Sen. Alexander and Rep. Pompeo: Wind Subsidy Allows Industry to Turn a Profit at Taxpayer Expense

Lawmakers say Congress should allow wind production tax credit to expire on December 31st

Posted on September 14, 2012

WASHINGTON – U.S. Senator Lamar Alexander (R-Tenn.) and Congressman Mike Pompeo (R-Kan.) today said Congress should end the wind production tax credit (PTC). They cited a new report showing that the subsidy is more than the average value for electricity in the wholesale market. This allows industry to make a profit from taxpayers and, the report states, would in the long run increase electric bills and jeopardize the reliability of the U.S. supply of power.


ALEXANDER said, “The wind subsidy, which was supposed to be temporary, continues to be a waste of taxpayer dollars. Over the five-year period ending in 2013, taxpayers will have spent $14 billion to subsidize wind developers, money that could be spent to reduce the debt or for energy research. The wind subsidy’s short-term sugar high will mean more expensive, less reliable energy in the future.”


POMPEO said, “Energy subsidies distort the energy market and result in increased cost burden for energy consumers and American taxpayers.  Time and again, the wind industry has approached the government with an outstretched hand, begging for more of our tax dollars with little to show in return on investment.  A one year renewal of the Wind PTC will cost taxpayers an additional $12 billion dollars over the next ten years.  We can no longer afford for ‘government investors’ to pick winners and losers in our energy markets.  One look at Solyndra tells us that model has failed,” stated Pompeo.


The report, “Negative Electricity Prices and the Production Tax Credit,” co-authored by economic consultants Frank Huntowski, Aaron Patterson, and Michael Schnitzer of the Northbridge Group, finds that the tax credit gives wind generators an incentive to bid into the wholesale electricity market at a loss because they can still make a profit through the tax credit, creating a “negative price” that undermines and distorts prices in the energy market. The wind production tax credit of 3.4 cents per kilowatt hour, before taxes, is now greater than the average value for electricity in the wholesale market.


According to the report, other traditional electricity generators, like coal and nuclear, must compete with wind producers’ negative pricing without the benefit of a tax credit. This distortion is already discouraging investment in these reliable baseload electricity generators, which will lead to less stable electricity supply and higher prices in the future, according to the authors of the report.


Alexander and Pompeo have repeatedly called for an end to the wind production tax credit, a subsidy first enacted in 1992 as a “temporary” means to lift a new industry (click HERE for a speech on “Big Wind” by Alexander at the Heritage Foundation). Since then, Congress has renewed the credit six times, costing taxpayers $14 billion in the five year period between 2009 and 2013 alone, according to the Joint Committee on Taxation and the U.S. Department of Treasury.


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