Tax credits blown away?
A sideline of mine – besides the frequent discussions of Maryland politics I write – is discussing energy issues. I didn’t seek out that aspect of the universe to write on, but I find it fascinating and quite important at the same time.
Today was a monumental day in Congress for the wind industry – yes, wind blows every day but those who profit from collecting the energy created and converting it (albeit somewhat clumsily and inefficiently) to electricity had their day in Congress today. Their goal: maintaining their cherished production tax credit at a hearing of the Oversight and Government Reform Committee.
Yet a large group of conservative and pro-liberty organizations are urging Congress to dump this credit, with the Competitive Enterprise Institute a leading voice. They co-wrote a letter last month calling on Congress to dump the subsidy, and followed up with further guidance today from CEI’s Myron Ebell:
Congress should not renew the Wind Production Tax Credit for another year and thereby upset the planned phase-out that was passed just last year.
The wind energy lobbyists spend more time seeking handouts than in trying to make their product competitive. The tax credit amounts to the worst kind of cronyism, costing taxpayers billions, foisting mandates on states and driving up electricity rates for consumers and manufacturers.
Over the course of the last several years, efforts in both Maryland and Delaware to harness the wind have fizzled out, most notably the lockdown of the much-ballyhooed Bluewater Wind project. And while Maryland is attempting to jumpstart that market with a public subsidy effective this fiscal year, it’s questionable whether anyone will attempt to build the turbines, even with the set-aside put in place.
Unfortunately, while the wind blows for free, the places where it blows the best tend to be difficult locations for infrastructure. Moreover, as we all know, those hot, humid days during the summer when we could use the cooling breeze rarely have enough wind to blow a scrap of paper around, let alone turn a turbine. It’s one of many good points made by Dr. Robert J. Michaels, a professor of economics at Cal State – Fullerton and Senior Fellow at the Institute for Energy Research.
Surely some will counter with the fact that fossil fuel industries have their own set of tax benefits and these subsidies for wind energy are simply a matter of leveling the playing field. But consider the number of jobs in these fossil fuel industries everywhere in the process – everything from working at the point of extraction to transport to conversion into electricity. In many cases, these jobs are among the most lucrative in their respective fields despite the fact the raw material is relatively cheap compared to the cost of wind energy.
It’s also worth pointing out that the “market” for wind energy is a relatively artificial one thanks to those states which have a carveout for a renewable energy portfolio, including Maryland. Generally, since neither the cost-effectiveness nor the necessary infrastructure is in place, the laws simply serve as another form of taxation of already-beleaguered utility companies because non-compliance carries a monetary cost. On the other hand, no one is saying that any proportion of our electricity has to come from coal or natural gas nor is it necessary because the market price dictates the direction utilities prefer to go.
With any luck, the production tax credits will become a thing of the past at the end of the year. Like zombies, they were resurrected from the dead at the end of last year thanks to a Congressional deal but maybe this year their time will run out.