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Estimating the State-Level Impact of Federal Wind Energy Subsidies

Estimating the State-Level Impact of Federal Wind Energy Subsidies

Full Title: Estimating the State-Level Impact of Federal Wind Energy Subsidies
Author(s): Institute for Energy Research
Publisher(s): Institute for Energy Research
Publication Date: November 1, 2015
Full Text: Download Resource
Description (excerpt):

This paper examines the distributional impacts of federal subsidies for wind energy across all U.S. states, building on our December 2013 report on the same topic. The obvious difficulty with examining federal subsidies for wind is that, at different points in time, developers of wind facilities have had more than one type of subsidy available to them. For example, over the past 10 years of the wind Production Tax Credit (PTC), some eligible wind facilities elected to take the Investment Tax Credit (ITC) or the Section 1603 grant program instead of the PTC.

As we explain below, this does not change the distributional nature of federal wind subsidies, but merely the timing—when wind developers elected to collect the subsidy. Also, our 2 methodology likely underestimates the total amount of subsidies paid to wind developers over the ten-year period because the fact that many wind developers elected to take Section 1603 grants implies that the grants were more valuable than the PTC.

To estimate the distributional impacts of federal wind subsidies, we assume the owners of all eligible U.S. wind facilities in operation over the last 10 years elected to take the PTC rather than other subsidies available to them. Essentially, we construct a new measure of wind subsidies based on the amount of the PTC (post-tax, per KWh) and the level of wind production in each state, and we call this the “federal wind subsidy burden” to differentiate this metric from actual PTC allocations (some of which were crowded out by other subsidy options).

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