Let’s Get Rid of the Wind Production Tax Credit

The Kansan reports that Rep. Mike Pompeo (R-KS) is calling for an end to the Wind Production Tax Credit (PTC).  This tax credit provides incentives, including grants, tax incentives, and energy production rebates on the first ten years of wind energy production.  These types of federal incentives have been credited with “an increase in wind production and wind energy jobs throughout theU.S.”

Like many wise observers, Rep. Pompeo does not believe that the federal government should be in the business of supporting any segment of the energy industry.  His insight is a solid one.  Heritage energy policy analysts have explained that legislation promoting special industries subsidies “[fail] the free market test.” 

Conservatives don’t just champion the free market because it sounds nice.  It is actually true that market distortions like the PTC simply do not create jobs, even if there is an illusion that they do.  In fact, they simply shift jobs from one sector of the economy to another.  Heritage’s Nick Loris explains:

“The opportunity cost of government spending is the lost labor and capital extracted from other sectors of the economy to artificially support the politically preferred ones.”

What’s more, the simple truth is that some wind project developers could compete without subsidies.  Of course, subsidies provide them with a convenient cushion, but they are not  necessary or “fair,” to use a term favored by President Obama.  Energy companies should have to compete just like any other type of business and should not be dependent on Washington – you know, everyone playing by the same rules.

Rep. Pompeo put it quite well:

“You have a pretty mature industry,” said Pompeo, discussing the wind energy industry. “They’ve had the tax credit for 20 years. They need to stand on their own two feet.”

Jonathan A. Lesser, PhD, of Continental Economics, recently published a paper in which he explains that the wind PTC is a high cost subsidy for low value, intermittent, and unreliable power.  Such subsidies “distort competitive markets, drive out unsubsidized competitors, and reduce incentives to innovate and improve efficiency.”

In his paper, he makes a similar point:

“[E]ven if one argued that wind generation was worthy of temporary “protection” when PURPA was enacted, surely after 35 years, the “infant” wind industry is fully grown.”

It’s time for this big baby to move out of its parents’ basement and get a real job.   The Wind PTC needs to end.

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