The Twist in Wind

In many industries, federal tax policies and regulations provide large incentives for increased production.

In the case of wind power, however, tax policy merely creates dependence.

As the debate of the production tax credit, or PTC, for wind power continues on the Hill, many groups have ramped up lobbying activities and arm-twisting both in the corridors of Congress and the cubicles of the press corps.

Currently, the total amount of federal tax credits for the energy sector peaks at $16 billion, with one-quarter designated for gas and oil and the rest apportioned for energy renewables like wind.  If the tax credit, as proposed, is eventually passed, the current 3:1 ratio could reach a subsidy ratio of 9:1 in the future.

According to the American Wind Energy Association, when the subsidy has not been available, production capacity and construction drops by a massive 84 percent.

Wind power is an important component of an “all-of-the-above” energy mix. The government should be in a position to remove red tape and needless regulations hampering the infusion of private investment in our energy sector. Rewarding industries where serious attempts to reduce carbon footprints is a good idea; but improvements in technology, carbon emissions and pricing will naturally determine which sources are more competitive, without government subsidies. The American economy has largely been advanced and sustained by inexpensive and reliable forms of energy, and an ‘all of the above’ energy policy is not only needed, but required to power our economy moving forward.

Until wind power is sustainable, it will remain dependent on subsidies, as confirmed by Warren Buffet, a large investor in renewable energy.  Buffet recently stated, the “only reason” to build wind farms was to obtain the tax credit.

Wind, like other renewable forms of energy, is important and should be encouraged, but our nation must be careful to not to disfavor one form over another. Clean coal, natural gas and even other traditional forms of fossil fuel, such as oil, must all be given an equal opportunity for the foreseeable future.

Tax credits can play an important role, but care must be taken that credits doled out by the federal government do not cost us more in the long run than they are worth.

 

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About The Author

Brigham A. McCown is Chairman and CEO of the Alliance for Innovation and Infrastructure, (Aii) a non-profit dedicated to the safety and modernization of infrastructure. He also serves as president and CEO of Nouveau, Inc. and managing shareholder of McCown, P.C., where he aids as a thought leader and attorney adviser in matters of energy, transportation, homeland security, and the environment. Until 2007, McCown was the nation’s chief energy transportation safety regulator as administrator of the Pipeline and Hazardous Materials Safety Administration. He also previously served as chief counsel of the Federal Motor Carrier Safety Administration. He is a retired naval officer and naval aviator and a member of numerous non-profit boards, including the National Infrastructure Safety Foundation and the Public Institute for Facility Safety. He currently divides his time between Washington, DC and San Francisco, California.