Over 20 years of federal tax breaks and state purchase mandates have failed to turn wind energy into an economically viable industry. The industry has disappointingly little to show for the handout, in terms of long-term job creation and energy affordability. But despite this poor performance, Congress and the IRS have repeatedly extended and expanded the production tax credit (PTC), the main tax break for wind energy. This year, this ever-expanding tax credit expanded even further.
First, at the start of January, Congress included a provision in the Fiscal Cliff deal to extend and greatly expand the PTC through lower eligibility requirements. In the past, wind farms had to be placed in service and generating electricity in order to claim the credit; starting in January, they only had to be in the beginning stages of construction. The IRS clarified shortly thereafter that wind farm projects would be able to receive the credit if they spent as little as 5 percent of the construction costs.
Then, in April, the IRS issued a notice that raised the value of the tax credit from $22 per megawatt-hour of electricity produced to $23 cents.
These changes, which occur with little public notice, mean that the PTC costs taxpayers more and more every year. Historically, the PTC has cost an average of $5 billion per year; thanks largely to these expansions, it's on track to cost $12 billion this year. Given the federal government's serious fiscal problems, it makes no sense to give increasing levels of support to any private industry, particularly one as inefficient as wind energy.
These repeated extensions and recent expansions were apparently not enough for the wind energy industry, as its lobbyists are currently asking Congress for even more help. Testifying before a House Oversight subcommittee in October, a spokesman for the American Wind Energy Alliance (AWEA) called for extending the PTC for six more years—a "phase-down" plan in name only.
If members of Congress are serious about creating jobs and keeping energy affordable for hardworking Americans, then they should stop giving special favors to their favorite energy technologies. They should encourage an energy portfolio based on energies that can actually make it on their own in the marketplace—not ones that need to be propped up with handouts indefinitely. Unfortunately for American taxpayers, few show signs of stopping the ever-increasing handouts. The PTC is currently scheduled to expire on December 31, 2013, and Congress should ensure that it does.
Harbin Hanson is Federal Affairs Manager for Americans for Prosperity.