Full Title: Wind Intermittency and the Production Tax Credit: A High Cost Subsidy for Low Value Power
Author(s): Wojciech Kopczuk, Justin Marion, Erich Muehlegger and Joel Slemrod
Publication Date: 9/2012
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The United States has subsidized the wind industry for 35 years. The subsidies began with the Public Utility Regulatory Policy Act (PURPA) and Energy Tax Act (ETA) of 1978. Subsequently, with passage of the Energy Policy Act of 1992 (EPAct) wind subsidies were increased through a variety of programs, most prominently the federal production tax credit (PTC). In many electric markets, the value of the PTC tax subsidy is greater than the price of electricity itself.
Today, many in Congress are debating whether it makes sense to continue subsidizing wind, including the Senate’s proposed one-year, $12.2 billion3 extension, given the Nation’s mounting debt, and the harm to conventional generation resources required to maintain reliability. In connection with this debate, this paper examines relevant electric system operational and reliability data in order to assess the consumer value of the subsidies and the actual operational performance of PTC-subsidized wind generation relative to consumer demand for electricity. We find that the vast majority of the Nation’s wind resources fail to produce any electricity when our customers need it most, and that the subsidy is adding billions of dollars of hidden costs while undermining the reliability of the grid.