If we want to build a healthier American economy, Congress must stop supporting special interests at the expense of our nation’s economic potential. The Production Tax Credit is a prime example of just how much this self-destructive pattern hurts competition, enables waste and works against the middle class.
Created in 1992 as a temporary provision to encourage investment in nascent forms of energy, the PTC has ballooned from a short term boost to aid innovation into a massive handout for the now multibillion-dollar wind industry. Since the PTC’s inception, wind energy production has surged from 2.8 million to 167.6 million megawatt-hours. That’s an increase of nearly 6,000 percent. Meanwhile, according to the Department of Energy, the cost of a wind turbine has come down by as much as 40 percent since 2008. The wind industry is also producing on a regular basis more energy than the market demands.
Common sense says that a mature and self-sufficient wind industry should no longer be paid for by the American taxpayer. But, common sense is a rare commodity in Washington and it becomes even scarcer when the special interest spigot has been opened.
The wind industry is now larger than ever and so is its influence on Capitol Hill. And with the growth in the wind industry’s lobbying have come perpetual increases in the PTC’s price tag. Last year, the PTC cost taxpayers $1.5 billion. This year it’s projected to cost $2.8 billion. Next year – $3.5 billion.
The PTC also fosters vast market distortion and even puts the environment at risk. The credit pays out per kilowatt-hour (kWh) of energy produced. That means the more energy you generate, the more money you make – regardless of actual demand. Wind power generators looking to milk the credit for all it’s worth are going to generate as much wind energy as possible. They then sell at artificially low prices and sometimes even engage in negative pricing, where they pay grid operators to take the load off their hands.
All of this puts immense pressure on non-PTC eligible clean energy producers, such as natural gas and nuclear, that are forced to compete on the skewed playing field of price-warping subsidies. In fact, all things considered, wind power in 2010 received 18-times the subsidies of nuclear power and 88-times those of natural gas per kWh. Ironically, because of this dynamic, the PTC can foster greater dependence on baseload energy resources that are worse for the environment.
Over its long life, the PTC has expired and been renewed nine times. In theory, the PTC is expired right now. In reality, the PTC is more like a walking-dead credit because it pays eligible claimants for ten years of energy produced. Facilities that met vague “beginning of construction” standards just before the PTC “expired” on Dec. 31, 2014 will receive credits until 2025 or beyond. That assumes special interests do not succeed in getting PTC extended yet again. Just a one-year extension comes with an estimated 10-year cost of $6.4 billion. If made permanent, as President Obama requested in his 2016 budget, taxpayers would be hit with a $35 billion bill to pay.
The wind industry has greatly matured since PTC’s inception, and it should not be spoon-fed by taxpayers any longer. Even the American Wind Energy Association recognized this back in 2012 when it publically supported a future phase-out of the PTC.
By beginning to take on such wasteful, counter-productive subsidies, Congress can show how serious we are in tackling true tax reform. This is why we introduced the PTC Elimination Act. Our legislation significantly scales back PTC handouts to those who remain eligible and completely dismantles the credit’s statutory framework. Similar proposals have been estimated to save taxpayers $9.6 billion.
But the PTC Elimination Act doesn’t stop there. It uses the savings to lower the U.S. corporate tax rate, which, being the highest in the world, is a major handicap for American businesses. Even President Obama agrees that the corporate rate has to come down if we want to keep U.S. businesses competitive.
Let’s put the American people first, bring new life to the U.S. economy, and eliminate the PTC once and for all.