Can the Wind Industry Survive Without Subsidies?

If it can’t, then why are we forcing taxpayers to subsidize a losing industry to begin with?

But according to Paul Gaynor, the chief executive of First Wind, the industry can survive without the federal production tax credit (PTC). Wind has received subsidies for the past 20 years. Yet even with these subsidies, just 2.3% of America’s electricity comes from wind. By most accounts, it hasn’t gotten any more economically viable either.

In 2011, the wholesale price of electricity was about 5 cents per kilowatt-hour, while the production tax credit for wind was 2.2 cents per kilowatt-hour – about 40% of the wholesale price.

For comparison, let’s assume that President Obama and anti-oil proponents are telling the truth about oil received $4 billion per year in subsidies (that myth debunked here). If they were telling the truth, that would mean that the oil industry would receive a subsidy equal to 60 cents per barrel, about 1 percent of what wind receives in relation to market prices. Oil would need to receive $50 per barrel (at $125 per barrel market value, which is what the price was in February) in order to receive the same subsidy percentage as wind.

But oil does not get $4 billion in subsidies. In relation to what actually amounts to a subsidy (and is not a tax break enjoyed by multiple different industries), oil gets about a nickel per barrel in subsidies. That’s right, five cents out of a $125 barrel of crude oil. If wind were to be on par with oil, they would receive 0.0022 cents per kilowatt-hour. One-thousandth of what they currently receive.

But back to Mr. Gaynor. He believes the industry can survive without the disproportionate subsidy:

“‘I think it would be great if we could come to a conference and not talk about being subsidized by the federal government,’ he told the Renewable Energy Finance Forum-Wall Street event here this week.

“‘I know the industry has needed it. I think the question for all of us is, ‘Do we need it anymore or forever? I believe the answer is no,’’ he says. ‘We shouldn’t need it.’”

“Gaynor says without the PTC, the wind industry would eliminate all Washington politics around extending the subsidy every year or two. It could also differentiate itself from other renewable energy sectors by being able to stand up on its own two feet, he adds.”

Of course, the rest of the industry isn’t as optimistic as Mr. Gaynor. They’ve been ramping up their lobbying campaign since last year.

We hope that Mr. Gaynor is correct, and that the wind industry does not need the subsidy. Congress should oblige him by not extending the PTC. They could even do one better by passing the Economic Freedom and Economic Prosperity Act (H.R.3308), which would eliminate tax subsidies for every form of energy (even oil and gas!)

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