Let Production Tax Credit Expire

A new report has been released from the Texas Public Policy Foundation analysts Bill Peacock and Josiah Neely reviewing the impact of the Production Tax Credit (PTC) for wind energy.  According to The Cost of the Production Tax Credit and Renewable Energy Subsidies in Texas, the PTC’s current annual cost in Texas alone is nearly $567 million. If the PTC continues, the cost of the tax credit would run about $4.1 billion through the 10 years ending in 2015.

“The continuation of the Production Tax Credit will cause more disruption in electricity markets and impose higher costs on consumers and taxpayers,” said Bill Peacock, the Foundation’s Vice President of Research and Director of the Center for Economic Freedom. “The negative consequences of the Production Tax Credit are even more apparent in Texas, as it has more wind-generated electricity than any other state.”

For wind producers in Texas there are several programs to aid in development: the PTC, Renewable Energy Credits (RECs) under the state’s Renewable Portfolio Standard, federal grants as part of the 2009 stimulus bill and access to transmission through the Competitive Renewable Energy Zone (CREZ) program. When combined, the programs will cost taxpayers about $12.8 billion through 2015 and the cost of subsidies in the state are on the rise.

“Texas is undergoing a major debate over whether price signals are adequate to maintain resource adequacy,” said Josiah Neeley, policy analyst for the Foundation’s Armstrong Center for Energy and the Environment. “A significant portion of the problem with price signals can be directly attributed to the subsidies for wind generation, particularly the Production Tax Credit.”

Peacock added, “Electric competition is working in Texas; rather, it is government interference with the market led by the Production Tax Credit that is causing today’s concerns regarding reliability. Congress should allow the Production Tax Credit to expire. If not, consumers, taxpayers, and Texas’ world-class energy-only electricity market will pay the price.”

One thought on “Let Production Tax Credit Expire

  1. The Texas Public Policy Foundation document has been debunked as a severely a very low underestimation of the benefits of wind and doesn’t address any of the billions of dollars of new investments wind has added to the Texas economy.

    The report overstates the cost of Texas wind energy development by a factor of almost 100. Correcting for several mathematical mistakes that include double-counting an incentive, accounting for costs that are either not Texas- or wind-specific and more than pay for themselves anyway, and over-stating the only cost that is actually borne by Texas residents by a factor of 3, leads to the conclusion that the cost of wind comes to a grand total of less than 25 cents per month for the average Texas household.

    For less than a quarter a month, what benefits do Texas residents get from wind energy? Data from the Texas independent grid operator shows that current levels of wind generation save Texas consumers around $1 billion each year (on average $10/month per household) by displacing fuel use at the most expensive, least efficient power plants. Additionally, last year the wind industry employed over 6,000 Texans, made around $115 million in property tax payments in the state, and paid local landowners $31 million in lease payments.

    Texas wind energy saves around 7 billion gallons of water each year, and reduces air pollution by the equivalent of taking 3 million cars off the road. Investing a quarter to earn $10 while also creating jobs and protecting the environment sounds like a smart investment to me. That is why leaders from both political parties are standing strong to renew the wind energy production tax credit before it expires at the end of this year.

    Michael Goggin, American Wind Energy Association