Time to Wind Down Wind Subsidies

On the campaign trail President Barack Obama pushes for renewing the billions in federal subsidies that support the wind power industry on the grounds that it creates thousands of jobs. Of course, dumping government money into any activity will create jobs—the question is are such jobs worthwhile? Over at the Wall Street Journal, Senator Lamar Alexander (R-Tenn.) and Congressman Mike Pompeo (R-Kan.) argue in their op/ed, "Puff, the Magic Drag on the Economy," [sub required] that it's past time for federal production tax credit propping up the wind power industry to fade away. As they note:

From 2009 to 2013, federal revenues lost to wind-power developers are estimated to be $14 billion—$6 billion from the production tax credit, plus $8 billion courtesy of an alternative-energy subsidy in the stimulus package—according to the Joint Committee on Taxation and the Treasury Department. If Congress were to extend the production tax credit, it would mean an additional $12 billion cost to taxpayers over the next 10 years.

The two Capitol Hill denizens point out that the tax credit is so lucrative that the wind power producers crank their wind turbines even when the grid doesn't need the power. This leads to "negative pricing." Basically, wind producers flood the grid with electricity forcing baseload coal and nuclear plants—which can't just power up and down to take into wind power's inherent erratic production—to sell their power at a loss.

The result, as the two Capitol Hill denizens go on to explain, is that: 

Temporarily lower energy prices driven by wind-power's negative pricing will cripple clean-coal and nuclear-power companies. But running coal and nuclear out of business is not good for the U.S. economy. There is no way a country like this one—which uses 20% to 25% of all the electricity in the world—can operate with generators that turn only when the wind blows.

One might reply that building nimble natural gas plants which can respond more quickly to the fickle fluctuations of wind power could address this problem. Since this is so, why not just let commercial power generators build gas plants and save the money spent subsidizing wind?

But what about all those subsidized jobs? Lamar and Pompeo reply:

But they are jobs that exist only because of the subsidy. Keeping a weak technology alive that can't make it on its own won't create nearly as many jobs as the private sector could create if it had the kind of low-cost, reliable, clean electricity that wind power simply can't generate.

The point is that the money spent on subsidized wind could have been invested privately in ways that would have created even more jobs in more productive areas of the economy.

As background on green jobs versus real jobs, see my column, "The Unseen Consequences of Green Jobs." I also describe my visit to a wind farm in Montana in my article, "Wind Turbines Are Beautiful."