End of federal tax credit could spell doom for wind energy

A recent Chicago Tribune article reinforces the relative competitive abilities of the various energy options available to utilities and energy users. The ability of various energy options to compete on a level playing field is an issue that we have been forced to review often on the Coalblog, as we regularly hear how renewable sources are (or will soon be) on par with fossil options.

Given that ever-present prediction of price parity, it is worth it to provide an update on the actual costs associated with producing energy from the various sources. In a recent article discussing an EIA report on federal subsidies for electricity production, the Institute for Energy Research published a staggering graph.

Federal Electric Subsidies

Federal Electric Subsidies

Put in textual terms, the various energy resources received the following subsidies in 2010 dollars per megawatt hour.

  • Natural Gas and Pet. Liquids  ~  $0.64
  • Coal  ~  $0.64
  • Large hydro  ~  $0.82
  • Nuclear  ~  $3.14
  • Geothermal  ~  $12.85
  • Wind  ~  $56.29
  • Solar  ~  $775.64

As can be seen by the figure, solar is being subsidized by over 1200 times more than coal and oil and natural gas electricity production, and wind is being subsidized over 80 times more than the more conventional fossil fuels on a unit of production basis.

The Tribune article discussed above bears out this near complete reliance on government largess. The Tribune reporter notes that without the existence of a $0.02/kWh tax credit/safety net for wind energy, the industry immediately goes into a tailspin, threatening to lay off more than 37,000 employees across the country, and stopping the development of almost 14,000 MW of planned wind projects.

The wind power industry is predicting massive layoffs and stalled or abandoned projects after a deal to renew a tax credit failed Thursday in Washington. […]

Kevin Borgia, who heads the Illinois Wind Energy Coalition, said several years of stability for the tax credit helped drive down costs for wind generation. Without the tax credit, the market for wind power generation will grind to a halt, he predicts. […]

Turbine-makers and development companies already are laying off employees […]

Navigant Consulting expects 37,000 industry jobs to be eliminated within the year. “They’re shutting down production lines,” said Peter Kelley, spokesman for the American Wind Energy Association. […]

To receive the current credit, developers must have their wind projects completed and online by the end of 2012. Therefore, reports are forecasting a massive rush to get developments finished before the federal handouts dry up.

This story once again brings the stability, affordability, and reliability of our domestic coal resources to the forefront. Despite an all out war on coal by regulatory agencies, elected officials, media, and environmental groups, our coal-based electricity resources continue to power 45% of our energy needs at stable costs and they are projected to do so well into the future.

The reality is that American coal is an economic, abundant and environmentally sound fuel source. While others options fail without massive subsidies and government aid, coal just continues to produce.

23. February 2012 by Jason Hayes
Categories: Jobs, Marketplace Information, Utilities | Tags: , , , , , , , | 3 comments