NCPA - National Center for Policy Analysis

Wind Energy Cannot Compete in Free Market

April 25, 2013

Renewable energy endeavors have been the recipients of massive federal subsidies meant to jumpstart the industry. A new House Science, Space and Technology Committee hearing recently examined the efficiency and effectiveness of federal wind energy incentives. The findings of the committee suggest that wind cannot compete in the free market without the subsidies, says Marlo Lewis, a senior fellow at the Competitive Enterprise Institute.

  • According to the U.S. Government Accountability Office, nine agencies administered 82 programs providing $4 billion in financial support to the wind industry in 2011.
  • The support, which was provided in the forms of grants, loans, loan guarantees and tax breaks, was used overwhelmingly for deployment of wind energy, rather than for research and development.
  • The American Wind Energy Association disputes the claim that 82 programs granted aid, saying that only two of the 82 programs were wind-specific and that less than 1 percent of wind projects took both a tax break and a Department of Energy loan.

Some members of the committee suggested shifting more funding toward research and development, which could serve to make wind technologies more competitive in the market.

  • The subsidies are currently wasted on start-ups and firms that use the government aid to prop up investments that will never be profitable.
  • The principles of the free market, as well as President Carter's energy programs, remind us that if a technology is viable the market will ensure its success, and if a technology is not commercially viable no amount of government support can lead to its success.

Despite this logic, the Cape Wind project, which seeks to place more than 130 440-foot wind turbines off the cost of the Nantucket Sound, has received regulatory approval from the U.S. Coast Guard, the U.S. Fish and Wildlife Service and the Federal Aviation Administration, each of which has noted the serious impacts of the proposal. In addition, the proposal would raise electricity rate for residents of Massachusetts.

  • Wind is not competitive because it is not reliable, it can fluctuate rapidly and consumers pay for certainty.
  • The cost per megawatt-hour (MWh) of combined capital and operating expenses of the lifetime of a new wind unit is $96/MWh versus $66.1/MWh for natural gas.
  • Wind turbines are also more expensive because they are usually built in remote locations and the energy they produce must be transported further, as well as the decreasing productivity they experience throughout their lifetime.

Source: Marlo Lewis, "Can Wind 'Compete' without Subsidy?", April 18, 2013.


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