Don't Stop Renewable Energy Subsidies. Just Make Them Better.

Categories: Buzz

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Every week, managing editor Patrick Williams disappears into his office and reemerges a cranky, nicotine-addicted, third-person-referring superhero we like to call Buzz.

OK, everybody relax and just breathe easy (though not too deeply). That whole global-warming, energy-supply, sooty-air thing is taken care of.

We know this because unlike many, many, many of you, we read The Dallas Morning News, and there on Monday they said so, sort of, in their lead editorial. "Now is a good time to break the tax-credit habit," read the sub-headline on the piece, which was about how the wind energy industry should end its dependence on a federal production tax credit. That 2.2-cent per kilowatt-hour credit, which received a one-year extension from Congress during the fiscal cliff battle at the end of last year, has helped boost wind production in Texas to about 10 percent of average usage over the past 10 years. That number's expected to climb in the future, so, the News concludes, it's time for wind to get off Uncle Sam's teat.

Now, a reasonable person might suggest that's a bit like saying, "Hey, you've made it 10 percent of the way up this cliff with a rope, so now it's time to let go." Of course, reasonable people probably didn't read the News' editorial, which as an aside notes that "since 1950, 70 percent of all energy subsidies went to fossil fuels."

Well, maybe. Toting up exactly who gets how much federal support in the energy industry is a complex task, and the answer you get varies based on who's doing the counting and how you define a subsidy. We checked various sources, and the cost of just coal to the public purse apparently ranges somewhere between $1.something billion and $345 billion annually. (The latter number came from Harvard, but they were counting "hidden" costs, like death and environmental pillaging. Pinkos.) The point is, if you're going to start kicking energy subsidies, there are much bigger targets.

Of course, there are also better ways of providing tax support to renewable energy -- not that the News mentioned those -- like allowing investors to form things called master limited partnerships, which offer tax benefits that encourage investment. Right now, renewable energy projects can't form MLPs. Fossil fuel projects can. (Surprise!)

A good free-market conservative might suggest that the government should just get out of the energy business and stop trying to pick winners and losers. Reality would suggest that's never going to happen and perhaps government influence in shaping our national infrastructure is not always a bad thing. The oil, gas and railroad industries probably wouldn't disagree, at least not with a straight face.

Jeff Clark, executive director of The Wind Coalition, a wind-power advocacy group, told us that declaring the energy playing field level and calling on wind power to go out and make it on its own might be a bit premature. "We need some permanence in the tax code," Clark said, instead of relying on variable breezes from Washington. Coal has been subsidized for 200 years, oil for 100 years and nuclear since its inception, he added. "The support we receive helps level the playing field."


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16 comments
mcdallas
mcdallas

So, basically, the Federal Government is breaking wind?


dward5
dward5

Wind power is an American success story. Clean, homegrown, renewable energy is being added while boosting rural and state economies and supporting tens of thousands of well-paying construction and manufacturing jobs. 

In response to pak152's posts below:


1) On the WSJ blog -

This article makes the common mistake of confusing capacity factor and capacity value. As the National Renewable Energy Laboratory study cited by the article explains, capacity factor is a measure of the amount of energy produced by a wind plant, while capacity value measures the amount of capacity a plant contributes towards meeting peak electric demand. 30-40% is the typical capacity factor of a wind plant, while 10-20% is the typical capacity value.

Wind plants are being built to provide large amounts of low-cost electricity to reduce the use of expensive fossil fuels and the pollution that results from their use. Folks in Texas can tell you that wind energy has already saved them billions of dollars by reducing the use of expensive natural gas and coal, while also reducing carbon dioxide emissions by millions of tons. Since reducing fossil fuel use and emissions are both issues of energy and not capacity, from that perspective the only metric that matters is the capacity factor of a wind plant. While a capacity factor of 35% may sound low to some, that is actually significantly higher than the capacity factors of other types of power plants. Natural gas plants typically have capacity factors of around 10%, hydroelectric plants are often around 25-30%. Even coal plants typically only have capacity factors that are in the 60-70% range.

For those who would like to delve a little deeper into the difference between energy and capacity, I would suggest this article:
http://www.awea.org/pubs/factsheets/Baseload_Factsheet.pdf

2) On the bias claims by the Institute for Energy Research:
Fact check: American Tradition Institute’s Taylor and Tanton blowing smoke on wind incentive - http://www.awea.org/blog/index.cfm?customel_dataPageID_1699=20633

3) On the second I.E.R. claim:
Fact check: Exelon-funded report inflates wind integration costs - http://www.awea.org/blog/index.cfm?customel_dataPageID_1699=19456 


4) Some of the top facts about wind power:
Fact check: Heritage works busily to create new wind myths - http://www.awea.org/blog/index.cfm?customel_dataPageID_1699=20314

5) Facts about the PTC: http://m.powerofwind.com/truth/policy/energy-incentives_2/more-info 


David Ward, American Wind Energy Association


scottindallas
scottindallas topcommenter

Again, Buzz's claim that electrical energy produces 10% of our energy is false.  They generate power less than 10% of the time during peak demand.  All else is immaterial.  Furthermore, BUZZ, if we hadn't wasted a dollar on wind, we could have replaced all the dirty coal with new clean burning natural gas.  But, the wind power is so unreliable, and so expensive that we still use those dirty coal plants and have to worry about blackouts.  It's stupid to invest in something so unreliable.  

http://www.nationalreview.com/articles/275673/texas-wind-energy-fails-again-robert-bryce

Read the article, study the graph.  I know the magazine has a perspective, but Robert Bryce is a serious reporter.  In TX we'd be better served supporting solar, since it's Sunny during our peak demand.  See how that works?  See how a National program may not be the best fit?   We've spent over 6 billion on powerlines for this worthless wind power alone.

mavdog
mavdog topcommenter

Don't extend master limited partnerships to renewable energy projects, get rid of them entirely.

The MLP is a tax minimizing structure that should not be granted. treat all income the same for tax purposes.

holmantx
holmantx topcommenter

78 cents of every federal dollar spent on renewable energy has been lost.

And half of that was probably borrowed, which is nothing more than a claim on future labor.

And so much money has been borrowed over the past 35 years it has perpetually bogged the private sector down, and usurped the Law of Self Interest.

Taxing wealth and Income YET TO BE CREATED . . . means it won't be (created).

The Golden Goose is down.

Sotiredofitall
Sotiredofitall topcommenter

"Hey, you've made it 10 percent of the way up this cliff with a rope, so now it's time to let go"  What indication do we have that they aren't just going fall off the rope anyway?

Would you invest in a master limited partnerships where the underlying company can't make a profit without a government subsidy?

Can we also talk about the ethanol subsidy farce?

gcowan
gcowan

Wind turbines are net subsidized. Fossil fuels pay large excise taxes and royalties, much larger than the tax breaks some of their producers get, and so are not net subsidized. Rather, they subsidize government, hugely, and government likes to share a little of this income with renewable energy producers, as greenwash.

scottindallas
scottindallas topcommenter

@dward5 Peak power generation is all that matters.  Energy can't be stored, unless you're filling a stock tank on a ranch.  In TX wind works 8-10% of the time.   That means your figure is 1/10th to 1/12th what your links claim.  Power generation needs to meet peak demand, everything else is coasting.  Wind is too inconsistent to be relied upon.   Go, read Robert Bryce's take on it.  He's an energy reporter.  His figures come from ERCOT, the biggest user of wind power.  Not an advocate, not a vendor, but one who uses these boondoggles.

RTGolden1
RTGolden1 topcommenter

@dward5 Do you have any independent links?  If we wanted to research whether or not the Wind Energy Industry is in favor of Wind Energy, I think that would have been easy to find.  A bunch of links to your own website highlights your talking points but does little to support your claims.

scottindallas
scottindallas topcommenter

I guess we have to wait a week to get a response from the author.

ThePosterFormerlyKnownasPaul
ThePosterFormerlyKnownasPaul topcommenter

@mavdog The MLP avoids the double taxation of corporate dividends.  


A current corporation has to pay tax on its income and then pay a dividend to its shareholders.  The shareholders then have to pay tax on the dividends received.

The MLP allows the profits generated by the entity to be taxed only once when they are distributed to the individual unit holder.  Additionally, the MLP allows the investor to receive their invested capital back without paying tax on this distribution.

PatrickWilliams
PatrickWilliams moderator

@scottindallasSorry for the slow response, Scott. Writing this stuff isn't all I do around here.

Let's see: I'm not sure why wind's contribution to energy supplies is immaterial except during times of peak load if the goal is to reduce carbon emissions.

As for clean burning natural gas -- well, yeah, it beats coal, but "clean" is a relative term. This is a pretty good article about that: http://www.washingtonpost.com/blogs/wonkblog/wp/2012/08/20/can-natural-gas-really-help-tackle-global-warming-heres-everything-you-need-to-know/
(The article doesn't address the issue of subsidies for natural gas, though.)

 I agree that building plentiful solar in Texas would be a good idea. And I recall that one of the environmental arguments for boosting solar production in Texas is that wind and solar production tend to peak at different times of day, so there's a complementary effect there. The PUC isn't persuaded, though.

From what I've read, the favored environmental strategy is for an all-of-the-above approach that makes reducing heat trapping gases a priority. If subsidies are preserved for fossil fuels and vanish for alternative energy, that approach doesn't stand much of a chance.

But then, confronting climate change isn't on the top of everyone's priority list. If your goals are only the most electricity and the lowest cost and don't factor in environmental costs, then sure, burn, baby, burn.

One of the difficult aspects of following this subject is the fact that you can find really smart people making elegant, sophisticated and entirely contradictory arguments. But if you accept the notion that humanity's contribution to global warming is a serious threat to the planet and civilization, then ultimately you run up against the question, "So what are we going to do about it?"

I think government, though taxation, subsidies and regulation -- for all it's many downsides -- is the best tool we have to address that question. Tons of people disagree, and maybe a free market is a better answer, but how could we know? The energy market isn't and has never been free, and the real costs of burning fossil fuels seldom see to enter into the equation.



mavdog
mavdog topcommenter

@ThePosterFormerlyKnownasPaul

The MLP allows the shareholder to have it both ways. They form the entity as a way to shield themselves from liability, which is not in itself a problem. That is what corporations allow where ordinary partnerhips or sole proprietorships don't.

However, by use of the MLP they get the shield and also get the same tax treatment of a ordinary partnership or sole proprietorship.

Choose one or the other.

The Corporation is viewed as a person, therefore any income they receive is taxed like a person. It isn't accurate to refer to this payment as tax as "double taxation", it is collecting a tax on income just like you and I are required to pay. Again, the investor is seeking to get the benefits of a corporation, pay for those benefits.

PatrickWilliams
PatrickWilliams moderator

@scottindallas@PatrickWilliamsYou say "So, that itinerant power from the windmills can't be counted on, so back up power has to be ever running.  So, the windmills don't off-set any other power production."

The two studies I saw abstracted on wind power's effect on carbon emissions says the effect is not linear, but it's not zero. Read about it here: http://www.forbes.com/sites/jeffmcmahon/2012/05/30/wind-power-may-not-reduce-carbon-emissions-argonne/

And then there's this that has some interesting comments impacts on peak load:

http://fayettepowerproject.com/blog/myth-baseload-reliability

And this about base load:

http://www.smartplanet.com/blog/energy-futurist/why-baseload-power-is-doomed/445

Does that mean that wind power is the sole, best or most efficient option for carbon reduction? Nope. But does that mean it has no part in the mix of generation and should be kicked to the curb while we continue to provide tax breaks for fossil fuels? I still don't think so.

Is wind power solely a renewable energy boondoggle? No, there's always rent seeking when the government makes plans to pass out dough, but let's not throw the baby out with ... you know. There might be better energy investments out there, and there are certainly some dogs (corn-base ethanol), but for all its shortcomings, wind doesn't appear to be simply dollars wasted.

Incidentally, I didn't intend to suggest that you we're shilling for anyone in this, and I apologize for coming across that way. What I meant to say is that sorting through the vast amounts of reporting and analysis on the subject, figuring out agendas and context makes drawing solid conclusions very hard.

scottindallas
scottindallas topcommenter

@PatrickWilliams@scottindallasIt's immaterial what wind contributes because it contributes nothing during peak demand.  Power plants can't be flipped on and off like a light switch.  So, that itinerant power from the windmills can't be counted on, so back up power has to be ever running.  So, the windmills don't off-set any other power production.  They don't lessen the pollution, as dirtier, older polluting power must be retained.  

If we had simply invested the extra money ($6 billion) we put into new powerlines for T Boone, we could have razed the dirty coal plants and built new cleaner natural gas plants.  We'd be far cleaner than we are today. 


Patrick, not all investment is the same.  If you have a family of 5 and buy a smart car for your wife, it won't save you much gas, cause you still need the suburban to move the family.  Seriously, the fact you don't understand this destroys your cred. 

You really get distracted by other issues.  It's not a trade off of all these things.  It's not gas v. wind.  Look at the charts.  It's the peak loads that matter.  There's no need to ever be concerned with night power use, it's free--like coasting in your car doesn't use gas.  (it does use gas to run the a/c, and accessories, but that's not where your gas goes.  It's peak demand.  We have amusement parks, cause of excess capacity on the electrical grid.  We can't save or store that energy, so the ill timed wind is as useful as a town cryer that wants to announce at 3:00AM.  

Finally, Buzz, yes, there are lots of paid advocates out there.  I'm an organic gardener by trade.  I believe in a cleaner environment, and arguably do more for that end than anyone else on these boards.  But, not all "green" solutions are "green."  There's all kinds of snake oil being sold.  If I had to fertilize 11 times with organics more than with conventional fertilizer, I wouldn't have many customers.  It's a failing of gov't that they may make bad choices, though I dare say I might be the most pointed advocate of re-regulation of electricity on these boards.  It's the duty of citizens to compare facts and to identify boondoggles.  Wind power is a boondoggle.  T Boone came out, got his and got out.  A nexus that no one noticed.  T Boone was big in wind and is big in NG.  Wind power requires the construction of NG powerplants as it's the quickest energy generation to flip on and off.  So, either way, we need more gas, more solar, before we blow a dime on wind power.   

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