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November 19, 2014

Stopping the Wind PTC Zombie Apocalypse


The dead will return to life during the lame duck session of Congress—or at least a number of expired tax provisions will, anyway. Many of these provisions are worthwhile and are designed to mitigate the harmful effects of our high corporate tax rate. That’s why IPI has written favorably about passing a tax extender package while urging a commitment to fundamental tax reform during the next Congress. But at least one of these tax zombies, the wind Production Tax Credit (PTC), should not be permitted to return from the dead.

Tax credits for wind production have been around in some form since the oil shock and Arab oil embargo of the 1970s, and the PTC has existed since 1992.

When you subsidize something, you get more of it. And the PTC is responsible for a lot of wind turbines. But wind isn’t living up to its end of the promise: After two decades of taxpayer subsidy, wind energy still can’t stand on its own as a competitive energy source without even more subsidies. As Warren Buffett said about the PTC, “That’s the only reason to build them. They don’t make sense without the tax credit.”

But the sins of the PTC extend beyond the subsidy. Taxpayers are also consumers, and wind energy requirements raise utility costs to consumers. Many states have renewable portfolio standards (RPS) that require utilities to purchase wind energy, implemented through power purchase agreements (PPAs) to buy higher-priced wind energy and pass those higher costs along to consumers. Because electricity is a nondiscretionary expense, these higher prices on electricity hit low-income consumers the hardest. In other words, proponents of wind energy are forcing low-income consumers to pay higher energy costs for their pet wind projects.

Finally, the facts on the ground have fundamentally changed. The urgency that drove the PTC is no longer relevant. America is entering an era of energy abundance in which foreign powers can no longer use energy prices as political leverage. Our natural gas resources in particular are abundant, inexpensive and clean. The conversion from coal to gas generation of electricity has resulted in lower emissions without the heavy hand of carbon taxes, onerous regulations and international treaties and commitments.

Here’s the good news: The wasteful and now unnecessary PTC expired in 2013. But if Congress includes it in the tax extenders package, the wind PTC zombie will come back to life and continue to wreak havoc on taxpayers and consumers.

Congress should pass an extenders package and resolve to move on fundamental tax reform during the next Congress. But that package should not include the PTC. It hasn’t succeeded in making wind energy competitive, it meets no demonstrable need, and it forces higher electricity prices to those consumers least able to absorb them. Kill the wind PTC zombie once and for all.


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