Removing Big Wind’s “Training Wheels”: The Case for Ending the Federal Production Tax Credit

David Dismukes. Funded by American Energy Alliance.  Project Funding: $20,000.

The federal wind Production Tax Credit (PTC), first enacted in 1992 to "jump start" a nascent, but promising industry, provides wind producers with a subsidy of $22 per megawatt hour of electricity generated.  The PTC has been extended seven times, but is scheduled to expire under current law on December 31, 2012.  Extension of the federal wind PTC has become the "stalking horse" in the debate on government's role in picking energy "winners and losers."  Although wind advocates proffer several internally inconsistent rationales for continuing the federal wind PTC, a closer examination of compelling facts and data indicates these purported justifications are not about wind's continued viability without the PTC.  Rather, the wind industry's arguments supporting a continuation of the federal wind PTC simply represent a classic case of "rent seeking" by an established industry seeking to maintain profits through a generous tax subsidy.

The study documents the explosive growth of wind generation as well as the favorable outlook for future wind generation development as a result of Renewable Portfolio Standards (RPS) - not the PTC.  The study finds that wind generation now comprises 50,000 megawatts (MW) of electricity capacity in the United States - a five-fold increase since 2006 - and will continue to grow even without the renewal of the PTC.  The PTC therefore only serves to tip the scale in favor of a well-established industry, giving wind a politically-determined advantage over other types of generation.