Don’t Revive the Wind Tax Credit

Until last year, the federal government gave a generous tax credit to wind producers of $23 per megawatt-hour. The tax credit has expired, and Nicholas Loris, economist at the Heritage Foundation, writes that wind producers are unable to compete without taxpayer support.

The $23 credit covered half of a typical wind producer’s wholesale electricity price; for some producers, it covered the entire price, says Loris. In an interview with the Financial Times, Loris notes that Siemens employee Lisa Davis, who heads the company’s global energy division, admitted that the wind industry was not yet able to compete with other energy sources.

Lawmakers have called for a reintroduction of the wind credit, but Loris writes that such a move would do nothing to make a business self-sustaining, rather it would make these businesses reliant on taxpayer dollars. He explains: Wind producers receiving a tax credit are so heavily subsidized that the credit allows them to ignore the costs of production. This removes the pressures that would otherwise exist to lower costs.

Why should wind energy be any different from a normal business venture? Startup businesses routinely fail when they are unable to form a sustainable, competitive business model. That failure, says Loris, is “a signal those resources can be put to more productive use in the economy.” Moreover, he points out that wind energy is hardly a brand new, startup business. Businesses have been looking at using wind energy for more than two decades, and its failure to thrive should not be rewarded with taxpayer subsidies.

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