I examined the magnitude of electricity subsidies for renewables compared with conventional generation technologies in my May 2011 editorial, based on data from a 2008 report prepared by the U.S. Energy Information Administration (EIA). An updated EIA report released in July determined that federal government subsidies have risen substantially during the past three years. In fact, overall renewable energy subsidies have almost tripled, increasing from $5.1 billion to $14.7 billion. In my opinion, we aren’t getting value for the money spent.
A Lucrative Business
My informal survey of the web sites of several wind turbine manufacturers found that the most often cited advantages of wind power are to reduce foreign oil imports (factually incorrect—unless wind power is used to power plug-in electric vehicles—as insignificant oil is used to produce electricity), produce millions of new, high-paying green jobs (we’re still waiting), and reduce carbon emissions. Believing in these goals, the federal government (and many states, for that matter) developed a system of incentives for developers of renewable projects. Federal incentives include the production tax credit (PTC), an investment tax credit, or a cash-back or grant option worth up to 30% of the project value. The PTC is slated to expire at the end of 2012 for most renewable technologies.
However, the price tag for those incentives is quickly rising. The EIA, in a report covering FY2010, found that the magnitude of those subsidies continues to grow each year, as illustrated in the table. In fact, the subsidies for wind were up over 140% (187% in absolute dollars spent) over the past three years.
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| Federal energy subsidies and incentives with a federal budget impact and in direct support of electricity production. Source: EIA |
Failing the Carbon-Reduction Test
Wind power’s performance in reducing electricity system carbon emissions also gets low marks. In many regions, wind turbine owners have bid into the electricity market at below cost or even negative prices, often up to the value of the PTC. That forces coal plants to cycle during off-peak hours. In simple terms, the less-than-full-load operation of these coal plants results in less-efficient operation, therefore producing more carbon emissions per MWh produced.
The practical effect is little reduction in systemwide carbon emissions with the introduction of wind energy. The National Academy of Science (NAS), in a report published in early 2007, agrees. The authors of the “Environmental Effects of Wind Energy Projects,” concluded that “Wind power will thus not reduce carbon emissions; it will only slow the increase by a small amount.” Several subsequent independent studies have confirmed the NAS assessment.
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