Ratepayer and taxpayer subsidies to wind power have been substantial for two decades. Ratepayers are typically paying three times more for wind power than what they would pay for spot electricity in today's market,⁷¹ and this premium could be higher. That obligation stems from the Public Utility Regulatory Policies Act of 1978 (PURPA), which requires utilities to purchase power from "qualifying facilities" at the utility's "avoided cost."⁷² PURPA, concluded one study, "almost single-handedly created the renewable energy industry."⁷³ California became the nation's renewable energy capital when its public utilities commission instructed utilities to enter into PURPA contracts at avoided costs that soon escalated far above market prices. Standard Offer No. 4 contracts, awarded to qualifying facilities in California between 1982 and 1988, were predicated, in particular, on oil prices approaching $100 per barrel.⁷⁴ Thus, the CPUC's avoided-cost guidelines locked in prices that today are around 12 cents per kwh.⁷⁵ With many of these contracts reverting to market prices (around 2-3 cents per kwh) in the 1996-98 period, many renewable projects face retirement without new government help.⁷⁶

PURPA's encouragement of renewables was augmented by preferential state and federal tax treatment. Between 1978 and 1986 -- the height of that treatment -- such preferences funneled as much as $2 billion to renewable energy projects.⁷⁷ During that time, the combined California-federal investment tax credit was as high as 50 percent, a two-year payout. ⁷⁸ This incited a flurry of first-generation wind capacity that encountered operational problems and hurt the entire industry's credibility.⁷⁹ "Wind farms," concluded one study, "were sometimes operated as tax farms."⁸⁰ Complained another prowind study about the "sledgehammer" approach, "Some of the early companies knew more about tax minimization than they did about engineering."⁸¹

After several years of relatively neutral tax treatment, a 1.5 cent per kwh tax credit was established for wind and closed-loop (organic) biomass in the Energy Policy Act of 1992.⁸² The credit applied to such qualifying facilities placed in service after December 31, 1993 (or a year earlier with closed-loop biomass), and before July 1, 1999. The credit phased down beginning at a reference price of 8 cents per kwh with a complete phaseout at a reference price of 11 cents per kwh. Both the 1.5 cent and 8 cent rates would increase with inflation beginning with 1994 generation.⁸³ The production tax credit is set to expire on June 30, 1999.⁸⁴

For government and nonprofit entities that could not utilize the above tax credit, the secretary of energy was authorized to make "incentive payments" of 1.5 cents per kwh (adjusted for inflation from base year 1993) for all renewable electric-generation technologies excluding hydroelectricity and power generated from municipal solid waste.⁸⁵ The tax credit was for 10 years and applied to qualifying facilities placed in service between October 1993 and September 2003.⁸⁶

The Department of Energy has spent $900 million (constant 1996 dollars) on wind energy subsidies through FY 1995.⁸⁷ Yearly DOE wind expenditures ranged from $10 million in FY 1990 to a high of $129 million in FY 1979. The California Energy Commission's Wind Program (founded in 1977) and Energy Technologies Advancement Program (founded in 1984) have provided tens of millions more dollars in wind subsidies.⁸⁸ Foreign governments have spent the equivalent of hundreds of millions of dollars more on research and commercialization.⁸⁹

A conservative estimate of the total U.S. taxpayer subsidy to wind power is more than $1,200 per installed kilowatt, even greater than the direct capital cost of wind under advanced technology of around $860 per kilowatt⁹⁰ and certainly more than the installed capacity cost of gas-fired combined cycle of approximately $580 per kilowatt. ⁹¹ On a dependable capacity or capacity-factor basis, the subsidy cost and capital-cost premium to market is severalfold greater.

Wind power has proven itself to be a perpetual "infant industry," with its competitive viability always somewhere on the horizon. Proponents have always argued for continued subsidies on the rationale that commercialization is in sight. During Congressional hearings in 1985, for example, an executive of the American Wind Energy Association testified that "the goal for this industry, the achievable goal, according to the California Energy Commission, is the lowest cost source of electricity, along with hydro, available to a utility by 1990."⁹² In 1997, wind proponents claim that "it is now possible to economically produce 20 percent of United States electrical needs" from wind energy,⁹³ neglecting the fact that across the country an electric surplus is developing that will make most any capacity additions entirely redundant.⁹⁴

The need for more subsidy for wind commercialization apparently continues. The 1995 report of the DOE-appointed Task Force on Strategic Energy Research and Development (Yergin Task Force⁹⁵), concluded that $350 million in future research and development funding was still needed for "wind characterization, aerodynamics, structures and fatigue, and advanced concepts and components."⁹⁶

What the Yergin task force failed to consider is that the federal government's crash course in wind-related research and development has been a bust to date, and further commitment may be doomed as well. Paul Gipe, one of the nation's leading advocates of wind energy, has pronounced the U.S. effort through the early 1990s "a chimera. . . nothing more than 'welfare for the educated.'"⁹⁷ He explains:

The United States lavished nearly half a billion dollars on the aerospace industry from 1974 to 1992 [for wind power R&D]. . . . [Yet] with the exception of United States Windpower's model 56-100, none of the United States-designed machines in California can be called a success. . . . By the mid-1990s there were no major United States manufacturers selling commercially proven wind turbines to independent developers in the United States and there were practically no United States wind turbines operating in Europe.⁹⁸

One byproduct of DOE centralization and largesse has been the professional corruption of the American Wind Energy Association, which, Gipe states, fell into the trap of measuring its success by the size of taxpayer subsidies.⁹⁹

The aggregate ratepayer and taxpayer commitment makes the embedded cost of wind power, conservatively estimated at 10 cents per kwh,¹⁰⁰ some of the most expensive energy of the present era, ranking with high-cost nuclear generation (above 10 cents per kwh compared to average generation costs of around 4 cents per kwh),¹⁰¹ synthetic oil (around $57 per barrel versus spot crude oil close to $20 per barrel),¹⁰² Strategic Petroleum Reserve oil (around $60 per barrel versus spot of $20 per barrel),¹⁰³ and synthetic natural gas ($3-$7 per MMBtu versus spot gas of around $2 per MMBtu).¹⁰⁴