"What The House GOP Doesn’t Want You To Know About Wind Vs. Oil Tax Credits"
Although yesterday’s hearing of the House Subcommittees on Energy and Oversight was meant to bring scrutiny to federal wind energy incentives, it really brought to light the hypocrisy of calling for an end to subsidies that are necessary to support a growing wind industry while at the same time not addressing the unnecessary incentives still enjoyed by the oil and gas industry.
A March 2013 report by the Government Accountability Office (GAO) seemed to be the starting place for the hearing which centered on the efficiency and effectiveness of wind energy incentives. Solely focused on wind energy, the GAO report really missed the mark in its accounting of programs that the wind industry benefits from — especially since out of the 82 initiatives listed, only two are wind-specific and one of those has expired (Section 1603 Treasury grant program).
This fact has not stopped opponents of wind energy. Concerns about the possibility of duplicative wind energy incentives were echoed throughout the hearing.
In his opening remarks, Oversight Subcommittee Chairman Paul Broun (R-GA) stated, “The wind industry in particular enjoys a wide variety of tax breaks.” He went on to list a handful of incentives available to the wind industry and expressed concern about possible overlapping subsidies, but failed to mention that the vast majority of federal support for wind energy has come from just two incentives: the Production Tax Credit (PTC) and the expired Section 1603 grant program. In fact, the GAO acknowledged in its study that nearly 90 percent of the 82 initiatives (that it reported as supporting wind energy) provided little to no financial support for wind energy.
It’s also important to note that because wind developers had to select either the PTC or the Section 1603 cash grant, the two most important incentives for wind energy have absolutely zero overlap.
One of the more confusing arguments offered during the hearing came from Rep. Cynthia Lummis (R-WY) who asserted, “The wind industry is now successful and mainstream, so the time has come to wean it from taxpayer subsidies.” First off, that argument is counter to what many wind energy opponents have been saying about the industry as they argue to get rid of the subsidies, often citing that the industry has been unsuccessful at becoming cost-competitive.
Second, and more importantly, that line of attack overwhelmingly applies to the oil and gas industry, which continues to receive over $4 billion in tax breaks every year. In addition to being eligible for tax structures currently not available to the renewable energy industry (e.g. master limited partnerships), oil and gas companies benefit from the following tax incentives: percentage depletion deductions; domestic manufacturing deductions for oil production; intangible drilling cost deductions; dual capacity taxpayer rules; amortization of geological and geophysical expenditures; and “last-in, first-out” accounting methods.
The only pro-wind industry witness at the hearing was Rob Gramlich, the Interim Chief Executive Officer and Senior Vice President for Policy at the American Wind Energy Association. Testifying just before him was California State University-Fullerton Professor of Economics Dr. Robert Michaels who listed six reasons why he feels that the government should not subsidize wind energy, including his claim that the wind industry does not create good jobs.
In his testimony, Mr. Gramlich countered the claim by pointing to the 80,000 full-time jobs created by wind energy and the value that the industry brings to the U.S. economy, which includes a rapidly growing renewable energy source that is generating power in 39 states, has added an average of $15 billion in private investment annually over the past five years and has created over 500 manufacturing facilities which provide nearly 70 percent of the parts that go into American-made turbines.
Rep. Lummis was right about one thing: the wind industry has been successful in many ways. But that success has been largely dependent on the PTC, which was only extended through the end of 2013. The PTC is critical to ensuring a more diverse electricity portfolio in the U.S. and helped wind energy become the biggest source of new electric generating capacity in 2012.
In order to drive even greater amounts of investment in the wind industry and to power even more homes with clean, non-polluting energy, the PTC must be extended. A multiyear PTC extension would create the tax certainty necessary for long-term growth and would continue to help drive down the cost of wind energy.
So far, wind energy incentives have supported a domestic energy source that is diversifying the U.S. energy mix, providing good jobs, increasing our manufacturing base and strengthening our energy security — that seems efficient and effective to me.
Mari Hernandez is a Research Associate in Energy Policy for the Center for American Progress.