Federal wind subsidies extended; just the tip of the iceberg

Buried in the $1.1 trillion omnibus that Congress considered at the end of 2016 was an extension of the main handout for the wind energy industry, the wind production tax credit (PTC). Even though American taxpayers have seen woefully little return on their forced investment in wind energy over the past 20+ years in terms of long-term job creation or economic viability, lawmakers bowed to pressure from green energy lobbyists yet again.

Congress resurrected this 2.3-cent per kilowatt-hour credit through 2020, at a cost of $16.5 billion over the next decade. The provision extends the credit at its full amount through the end of 2016, and then phases it down by 20 percent annually over three years — 80 percent for wind facilities beginning construction in 2017; 60 percent for those in 2018; 40 percent for those in 2019.

{mosads}Special interests in the wind energy industry can signal that they are compromising with this “phase down” plan, but in reality they’re getting a long-term lucrative deal at the expense of American taxpayers. Beneficiaries can claim the credit for 10 years after getting eligibility, which means that American taxpayers will be bankrolling Big Wind’s bottom line until 2030.  Plus, the wind energy industry knows that it can get a leg up from government elsewhere. The federal PTC is just the tip of the iceberg. Here’s what to look out for in the coming years that will expand handouts for wind energy:

(1) Federal level efforts to expand handouts to wind energy; 

One threat on the federal level is IRS efforts to expand the credit. The IRS has done so repeatedly in the past without input from Congress —setting rock-bottom requirements for eligibility, and issuing new guidance to raise the amount of the subsidy. By engaging in similar actions in the future, the IRS would make it easier for wind farm companies to qualify and increasing the cost of the credit to taxpayers, and negating the “phase down” nature of this recent extension.  

Also on the federal level, the wind energy lobby will increasingly use the regulatory state to force support from taxpayers and ratepayers. President Obama’s newest carbon rule, the so-called Clean Power Plan, is the cornerstone of this effort because it provides billions in subsidies to wind.

The rule forces states to cut an average of 32 percent of their emissions by 2030, and much of this will come from increasing wind electricity capacity. The Energy Information Administration recently recommended an energy portfolio to comply with the Clean Power Plan that devotes 57 percent to wind power — much higher than the historical 3 percent. The lobbying arm of the wind energy industry, the American Wind Energy Alliance, is unsurprisingly celebrating.

(2) State level efforts to expand handouts to wind energy; 

Combined with these efforts at the federal level, wind energy lobbyists will increasingly look to the state level to expand their handout. Watch out for this as state legislative sessions start up in January across the country.

Many state legislatures will consider expanding state-based versions of the federal production tax credit. In Nebraska, for example, special interests in the wind energy industry and their allies in the state legislature will continue their attempt to pass a 25 percent tax credit for wind power companies. This proposal would cost Nebraska taxpayers $75 million over the next decade, and it would be on top of the cost of existing federal subsidies.

Other states will consider increasing their renewable portfolio standards, mandates that require utilities to buy a certain percentage of their electricity from green sources like wind and solar. Recently introduced legislation in Illinois, for example, would increase the state’s green energy mandate from 25 percent by 2025 to 35 percent by 2030. This will pad the pockets of Big Wind, but it will double-down on the damage that the current 25 percent mandate poses on Illinois families and businesses — $574 million in costs, 4.77 percent in electricity price hikes, and 8,000 lost jobs according to a study from the Beacon Hill Institute.

Layering state subsidies on top of federal subsidies may be great for Big Wind’s bottom line, but it’s a terrible deal for American taxpayers and ratepayers. These programs force Americans to pay twice for wind power — first on their tax bill, then on their energy bill. Americans deserve access to affordable and reliable energy solutions — ones that can afford to compete in an open marketplace based on their merits — instead of propping up politically favored ones for decades.

Harbin is deputy director of Federal Affairs for Americans for Prosperity, an advocacy group initially funded by oilmen David and Charles Koch.