The Wind Subsidy Bubble

Green pork should be a GOP budget target.

Ethanol isn't the only heavily subsidized energy source that won a multibillion dollar jackpot in last week's tax deal. The other big winner was the wind industry, which received a one year extension of a $3 billion grant program for renewable energy projects.

Talk about throwing good money after bad. Despite more than $30 billion in subsidies for "clean energy" in the 2009 stimulus bill, Big Wind still can't make it in the marketplace. Denise Bode, CEO of the American Wind Energy Association, had warned that without last week's extension of the federal 1603 investment credit, the outlook for the wind industry would be "flatline or down." Some 20,000 wind energy jobs, about one-quarter of the industry's total, could have been lost, the wind lobby concedes. For most industries that would be an admission of failure, but in Washington this kind of forecast is used to justify more subsidies.

But what have these subsidies bought taxpayers? According to AWEA, in the first half of 2010 wind power installations "dropped by 57% and 71% from 2008 and 2009 levels." In the third quarter, the industry says it "added just 395 megawatts (MW) of wind-powered electric generating capacity," making it the lowest quarter since 2007. New wind installations are down 72% from last year to their lowest level since 2006. And this is supposed to be the miracle electricity source of the future?

The coal industry, which Mr. Obama's Environmental Protection Agency and Interior Department have done everything possible to curtail, added almost three times more to the nation's electric power capacity in the first nine months of 2010 (39%) than did wind (14%), according to the U.S. Energy Information Administration.

The grant program that Congress has extended was created in the 2008 stimulus bill. It forces taxpayers to pay 30% of a renewable energy project's costs. Big Wind insisted on these grants because wind energy producers don't make enough net income to take advantage of the generous renewable energy tax credit.

The industry also wants a federal renewable energy standard, which would require utilities to buy power from green energy projects regardless of price. Without that additional subsidy, AWEA concedes that wind power will "stall out." It is lobbying for billions of dollars of subsidies to cover the cost of hooking off-shore wind projects to the electricity transmission grid. And now that the cap-and-tax scheme on coal and oil and gas has failed in Congress, the windmillers want the EPA to use regulation to raise costs on carbon sources of power.

Big Wind also has lobbying operations in state capitals, where it has been pushing state renewable energy standards. More than half the states—mostly in the West and Northeast—have enacted these mandates, which are already inflating home and business electricity bills.

According to an analysis by Chris Horner, an energy expert at the Competitive Enterprise Institute, the stimulus bill's subsidies for renewable energy cost taxpayers about $475,000 for every job generated. That's at least four times what it costs a nonsubsidized private firm to create a job—a lousy return on investment even for government.

The wind industry claims to employ 85,000 Americans. That's almost certainly an exaggeration, but if it is true it compares with roughly 140,000 miners and others directly employed by the coal industry. Wind accounts for a little more than 1% of electricity generation and coal almost 50%. So it takes at least 25 times more workers to produce a kilowatt of electricity from wind as from coal.

Given this level of inefficiency, it's no wonder that wind and solar energy require at least 20 times more in government subsidies per unit of electricity generated than the average for coal and natural gas, according to a 2007 study by the Energy Information Administration.

The wind industry gave the vast majority of its campaign contributions this election cycle to Speaker Nancy Pelosi's Democrats. If Republicans are serious about shrinking the federal budget and ending corporate welfare, a very good target would be green pork, starting with wind.