Wind Tax Credit Stalls in Congress Despite Bipartisan support. So what’s the Disconnect here?

April 25, 2012

Politico has an informative piece on the current impasse surrounding the much-needed passage of a Production Tax Credit for Wind Energy (link below).

The article mentions my congressman, Dave Camp, who is chairman of Ways and Means – a position that is usually prefaced in journalism with the qualifiers “the powerful”, or described as being one of the most important legislative posts.

Well, I went to high school with Dave. He’s a nice guy. My wife has taught his kids. He’s a good Father, clearly. We agreeably disagree on almost everything, and I try to restrain myself from beating him up too often for ignoring my early warnings on that nasty Iraq business.
I met with him last fall and discussed the the Wind Production Tax credit, which is vital to keep a consistent, predictable playing field for one of the 21st century’s most important industries. (video coming very soon on this) I spent an hour on the phone with a couple of his staffers afterward. They were polite and well spoken.

But damned if I can tell what he thinks about it, or what he’s doing on it. Turns out some of his colleagues are a little confused as well.

Politico:

Congress is taking the wind out of turbine sales.

And that’s despite support from President Barack Obama, the U.S. Chamber of Commerce and a substantial roster of House Republicans who see extending the wind tax credit as an electoral imperative.

Rep. Dave Reichert (R-Wash.) is so frustrated he’s thought about trying to go over House Ways and Means Chairman Dave Camp’s head to get legislation moving.

The credit doesn’t expire until the end of this year, but turbine makers are already feeling pain because developers can’t afford to lay bets that Congress will sort it out later.

The bottom line: It takes a long time to get projects up and running, and, amid tight budgets, subsidy scandals and election-year politics, there’s no guarantee that this tax break will catch a tailwind in time to avoid a crippling interruption in production.

On one level, the wind credit is just another casualty of the ongoing tussle between conservative budget hawks who want to rein in government spending and business-minded Republicans who support subsidizing industrial innovation. But what makes this tax break unusual is the damage that’s already being done — and the possibility that inaction could devastate an industry that Congress has propped up for two decades.

“It’s a horrible way to do business,” Rep. Steve LaTourette (R-Ohio) said. “But that’s the way the place works.”

Bottom line, if congress is serious about defunding all energy subsidies and making a truly level playing field, well and good, then start with the oil companies, and by the way, tell them they have to keep the Strait of Hormuz open on their own dime.

But if not, check the graph above. It shows what has happened in the past when congress has made a political football of the PTC. Last time it expired in 2004, the industry had a 77 percent drop the following year. It’s not because wind can not be competitive without subsidies, any more than oil and gas needs them – but predictability is the number one thing you have to give business people if you expect them to make long term investments, and we have not been doing that.

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19 Responses to “Wind Tax Credit Stalls in Congress Despite Bipartisan support. So what’s the Disconnect here?”

  1. daveburton Says:

    Peter, wind energy isn’t even competitive with obscenely expensive imported oil for electricity production in Hawaii, so there’s no way it’s going to come close to being competitive with cheap, plentiful natural gas on the mainland. Wind energy is an economic disaster. The reason that wind farms aren’t built without subsidies, and the reason that when the subsidies end they aren’t even maintained, but are left to fall into disrepair, is that they can’t possibly pay for themselves without heavy subsidies.

    The oil & gas industry is heavily taxed, and does not receive government subsidies (unless you consider ethanol and other biofuels part of the oil & gas industry). The wind industry does get heavy subsidies, and is entirely dependent upon them.

    Like all other domestic industries, the oil & gas industry is allowed a variety of tax deductions, most of which are in common with other industries. But they get no subsidies. You might quibble about the merits of some of those deductions, but they are small compared to the size of the business, and, unlike the wind industry, the oil & gas industry is not dependent on those subsidies. You can learn more about them here:

    http://www.ldjackson.net/the-myth-of-big-oil-subsidies/


  2. Let’s be clear. Subsidies come in the form of tax relief. Wind energy gets a production tax credit of limited duration with strings attached to a fickle Congress. Oil gets permanent tax breaks and lots of them. And yes they are so much more tax breaks that they are the envy of every other business. You can’t be against wind tax breaks and for oil tax breaks without being a hypocrite.

    Myth #1 “The oil & gas industry is heavily taxed, and does not receive government subsidies”

    Really? Investopedia seems to be rather sanguine about oil industry tax breaks.
    http://www.investopedia.com/articles/07/oil-tax-break.asp#axzz1t7aYXalv

    Oil: A Big Investment With Big Tax Breaks

    Read more: http://www.investopedia.com/articles/07/oil-tax-break.asp#ixzz1t7fvi97C

    “when it comes to tax-advantaged investments for wealthy or sophisticated investors, one investment class continues to stand alone above all others: oil. With the backing of the U.S. government, domestic energy production has created a litany of tax incentives for both investors and small producers.”

    They seem to be implying that it is a better investment because it is so heavily subsidized by the government.

    How much? 70 billion over the next 10 years.

    http://www.americanprogress.org/issues/2011/05/big_oil_tax_breaks.html

    Myth #2 “The wind industry does get heavy subsidies”

    You are joking, right?

    http://www.awea.org/blog/index.cfm?customel_dataPageID_1699=16069

    The fact is, oil and gas companies have received more than 75 times the total cumulative dollar amount of federal subsidies that renewables have ($446.96 billion vs. $5.93 billion through 2009, according to a recent study from the venture capital firm DBL Investors)

    Its just the distortion of economics by the most wealthy and powerful corporations ability to lobby and control government.

    You have to be in a special bubble of denial to blank out the fact that the oil companies are costing taxpayers billions and are swilling at the treasury trough.

    • suyts Says:

      Chris, I don’t think you understand the purposes of those tax breaks…… you stated, “You can’t be against wind tax breaks and for oil tax breaks without being a hypocrite.”

      Some consider these tax breaks as an investment. If the U.S. sends $4 billion to oil companies to encourage them to drill oil here, what can we expect in return? Well, for starters, more revenue back into the U.S. coffers than our initial outlay. We also get a lot of other stuff, like employment. Fuel for our transport of goods, products and people. All of this is necessary for our economy. I know many people think that sucks, but that’s the world we presently live in. Further we also get less of a trade imbalance. The more we pump here, the less we have to buy from OPEC and the like.

      With the tax breaks for wind what do we get? Well, not much. A few jobs, more expensive electricity which is also unreliable.

      What I’m for is assisting successful useful industries. I don’t think we get the bang for our buck from wind. Well, I know we don’t. Your gas comparison is almost legitimate, but comparing the tax breaks for oil with the tax breaks for wind isn’t. They’re not in competitive markets. One doesn’t have anything to do with the other.

      • greenman3610 Says:

        You reveal a great deal of ignorance about the real state of the electricity world.
        In fact, Iowa, which has 20 percent wind penetration, has had much less rise in electricity cost than other midwestern states more dependent on fossil fuel.
        currently, wind power is among the lowest cost sources of electricity, which is one reason it has been about a third of new capacity added in the US in the last 5 years or so.
        As far as reliability, the lights have not gone off in Iowa, just as they have not gone off in the German states that get 50 percent or more of their power from wind.
        http://climatecrocks.com/2011/09/30/negative-pricing-germany-swamped-with-renewable-energy/
        http://climatecrocks.com/2011/03/19/while-japans-nukes-sputter-wind-turbines-keep-spinning/
        You are living in the last century. If you keep coming back, I’ll bring you up to steam on the real world. New wind video out shortly – meanwhile, here’s one of my older ones.

        • suyts Says:

          Thanks Green for entirely ignoring my central point. But, I’ll play with your misdirection.

          Green, I think you’re the one displaying your ignorance. No, the lights haven’t gone out, but it isn’t because of wind it is in spite of wind….. maybe if you referenced some people in Texas?

          In Kansas, we also have wind, in 2010 on the hottest day of the year, we had no wind to purchase. And, no, our lights didn’t go out either. Why? Because we have nat gas generation idling as backup. Just like Iowa does.

          I’ll try to explain this as best I can, if I’m not clear feel free to ask. Wind even when it is blowing doesn’t provide steady electricity. So, when counting on energy, sure its fine to have, but it doesn’t solve anything. We still have to have baseload energy and we still have to supply peak demand energy….. when it is demanded. With wind, all we’ve done is added extra miles of line which need maintained.

          Germany is mostly solar, which is a separate issue, which I’ll explain why their reducing their subsidies as well……

          • greenman3610 Says:

            All forms of electricity are intermittent. That’s why utilities have, indeed, are required to have, a minimum reserve capacity on hand for when big coal plants crap out, or a nuclear plant needs to be refueled.
            The key is to have a grid that is well integrated enough to move energy from where it is to where it needs to be, something that we need to do anyway if we seek to keep from becoming a third world nation.
            In the renewable grid, there is a recognition that the wind is always blowing somewhere, that the sun is strongest when peaks are highest, and wind is less strong. We actually see this in countries that are leaving us behind in the technology war.
            Mark Jacobsen at Stanford is the point guy doing research and modeling for grid integration. Check his work out to see what the 21st century will be like.
            http://www.scientificamerican.com/article.cfm?id=a-path-to-sustainable-energy-by-2030

          • suyts Says:

            Right, so what’s the gain with wind again? Thanks for the link, but I’ve read it some time back. Do you guys realize the cost of these proposals? And, why is a tax always part of a solution?

            Check this for the difference in the thought of efficiency of our grid….. http://suyts.wordpress.com/2011/10/24/an-alarmist-version-of-efficiency/

            And, this is my problem with all of this. Why not just let the technology advance and implement it when it is cost effective? As far as pumped storage, if you seriously think that’s an option, then why in the heck don’t we simply construct more hydro? It’s the best form of energy we can get!

        • suyts Says:

          Germany had a great plan…. make it essentially free to put up solar panels and then feed back onto the grid! What could go wrong with that?

          Well, a lot. First and most obviously, they don’t work at night, and are greatly diminished on overcast days. But, that isn’t really their problem. The biggest problem Germany is having is entry points for the power. It’s coming from everywhere! You’re link you provided mentioned that they were giving away energy. Why? Because their grid can’t handle all of the intermittent entries of energy.

          Grids aren’t designed that way, nor can they be. You just can’t willy-nilly throw energy on the grid. This is why they’re reducing their subsidies. Power line construction is from source to consumer. That is to say all of the line is sized to how much energy is going to be going through it…. and so are the protective devices as are the regulators. When your source is from everywhere, it is impossible to create a grid to minimal energy loss and proper power quality.

          Germany has reached its saturation point. …… in the mean time http://www.dailymail.co.uk/news/article-2031786/Germany-importing-electricity-France-decision-shut-nuclear-reactors.html they’re buying their power from France

        • suyts Says:

          Watching your video is a sad thing. Pumped water and air storage? That isn’t scalable to what is necessary. But, if it were, do you think for a second the environmentalists would allow it? Not a chance.

          The discussion on Texas was a bit fallacious, how was it that the demand wasn’t expected? It absolutely was, but that simply underscores the why wind isn’t possibly a energy solution. Again, we still need baseload, which wind cannot provide. And we need peak energy which wind can not be relied upon.

          China will continue to expand it’s windmill manufacturing as long as we continue to pay them. The REE necessary to build them essentially only comes from China.

          That stated, I do agree with the conclusion. It will be an energy source sometime in the future, just not anytime soon. The physical constraints are too great at this time. There is no urgency. BTW, just because I’m a nice guy, I’ll give you a heads up on a very near future talking point. Windmills cause local warming….. http://www.nature.com/nclimate/journal/vaop/ncurrent/full/nclimate1505.html

          • greenman3610 Says:

            You’re a nice guy, just not a very bright guy. Par for the denial course. If you stick around, you might learn something.
            pumped storage already exists, at utility scale, and makes sense when fuel actually has a cost – therefore, your objection is kind of nonsense.
            and your “wind causes warming” canard is so out to lunch – it sheds light on your inability to grasp the global scale of greenhouse warming.
            Your inability to grasp the concept of wind as base load indicates a certain sclerosis of the imagination. It’s happening.
            The future is here. You’re not in Kansas anymore.

          • suyts Says:

            Lol, that’s wasn’t my canard, you twit, that’s some of your precious peer-reviewed science.

            So, pump storage is happening at utility scale? Nice, how many megawatts is that pumping? When I said scale I mean now multiply that to facilitate the U.S.

            I’ll tell you what’s not very bright, dismissing the thoughts of a person experiencing the idiocy caused by this advocacy. An expert in smart-grid implementation.

            I guess it was too much to expect a conversation from an alarmist without personal insults. I suppose intelligence is relative, but compared to 99% of the population, I do pretty well on the WAIS. But, you don’t moderate so, you have that over most of your ideologues.

            I’ll leave you with this….. do you wonder why, if wind energy is so cool, so successful, that every time the tax credits are pulled no one wants to plant them?

          • greenman3610 Says:

            some people should just stay out of science discussions.
            You challenged my numbers but instantly changed the subject when I produced them. Since then its all arm waving.
            Really, avoid fancy schmancy peer reviewed stuff, it obviously just confuses you – stick to the Daily Mail.
            Thanks for playing.

  3. suyts Says:

    Green, I’m curious man, why do you guys keep conflating wind energy with oil? They are two entirely separate issues and have almost nothing to do with each other.

    Wind energy is an unstable, expensive source of electricity. It does things like supplies electricity for lights and appliances and whatnot, and very little of that.

    Oil OTOH, does things like help us make Ammonia, Anesthetics, Antihistamines, Artificial limbs, Artificial Turf, Antiseptics, Aspirin, Auto Parts, Awnings, Balloons, Ballpoint pens, …… well you get the point I hope.

    Sure, it also is necessary in production of gasoline and diesel. You know, the stuff necessary for transport of goods and services as well as the population.

    In the U.S. oil isn’t used that much in electric generation. A little bit, but none that makes any difference. Petroleum makes up 0.1% of electric generation in the U.S. Any tax break to oil has absolutely nothing to do with the viability of wind generation. Wind fails all be itself. As witnessed by your graphic. I’m all for ending subsidies. But, it’s silly to pretend this has anything to do with wind.


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