Wind Energy Tax Credits Defeated in Senate

The Senate defeated the Stabenow Amendment that would have among other things, extended the Production Tax Credit for wind energy one year and revived the expired 1603 Treasury grant. The Production Tax Credit (PTC) [PDF] provides an income tax credit of 2.2 cents per kilowatt-hour for the production of electricity from utility-scale wind turbines. It is set to expire on December 31, 2012. Section 1603 of the American Recovery and Reinvestment Act of 2009 allows wind project developers to choose to receive a 30 percent investment tax credit (ITC) in place of the PTC or the equivalent cash payment from the Department of Treasury for the value of the 30 percent ITC.

The Stabenow Amendment was defeated on 49 to 49 vote and according to Senate rules needed 60 votes to pass. In an earlier letter to various senators, the free-market coalition, the American Energy Alliance succinctly explained [PDF] why the tax credit should not be extended:

It is increasingly clear that the intervention of politicians and bureaucrats in the energy sector has had devastating economic consequences and led to embarrassing scandals. Yet the Senate is considering amendments to extend disastrous subsidies for windmills and other form of politically-preferred energy sources. We urge you to oppose these amendments.

The PTC was created by the Energy Policy Act of 1992. The wind industry insisted at the time that it needed short-term help from taxpayers and would soon be able to compete on its economic merits. Twenty years later, wind is still uncompetitive, unreliable, and expensive, as reported by the Energy Information Administration (EIA). Yet Congress increased subsidies for wind dramatically in recent years, to a record $5 billion in 2010 according to the EIA.

Even with lavish subsidies and renewable mandates in many states, windmills provide just 2.3 percent of America's electricity generation and according to estimates from the Energy Information Administration, wind will only produce about 4 percent of our electricity by 2035. Worse, redundant back-up capacity is required for when the wind isn't blowing and demand is high.

Wind has been used to generate electricity for over 100 years and can no longer be seen as an infant industry. After decades of subsides and special treatment, wind must someday stand on its own as an economically sustainable industry. Now is a great time to start….

Sounds about right. 

For background, see my 2010 column, Wind Turbines Are Beautiful.