Lisa Linowes: Wind Energy Without the PTC (Master Resource)

Wind Energy Without the PTC

The debate surrounding the Production Tax Credit (PTC) intensified last quarter following several high-profile attempts by Congress to extend the credit before it expires at year-end. Industry warnings of precipitous declines in clean-tech investment and imminent job losses have reached a fevered pitch. The New York Times, for example, reflexively accused budget-hawks in Congress of being preoccupied with safeguarding the dominance of the oil and gas industries.

The idea that wind, which represents less than 3% of total electricity generation in the country after huge taxpayer benefits and state mandates, could threaten the continued use of fossil fuels in electric generation is fantasy. It  demonstrates a general ignorance about wind energy’s purpose and its limited contribution to our energy portfolio.

While we might forgive a newspaper editor’s misunderstanding of the complexities of renewable energy policy, it’s quite another thing to see the same level of ignorance on display on Capitol Hill by the very people tasked with understanding and voting on these policies.

Last month, the House Subcommittee on Select Revenue Measures invited fellow House members to speak on behalf of bills they introduced or co-sponsored that would extend more than sixty expiring tax provisions, including the PTC. Of the nearly thirty witnesses who testified, one-third pressed for immediate extension of the credit.

Representatives Bass and Welch from New England, Deutch of Florida, Reichert of Washington and others repeatedly echoed the same AWEA talking points about job creation, the need to reduce reliance on fossil fuel, risks of climate change and, my favorite, economic opportunity for their state.

Like the Times, they touted the importance of the U.S. remaining a strong global clean energy market.

And like the Times, not one of those advocating for the PTC had a clue the role of the subsidy in the power market or the likely outcome if the subsidy were to expire. Either that, or political expediency ruled the day and they didn’t care.

PTC and RPS Policy Links

In the early 1990′s following enactment of the PTC there was no demand for wind power. States did not have renewable mandates and by time the Asian Financial crisis hit, oil prices collapsed taking with them any financial incentive to install costly renewables. When energy prices recovered somewhat there was an uptick in wind development but it was concentrated in four states with renewable programs — California, Iowa, Minnesota and Texas.

In the years 2000, 2002 and 2004, the PTC expired and wind development stalled but in that same period, energy prices were fluctuating, the 9/11 terrorist attack shocked the US economy and we slipped into recession. Claims that expiration of the PTC alone caused wind development to stall are overly simplistic. In fact, given available data, it’s impossible to isolate the PTC’s affect. Some energy experts maintain the PTC was largely irrelevant in those years.

After 2004, the subsidy may have contributed to growth, but so did State policies mandating renewables.[1].

When states adopted Renewable Portfolio Standards (RPS) [2] as a means of addressing climate change wind installations showed marked growth. Legislators believed claims made by wind proponents that wind, with no fuel costs, would protect ratepayers from dramatic swings in fuel prices, and eventually stabilize and lower energy prices. In return, they envisioned a transition to more renewables, the decommissioning of older fossil plants and cleaner air.

But wind is an unpredictable, non-dispatchable resource that’s built long distances from load and largely delivers energy at a time of day and year when least needed. With high upfront costs and fewer hours to spread the cost over, wind cannot compete with reliable, lower-priced fossil and nuclear generation. It’s inherently a low-value resource, that demands above market prices.

The PTC subsidizes project capital costs by providing an outside revenue stream [3] for investors and project owners. The credit, in turn, artificially shields ratepayers from the true price of wind power.

Yet, federally subsidizing wind is not enough to incite utilities to buy.

RPS policies created demand for wind [4] by establishing non-competitive segments of the power market for qualifying renewables. Today, over half of the states have RPS policies which apply to more than 50-percent of total U.S. electricity load.

Life after the PTC: No Free Lunch

The PTC and RPS combined provide the wind industry a market for its energy and a means of shielding ratepayers from the true cost of their product. But the PTC disproportionately benefits ratepayers in States with renewable mandates by distributing the high cost of wind to taxpayers at large.

Some complain that Americans are double-paying for wind — once through above-market energy prices and again in their taxes, but this is not true. In fact, we are paying the true price of wind allocated in both the rate-base and the tax-base. If the PTC were to expire, people living in Georgia, Wyoming and other states with no RPS policies would rightfully be relieved of subsidizing policies enacted in other states. But what would happen in states with mandates?

Existing wind projects that are still collecting the PTC would not be impacted, but proposals for new wind would be under pressure to significantly lower their capital costs and improve their production numbers in order to account for the lost federal revenue. In addition, the value of the renewable energy credits would likely increase thus placing even more upward pressure on renewable energy prices. Legislatures will be forced to confront the real cost of wind power and evaluate whether the policy will ever deliver on goals originally envisioned.

The AWEA insists the PTC is an effective tool to keep electricity rates low. In fact, it is nothing more than a cost imposed on all taxpayers in order to accommodate development of a politically well-connected, high-priced, low-value resource that cannot meet our electric capacity needs.

[1]Wind also benefited from rising natural gas prices (over $5 per million BTU) making wind power contracts an attractive way to displace higher-cost natural gas generation.

[2]RPS policies mandate utilities supply a minimum percentage of their customer load with electricity from qualified renewable sources.

[3]The open-ended subsidy of 2.2¢/kWh in after-tax income represents a pre-tax value of approximately 3.7¢/kWh.. The PTC is tied to the Consumer Price Index (CPI) and therefore is scaled each year. Today, the PTC costs US taxpayers $1.5 billion per year.

[4] Wiser, R., Namovicz, C., Glelecki, M., Smith, R., Renewables Portfolio Standards: A Factual Introduction to Experience from the United States  Some states allow out-of-state generation to count toward their RPS requirements. Renewable capacity built in a non-RPS state may be used to meet another state’s mandate.

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Comment by Monique Aniel Thurston on May 11, 2012 at 11:21am

Thank  you  Lisa  for  your  review of  the history , current situation  and  future  of the PTC and of  the role and interconnection of  the RPS mandates as a  basis  for  the  future of  wind  power  cost  .

This was certainly  a " coup  of genius "of  an  industry  knowing well  that it  needed to be accepted ,if  not  imposed , because  neither competitive ,  necessary,  reliable nor  palatable .

This  sad  state  of  affairs was started  in  Maine  by  Angus King  who  signed  one  the  first state RPS  Act in 1997 ( see below ).

Followed after that the  REGGIE  mandates  and  finally the Expedited Wind Law  ( LD 2283) which   removed  all  scenic  obstacles for  wind  turbines  and sacrificing  more  than  a quarter  of  the State  of Maine  to  the turbines  altar .

The  profound deceit of  that law  is based on  its  premises :

. reducing carbon emission ( purely assumptive and whose  mission  to  verify  its accuracy and  to monitor  quantitatively  its  progress was  delegated  to  the legislature  who  failed to  do so since 2008) 

. the preservation  of  the Scenic  Quality of Maine (  a perverse  statement of ironical  and deceptive  quality since  scenic  was  no  longer  a consideration  in  the permitting  of wind  power except for  some  very  specific  sites)

. the concept  of  tangible  benefits ( unpredictable  because  of the complex relationsip  between  town  valuations and  state revenue  sharing).

In  Maine, the  path to expensive wind  generation was carved in  two steps : First Renewables mandates , then a law  ( LD 2283 ) pursuing actively  the elimination of   40 years  of  protection  of Maine Natural beauty  by  all regulatory  agencies.  

It  is  important  however  to  remember  that  Governor  Lepage  tried  both  to  decrease the  growth of  the RPS mandates during last  year's   legislative  session and  this  year tried  to  lift  the 100 MW ceiling   for  renewable  generators with a  bill called :" LD 1863 An Act to Lower the Price of Electricity for Maine Consumers":

This bill would have  removed the 100 megawatt cap for qualifying renewable generation, specifically hydro power. Wind generation can already qualify if greater than 100 MW. This re-enforced the policy that long term contracts for electricity must place reducing electric prices as a top priority.

In  our  testimony we mentioned that Maine's renewable generation is largely owned by out of state, or foreign entities, so there is little basis for protecting their interests at the expense of higher costs for ratepayers for potentially more expensive in-state generation. ( An  argument used  by EUT committee  Chair Stacy Fitts , who was  the architect  behind  any  attempt to correct LD 2283 for  the past two years ) 

We  also  expressed  our  concerns that with  potential  failure of Production Tax Credits (  this testimony  was given  in April  when  the fourth  attempt to extend the PTC had  failed ) to be extended by the federal government, there is a heightened risk that RPS mandates will force suppliers to "cover the PTC cost" with higher rates since wind developers are essentially going to have to make up for $22 per MW of lost income. Allowing HQ to fulfill RPS requirements will moderate that risk.

The Governor's  RPS  bill  was killed in the Energy , Utility and Technology   Committee in 2011 and , LD 1863,  was  rejected ( after being amended ) during  the last week  of  the Maine  legislative session in April .( 2012 )

 From your  analysis Lisa , it seems that Maine will be  suffering  from a increase  in the cost  of  wind  energy if the PTC is  not extended .

But the legislators could not  say  that they  have not  been  warned !!!!

With only  a  fraction  of the 2700 MW of wind recommended  by LD 2283 in  place and thus  potentially  thousand of  new  MW constructed without  the PTC , it  is  urgent  for  the new   Maine legislature  to  address  the  problem  of  the real  cost  of wind .

We  have  urged  the  Legislature to review ,amend or rescind LD 2283  for  two  years  now .

We  have  asked  three  moratoriums in the  past  three years  to two  different  governors.

We have  addressed the noise  and  scenic  issues  .

Thank  you Lisa for pointing us to  the stark reality of the  economics of  wind power  without  subsidies .



Please read below  from PUC website in 1997 :


Maine Legislature Adopts Portfolio StandardOn May 29, 1997, Governor Angus S. King signed into law a bill to restructure the state's electric power industry. As of March 1, 2000, the state's investor-owned utilities will no longer own power plants. These utilities will continue to be regulated as transmission and distribution providers, and retail customers will be able to choose their electricity provider in a competitive market. Recovery of stranded costs has been referred to the PUC for adjudicatory proceedings by July 1, 1999.

The law establishes a renewable portfolio standard as a component of power provider licensing, which requires each competitive electricity provider to include no less than 30% of its supply from renewable resources, including hydro. The law also requires the PUC to establish information disclosure standards for competitive electricity providers so that consumers can make informed market choices and to establish a program allowing retail customers to make voluntary contributions to fund renewables-related research and development (R&D). PUC Contact: Faith Huntington, (207) 287-1373







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


(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 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?" 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.”

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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."

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