 5,000 megawatts of wind power were needed, wind was producing under 50 megawatts—just one percent of the requirement.[v] Following on with this analogy, it will cost the consumer another $100,000 to provide a reliable car that can operate in cold weather.

Would you operate your family budget in this way? Most families could not afford that kind of luxury. If wind cannot be relied upon to provide power when needed most, then why build it in lieu of some of power that would be reliable and dependable? Why should politicians have that kind of luxury with taxpayers’ money?

Wind capacity continues to grow, but expectations for wind capacity growth in developed countries are not rosy given cut-backs and or expiring subsidies and low natural gas prices making wind even less economic despite the subsidies.  European countries, who were the first on the renewable band wagon have found that they cannot continue to afford to pay for their renewable “luxury”. There are important lessons to be learned about the dangers of choosing winners and losers in the energy marketplace from Germany’s and Spain’s experience. Spanish taxpayers have paid dearly to make their nation a global leader in renewable energy and Germany has generated some of the highest electricity rates in the world through their feed-in tariffs for renewables.

Conclusion

According to Rep. Mike Pompeo of Kansas, the wind industry “simply cannot continue to rely on the American taxpayer. Each time it comes up to a year of expiration, they say, ‘If we just get a few more years our technology will mature and we will become more competitive.’ It’s time for them to figure out how to do that.”[vi]



[i] Bloomberg Business Week, Obama’s budget would extend treasury grants for wind, solar, February 13, 2012 http://www.businessweek.com/news/2012-02-13/obama-s-budget-would-extend-treasury-grants-for-wind-solar.html

[iii] The Hill, Obama’s budget doubles down on renewable energy, February 13, 2012, http://thehill.com/blogs/e2-wire/e2-wire/210295-obamas-budget-doubles-down-on-renewable-energy

[iv] Bloomberg, U.S. Government Arranged Most Loans for Clean Energy in 2011, January 17, 2011, http://www.businessweek.com/news/2012-01-17/u-s-government-arranged-most-loans-for-clean-energy-in-2011.html

[v] Independent, Kevin Myers: Energy policy based on renewables will win hearts but won’t protect their owners from frostbite and death due to exposure, February 7, 2012, http://www.independent.ie/opinion/columnists/kevin-myers/kevin-myers-energy-policy-based-on-renewables-will-win-hearts-but-wont-protect-their-owners-from-frostbite-and-death-due-to-exposure-3012098.html

[vi] Wall Street Journal, Wind-Power Firms on Edge, February 2, 2012, http://online.wsj.com/article/SB10001424052970203363504577186993654897460.html


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