The federal government allows wind energy producers a tax credit of 2.2 cents/kwh for all energy produced by wind. This allows wind energy producers to be price-competitive with energy produced from non-renewable resources. Without the credit, there is little doubt that new wind production facilities, quite costly from a capital-outlay perspective, will dwindle to nothing. Many existing facilities also will likely close.
There is a fair debate over how many jobs the tax credit has produced, but a reasonable estimate is around 75,000 jobs. Because of the uncertainty about the extension of the credit, 10,000 of those jobs are already gone. If the credit is allowed to expire in December 2012, many of the remainder will simply go away. These jobs pay well, $30k-$100k per year. See “Tax Credit in Doubt, Wind Power Industry is Wilting,” NYT 9-20-09. Our economy can ill afford the loss of these jobs.
Republican Presidential nominee Mitt Romney is opposed to extension of the production tax credit because he believes it is unwise for the government to “pick winners and losers” among market competitors. Okay, let’s go with that. Because they are not yet profitable, wind energy producers pay little or no tax, while the much more profitable fossil fuel producers are assessed billions of tax dollars every year. If the credit goes away, those consumers who purchase wind energy for the most part would instead purchase fossil fuel generated energy, meaning that the profit of those companies would rise. This would result in more tax revenue to the government. Estimates are that the tax credit “costs” the American government around $1 billion per year, and that is probably how the cost of the tax credit was calculated.
According to the Energy Dept., in the first half of 2012 wind energy accounted for 3.2% of the total energy generated in the United States. That is a rapidly growing figure, in large part due to the tax credit. Let’s suppose we eliminate completely that segment of the economy and send all wind energy production dollars to the large number of fossil fuel energy manufacturers who would benefit by the additional business. Spread across many producers, the profitability impact to each manufacturer would be nominal.
Is there a corresponding value to encouraging non-polluting energy resources? Well, there are those two little problems of global warming and American dependence on foreign oil sources. I am going with the best scientists in the world on the global warming issue. They believe the burning of fossil fuels is the largest contributor to a significant and undeniable global warming problem. Every megawatt of energy produced without a corresponding impact on the environment is a positive. And while the greatly increased production of natural gas in this country has ameliorated the level of dependence on foreign oil sources, that dependency is highly unlikely ever to disappear. Fossil fuel sources will eventually play out, the only question is when. The wind, on the other hand, is free and here forever.
So, if the economic impact to fossil fuel generators individually is so small with the production tax credit, why is the fossil-fuel industry so opposed to its extension? Well, it’s the long term. If the tax credit continues, there is little doubt the cost of wind energy will decrease and wind energy will become more price-competitive. Wind, as a domestically-produced and non-polluting energy source, will surely be a source of choice for many Americans at some point if allowed to grow. Better to kill the tiger while it is still a cub than to face it once it become an adult.
So, do I believe wind power is the ultimate solution to our energy problems? No. I am skeptical we could ever build enough windmills to satisfy all of our energy needs. (Actually, the best idea I have heard in years is a plan to install solar panels on the moon and microwave energy back to the earth. It is not far-fetched at all. In fact, it is entirely plausible. More on that idea later.) But wind energy helps for now, and it can become a significant part of both interim and long-term solutions.
I believe in a robust and free marketplace. However, we cannot allow an undirected and unregulated economic market alone to dictate important policy choices for our country. The only wise policy choice here is to continue to help a fledgling industry that holds potential great advantage to our country, even if it means the enormously profitable fossil fuel producers have slightly less income as a result. In my opinion, public officials advocating to the contrary are irresponsible.
Tim Riley
Let's look at it with logic 