Wind Energy Receives Preferential Treatment

October 21, 2013

As the federal budget debate continues to heat up, one of the contentious energy policy battles is over the extension of the wind production tax credit (PTC), a 2.3-cents-per-kilowatt-hour handout that is awarded to wind producers and other qualifying sources and continues for a decade after initial production, says Nicolas Loris, the Herbert and Joyce Morgan Fellow at the Heritage Foundation.

Proponents of the subsidy are yet again calling for an extension or a multiyear phase-out, but Congress should refrain from extending or phasing out the preferential treatment for wind and instead remove all targeted tax credits for all energy sources and technologies. And Congress should broadly lower tax rates to create a competitive environment that allows the best technologies to provide affordable, reliable energy for Americans.

  • The Joint Committee on Taxation estimates that extending the PTC one year would cost taxpayers $6.1 billion over 10 years, and a five-year extension would cost over $18 billion over the same time frame.
  • With such a generous subsidy, wind producers can ignore costs, underbid other electricity producers in times of excess supply, sell their power to utilities and still profit by collecting the $2.3 cents per kilowatt hour generated from the handout.
  • The PTC also threatens the long-term viability of the wind industry by focusing efforts on securing an extension rather than recognizing the true price point necessary to become competitive and innovative to achieve that goal.

Rather than creating a sustainable industry, the PTC has artificially propped up an industry, advanced special interests and allocated labor and capital away from more competitive uses in the marketplace. It is time to allow the PTC to sunset one final time and remove all preferential treatment in the energy industry.

Source: Nicolas Loris, "Let the Wind PTC Die Down Immediately," Heritage Foundation, October 8, 2013.

 

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