No, Congress will not extend the PTC

In another month, the wind PTC will finally expire after twenty-seven years. Taxpayers will still be on the hook for billions more in PTCs through the next decade but the burden should not increase. In that time, the wind industry has grown significantly reaching over 100,000 MW and now mainstreamed into the US electricity market. Big Wind is no longer a nascent industry, but one that must stand on its own, whether it's ready or not.


​This is the last year wind energy projects can qualify for the federal production tax credit (PTC), but at 40% or 1¢/kwh, it’s unlikely the subsidy will drive the construction of many new megawatts. Current development activity is mainly tied to projects that safe-harbored turbines in 2016 (100% PTC), 2017 (80%) and some in 2018 (60%) and must be operational before the end of 2020, 2021, and 2022 respectively. Projects unable to meet these deadlines have a negative outlook.

Logistical issues relating to turbine and equipment deliveries could impact the number of MWs installed. This is due largely to fewer MWs constructed in 2017 and 2018 relative to safe-harbored turbines leaving only 1½ - 2 years for a substantial amount of proposed wind to be placed in service. Targeted communities are experiencing intense pressure right now as wind developers lose patience over delays. Some projects are certain to be cancelled. Windaction is also tracking possible increases in project-related accidents and component failures similar to those reported in 2012 when the Section 1603 cash grants sunset. Rushed development raises legitimate public safety concerns.

Despite positive press to the contrary, losing the PTC could prove a blow to Big Wind. Low natural gas prices and competition from other renewable energy projects (including wind) have placed significant downward pressure on the price project owners can demand for their wind energy. These low prices are balanced by the enormity of the PTC’s value relative to project cost. At full value, the PTC with depreciation deductions totals around 50 percent of project cost. New projects will have to fill the void left when the PTC expires. Turning to conventional project finance will mean raising prices making wind power less competitive. There is already evidence that prices are going up.

It’s possible Congress may extend the PTC but the chances of success are limited. Opening the public purse again for an industry that'had 5-years to plan is a tough sell. This is especially true if cost matters.

Under the current scheme, the annual cost of the PTC (wind) and ITC (solar) combined exceeds $9 billion in 2021 before tapering off. In total, the cost of the PTC/ITC is estimated at $60.7 billion from 2020 through to 2029. To put this into perspective, the PTC and ITC represent the two most expensive energy subsidies and combined are the 39th most expensive federal expenditures of the Treasury out of 165 line items. Any extension of the PTC would further increase these costs.

ESTIMATES OF TOTAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2019-2029
(in millions of dollars)
 
Year 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2020-2029
Energy PTC 4,230 4,310 4,290 4,250 4,200 4,070 3,920 3,290 2,590 1,760 1,070 33,750
Energy ITC 3,710 4,510 4,820 4,490 3,700 2,690 2,010 1,540 1,220 1,020 920 26,920
TOTAL 7,940 8,820 9,110 8,740 7,900 6,760 5,930 4,830 3,810 2,780 1,990 60,670

Table totals from corporations and individuals (Source: US Department of Treasury)

As deadlines near, project developers could seek concessions from the IRS regarding the 4-year construction window but we would expect any consideration to be consistent with the excused delays outlined in the agency’s 2013-29 notice relating to events outside a developer’s control (i.e. weather conditions, natural disasters, and delays in obtaining permits or licenses from federal, state, local, or Indian tribal governments). For example, Vineyard Wind, which hopes to install 800 MW of wind off the shores of Massachusetts, is pressing the IRS for an extension due to delays in securing a positive decision on its EIS. [1] 

It should be noted that the IRS recently amended its guidance pertaining to national security concerns. Projects delayed due to military objections are now eligible for additional time (up to 4 years) from the IRS.

In another month, the wind PTC will finally expire after twenty-seven years. Taxpayers will still be on the hook for billions more in PTCs through the next decade but the burden should not increase. In that time, the wind industry has grown significantly reaching over 100,000 MW and now mainstreamed into the US electricity market. Big Wind is no longer a nascent industry, but one that must stand on its own, whether it's ready or not.

________________________________

[1] Wind energy developers have the option of making an irrevocable election to receive a 30% investment tax credit in lieu of the PTC. For offshore, this is the more likely scenario given the high capital cost to construct projects. Under the phase-down, the ITC benefit is similarly reduced. 

NOV142019

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Comment by Willem Post on November 14, 2019 at 11:58am

Wind and Solar Subsidies Provide a Bonanza for Wall Street

http://www.windtaskforce.org/profiles/blogs/the-more-wind-and-solar...

 

This URL shows wind and solar prices per kWh would be at least 50% higher without direct and indirect subsidies. They would be even higher, if the costs of other items were properly allocated to the owners of wind and solar projects, instead of shifted elsewhere. See below section High Levels of Wind and Solar Require Energy Storage.

 

http://www.windtaskforce.org/profiles/blogs/economics-of-tesla-powe...

http://www.windtaskforce.org/profiles/blogs/large-scale-solar-plant...

http://www.usu.edu/ipe/wp-content/uploads/2016/04/UnseenWindFull.pdf

 

This URL shows about 2/3 of the financial value of a wind project is due to direct and indirect subsidies, and the other 1/3 is due to electricity sales.

http://johnrsweet.com/Personal/Wind/PDF/Schleede-BigMoney-20050414.pdf

 

- Indirect subsidies are due to federal and state tax rebates due to loan interest deductions from taxable income, and federal and state MARCS depreciation deductions from taxable income.

 

- Direct subsidies are up-front federal and state cash grants, the partial waiving of state sales taxes, the partial waiving of local property, municipal and school taxes. See URLs.

 

http://www.windtaskforce.org/profiles/blogs/excessive-subsidies-for...

https://www.eia.gov/analysis/requests/subsidy/pdf/subsidy.pdf

 

Any owner, foreign or domestic, of a wind and/or solar project, looking to shelter taxable income from their other US businesses, is allowed to depreciate in 6 years almost the entire cost of a wind and solar project under the IRS scheme called Modified Accelerated Cost Recovery System, MARCS. The normal period for other forms of utility depreciation is about 20 years.

 

Then, with help of Wall Street financial wizardry from financial tax shelter advisers, such as BNEF*, JPMorgan, Lazard, etc., the owner sells the project to a new owner who is allowed to depreciate, according to MARCS, almost his entire cost all over again. Over the past 20 years, there now are many thousands of owners of RE projects who are cashing in on that bonanza.

 

Loss of Federal and State Tax Revenues: The loss of tax revenues to federal and state governments due to MARCS was estimated by the IRS at $266 billion for the 5y period of 2017 - 2021, or about $53.2 billion/y.

The IRS is required to annually provide a 5y-running estimate to Congress, by law.

The next report would be for the 2018 - 2022 period

 

The indirect largesse of about $53.2 billion/y, mostly for wind and solar plants^ that produce expensive, variable/intermittent electricity, does not show up in electric rates. It likely is added to federal and state debts.

 

Most of the direct federal subsidies to all energy projects of about $25 billion/y also do not show up in electric rates. They likely were also added to the federal debt.

 

Most of the direct state subsidies to RE projects likely were added to state debts.

 

The additional costs of state-mandated RPS requirements likely were added to the utility rate base for electric rates.

 

* BNEF is Bloomberg New Energy Finance, owned by the pro-RE former Mayor Bloomberg of New York, which provides financial services to the wealthy of the world, including providing them with tax avoidance schemes.

 

^ In New England, wind is near zero for about 30% of the hours of the year, and solar is minimal or zero for about 70% of the hours of the year. Often these hours coincide for multi-day periods, which happen at random throughout the year, per ISO-NE real-time, minute-by-minute generation data posted on its website. Where would the electricity come from during these hours; $multi-billion battery storage, insufficient capacity hydro storage?

 

https://www.nrel.gov/docs/fy17osti/68227.pdf

https://www.greentechmedia.com/articles/read/tax-equity-investors-b...

 

Warren Buffett Quote: "I will do anything that is basically covered by the law to reduce Berkshire's tax rate," Buffet told an audience in Omaha, Nebraska recently. "For example, on wind energy, we get a tax credit if we build a lot of wind farms. That's the only reason to build them. They don't make sense without the tax credit." 

https://www.usnews.com/opinion/blogs/nancy-pfotenhauer/2014/05/12/e...

Comment by Willem Post on November 14, 2019 at 11:57am

Cost Shifting From Millionaire Owners to Struggling Ratepayers and Taxpayers 

http://www.windtaskforce.org/profiles/blogs/cost-shifting-is-the-na...

 

Clever multi-millionaires have known about wind and solar being much more expensive compared with existing generation (coal, oil, gas, nuclear, hydro, etc.) for at least 25 years.

https://www.instituteforenergyresearch.org/wp-content/uploads/2019/...

 

By beating the drums of climate change and global warming, and using clever lobbyists in the halls of Congress and State legislatures, they were able to get all sorts of goodies, such as upfront cash grants, upfront tax credits, low-cost loans, generous, above-market, feed-in tariffs, production tax credits, and loan interest and asset depreciation write-offs to avoid paying income taxes.

 

All that enables them, and others to claim wind and solar is equivalent and competitive with other workers. What more could these millionaires ask for?

 

Cost Shifting: Here is a partial list of the costs that were shifted, i.e., not charged to wind and solar plant owners, to make wind and solar appear less costly than in reality to the lay public and legislators.

 

1) The various forms of grid-stabilizing inertia (presently provided by synchronous gas, coal, oil, nuclear, bio and hydro plants).

 

2) The filling-in, peaking and balancing by traditional generators (mostly gas turbines in New England), due to wind and solar variability and intermittency, 24/7/365. Their random outputs require the other generators to inefficiently ramp up and down their outputs at part load, and to inefficiently make more frequent starts and stops, which also causes more wear and tear, all at no cost to wind and solar owners.

 

The more wind and solar on the grid, the larger the required up and down ramping of the gas turbines, which imparts added costs to owners for which they likely would not be paid: And the wind and solar erratic output is coddled by government programs and subsidies!!

 

Owners of traditional generators:  

 

- Have less annual production to cover power plant costs, which jeopardizes the economic viability of their plants.

 

- Are left with inefficient remaining production (more fuel/kWh, more CO2/kWh), due to up and down ramping at part load, and due to more frequent starts and stops, which leads to less fuel and CO2 reduction than claimed, and increased costs for owners. See URL

http://www.windtaskforce.org/profiles/blogs/fuel-and-co2-reductions...

 

- Have more wear and tear of their gas turbine plants, which further adds to owner costs

 

NOTE: All of this is quite similar to a car efficiently operating at a steady 55 mph, versus a car inefficiently operating at continuously varying speeds between 45 mph to 65 mph, and accelerating for frequent starts and decelerating for frequent stops.

 

3) Any battery systems to stabilize distribution grid with many solar systems. They would quickly offset downward spikes due to variable cloud cover. See URL.

http://www.windtaskforce.org/profiles/blogs/large-scale-solar-plant...

 

4) Any measures to deal with DUCK curves, such as a) daily gas turbine plant down and up ramping, b) utility-scale storage and c) demand management.

 

NOTE: GMP in Vermont, has determined 70 of its 150 substations will eventually need upgrades to avoid “transmission ground fault overvoltage,” (TGFOV), if more solar is added per requirements of the VT Comprehensive Energy Plan. This is nothing new, as utilities in southern Germany have been dealing with these issues for over ten years, which has contributed to German households having the highest electric rates (about 30 eurocent/kWh) in Europe.

 

5) Grid-related costs, such as grid extensions and augmentations to connect the remotely distributed wind and solar, and to deal with variable and intermittent wind and solar on the grid. Those grid items usually are utilized at the low capacity factors of wind and solar, i.e., a lot of hardware doing little work.

 

6) Utility-scale electricity storage (presently provided by the world’s traditional fuel supply system).

https://www.neon-energie.de/Hirth-2013-Market-Value-Renewables-Sola...

 

The above 6 items are entirely separate from the high levels of direct and indirectsubsidies. They serve to make wind and solar appear to be much less costly than in reality. See sections 1 and 2 and Appendix.

  

All that enables wind and solar proponents to endlessly proclaim: “Wind and solar are competitive with fossil and nuclear”.

 

Example of Cost Shifting: For example, to bring wind electricity from the Panhandle in west Texas to population centers in east Texas, about 1000 miles of transmission was built at a capital cost of $7 billion. The entire cost was “socialized”, i.e., it appeared as a surcharge on residential electric bills. Wind in Texas would have been much more expensive, if the owning and operating cost, c/kWh, of those transmission lines were added to the cost of wind.

 

Example of Cost Shifting: Often the expensive grid connection of offshore wind plants, say from 20 miles south of Martha's Vineyard, across the island, then about 7 additional miles under water, and then to the reinforced mainland grid, is not separately stated in the capital cost estimates, i.e., all or part of it is provided by the utilities that buy the electricity under PPAs to make PPA-pricing appear smaller than in reality. That cost would be “socialized”, i.e., it appears as a surcharge on residential electric bills, or is added to the rate base.

 

Wind and Solar Wholesale Prices in NE: Here are some wholesale prices of wind electricity RE folks in New England, especially in Maine, do not want to talk about. They would rather dream RE fantasies, obfuscate/fudge the numbers, and aim to convert others to their dream scenarios, somewhat like religious missionaries. See table 2.

 

Comments on Below Table

 

Indirect subsidies are due to loan interest deduction and depreciation deductions from taxable incomes.

Direct subsidies are due to up front grants, waiving of state sales taxes, and/or local property (municipal and school) taxes. See URL.

 

An owner of ridgeline wind would have to sell his output at 18.8 c/kWh, if the owner were not getting the benefits of cost shifting and upfront cash grants and subsidies.

That owner could sell his output at 16.4 c/kWh, if his costs were reduced due to cost shifting.

He could sell his output at 9 c/kWh, if on top of the cost shifting he also received various subsidies. The same rationale holds for solar. See table.

 

In NE construction costs of ridgeline wind and offshore wind are high/MW, and the capacity factor of wind is about 0.285 and of solar about 0.14. Thus, NE wind and solar have high prices/MWh. See table.

 

In US areas, such as the Great Plains, Texas Panhandle and Southwest, with much lower construction costs/MW and much better sun and wind conditions than New England, wind and solar electricity prices/MWh are less.

 

Those lower prices often are mentioned, without mentioning other factors, by the pro-RE media and financial consultants, such as Bloomberg, etc., which surely deceives the lay public

 

Future electricity cost/MWh, due to the planned build-out of NE offshore wind added to the planned build-out of NE onshore wind, likely would not significantly change, because of the high costs of grid extensions and upgrades to connect the wind plants and to provide significantly increased connections to the New York and Canadian grids.

 

NOTE: For the past 20 years, Germany and Denmark have been increasing their connections to nearby grids, because of their increased wind and solar.

 

The subsidy percentages in below table are from a cost analysis of NE wind and solar in this article. See URL.

http://www.windtaskforce.org/profiles/blogs/excessive-subsidies-for...

 

Values for 2018 are represented in below table.

 

NE Wind/Solar

NE Wind

%

NE Solar

%

Ridgeline

Large-scale

c/kWh

c/kWh

Price to utility

No direct/indirect subsidies

No cost shifting

18.8

100

23.5

100

Less cost shifting

2.4

13

2.1

9

Price to utility

No direct/indirect subsidies

With cost shifting

16.4

87

21.4

91

Less subsidy, wind

45% of 16.4

7.4

39

Less subsidy, solar

45% of 21.4

9.6

41

Price to utility*

With direct/indirect subsidies

With cost shifting

9.0

48

11.8

50

 

* Owner prices to utilities are based on recent 20-year electricity supply contracts awarded by competitive bidding in New England. These prices would have been about 48% to 50% higher without the direct and indirect subsidies and the cost shifting. Similar percentages apply in areas with better wind and solar conditions, and lower construction costs/MW, than New England. The prices, c/MWh, in those areas are lower than New England.

Hannah Pingree on the Maine expedited wind law

Hannah Pingree - Director of Maine's Office of Innovation and the Future

"Once the committee passed the wind energy bill on to the full House and Senate, lawmakers there didn’t even debate it. They passed it unanimously and with no discussion. House Majority Leader Hannah Pingree, a Democrat from North Haven, says legislators probably didn’t know how many turbines would be constructed in Maine."

https://pinetreewatch.org/wind-power-bandwagon-hits-bumps-in-the-road-3/

 

Maine as Third World Country:

CMP Transmission Rate Skyrockets 19.6% Due to Wind Power

 

Click here to read how the Maine ratepayer has been sold down the river by the Angus King cabal.

Maine Center For Public Interest Reporting – Three Part Series: A CRITICAL LOOK AT MAINE’S WIND ACT

******** IF LINKS BELOW DON'T WORK, GOOGLE THEM*********

(excerpts) From Part 1 – On Maine’s Wind Law “Once the committee passed the wind energy bill on to the full House and Senate, lawmakers there didn’t even debate it. They passed it unanimously and with no discussion. House Majority Leader Hannah Pingree, a Democrat from North Haven, says legislators probably didn’t know how many turbines would be constructed in Maine if the law’s goals were met." . – Maine Center for Public Interest Reporting, August 2010 https://www.pinetreewatchdog.org/wind-power-bandwagon-hits-bumps-in-the-road-3/From Part 2 – On Wind and Oil Yet using wind energy doesn’t lower dependence on imported foreign oil. That’s because the majority of imported oil in Maine is used for heating and transportation. And switching our dependence from foreign oil to Maine-produced electricity isn’t likely to happen very soon, says Bartlett. “Right now, people can’t switch to electric cars and heating – if they did, we’d be in trouble.” So was one of the fundamental premises of the task force false, or at least misleading?" https://www.pinetreewatchdog.org/wind-swept-task-force-set-the-rules/From Part 3 – On Wind-Required New Transmission Lines Finally, the building of enormous, high-voltage transmission lines that the regional electricity system operator says are required to move substantial amounts of wind power to markets south of Maine was never even discussed by the task force – an omission that Mills said will come to haunt the state.“If you try to put 2,500 or 3,000 megawatts in northern or eastern Maine – oh, my god, try to build the transmission!” said Mills. “It’s not just the towers, it’s the lines – that’s when I begin to think that the goal is a little farfetched.” https://www.pinetreewatchdog.org/flaws-in-bill-like-skating-with-dull-skates/

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