Subsidies and tax credits are not the same thing. Subsidies are direct payments to a company, such as Spanish-based Gamesa (that laid-off 165 people in August), that received $10 million of the total $20 billion subsidy the wind energy industry received during the past 20 years. The wind industry is an artificial market that would not exist without government subsidies. The Production Tax Credit (PTC, a subsidy despite its name), the one the American Wind Energy Association (AWEA) says the industry cannot live without, is set to expire at the end of 2012.
But hope springs eternal, especially when taxpayer money is involved. The AWEA, in 1986, said that wind electrical generation would be cost-competitive with other forms of electricity generation if only it received the taxpayer’s help for a few more years. Let’s see. The industry has had more than 25 years to become competitive, yet has failed to do so. Just how long is “a few more years?”
Democrats/liberals/progressives (DLP) will maintain that subsidies and tax credits are the same thing. That argument rests upon the premise that all oil and gas industry revenues belong to the public (as in socialism), and that there is a direct cost to the public when the oil and gas industry avails itself of tax credits that are available to all industries.
But let’s pretend, for a moment, that subsidies and tax credits are the same thing.
In a BTU-to-BTU (British Thermal Unit) comparison, wind-generated electricity doesn’t do well compared to fossil fuel generated electricity. The Energy Information Administration, in 2007, estimated the per-BTU cost of electricity generated by fossil fuel (Natural Gas and Petroleum Liquids) to be $0.25, while the cost per-BTU of electricity generated by wind to be $23.37. (see table ES5, page 6) So, wind’s subsidy is over 93 times what fossil fuels received. Just so you know, nuclear power generated electricity received $1.59 per-BTU, so wind received over 14 times the support that nuclear did.
According to the Congressional Budget Office (CBO), in 2011, the US averaged renewable energy production of 909,000 barrels of oil equivalent per day, and received $1.4 billion, with a majority of that money going to the wind energy industry. None of that money includes the $3.25 billion in tax-free subsidies (direct payments of tax dollars) awarded under section 1603 of the American Recovery and Reinvestment Act to the wind energy industry by the Treasury Department. According to Robert Bryce:
“On a per-unit-of-energy produced basis, the PTC provides a subsidy to the wind industry that is at least 12 times as great as that provided to the oil and gas sector and 6.5 times as great as that provided to the nuclear industry.”
Further, Bryce says that wind energy industry is getting a $1540 per barrel equivalent subsidy, over 12 times the amount of tax credit provided to the oil and gas industry of $127 per barrel equivalent.
Whether or not green energy (in this case, in the form of wind energy) is preferable is not the topic of discussion here. What is being discussed is how, if we pretend that subsidies and tax credits are the same thing, the wind energy industry still makes out like a bandit.
DLPs will argue that China is heavily subsidizing the wind energy industry, so we should also. Well, if y’all want to (continue to) subsidize the wind energy industry, feel free to do so by buying wind energy industry stocks. There are some bargains (look at the 3-year chart) to be had. Just use your own money, not forced subsidization through tax dollars, to do so. I promise not to gloat too much when y’all go broke.
And this discussion omits how the wind energy industry is given a pass on its killing of birds protected by federal law under the Migratory Bird Treaty Act and the Eagle Protection Act. But that’s the subject of a future article.
But that’s just my opinion.