Why are we not talking about the cost to taxpayers which comes from wind farms that have NOT been built due to expiration of the PTC?
Critics of the Production Tax Credit have been citing a report from the Congressional Joint Committee on Taxation that claims there is a direct cost to the taxpayer of $13.8 billion over five years as a result of the wind tax credit.
WHAT MOST PEOPLE DON’T KNOW is that this estimate was calculated — according to the Congressional Research Service — by calculating the “foregone tax revenue” from wind farms that are currently receiving the credit. This estimate was based on the assumption that wind farms would be paying more taxes if they had not received the PTC.
This is a completely false assumption and I am astonished that the American Wind Energy Association has not done more to refute the estimate. Had these wind farms not received the PTC, they would likely not have been built in the first place, as evidenced by the 92% drop in new wind farm starts since the PTC expired in 2013. Without the tax credit, NO wind farms would have been built and that means there would have been NO tax revenue at all.
A wind farm can produce between $2 million and $10 million in annual income, and owners do pay taxes on that income, albeit at a reduced rate due to the PTC. But taxes ARE paid by these wind farms and throughout the entire supply chain that supports them. Thus, the PTC is IN FACT a tax revenue GENERATOR. There is NO cost to the taxpayer as a result of the PTC. There certainly IS a direct cost to the taxpayer (in terms of foregone revenue) for every wind farm that is not built but would have been if the PTC had been extended for the long term.
It’s time to make noise. The American Wind Energy Association should sharpen its message and drive the point clearly that the PTC generates tax revenue by promoting the development of wind farms and suppliers that pay taxes. Without the PTC, this important tax revenue from wind simply evaporates.
Ask your friends what they think the success of renewable energy would look like to them. I expect many of them would say that once the cost of renewable energy is reduced to the same level as fossil energy, then renewables would be considered successful.
Are fossil fuels really the benchmark for renewable energy?
We seem to be saying that the most important consideration for renewable energy is that the price must compete favorably with coal and natural gas. Is that really the most important consideration?
Consider the now-indisputable fact that May and June were the hottest months in recorded history…worldwide. Consider that atmospheric and ocean surface temperatures have increased steadily over the last 25 years, and have moved dramatically upward over the last few. Then consider that methane hydrate deposits on the sea floor are now destabilizing, hovering just at the temperature that keeps methane from dissolving into the atmosphere. One more degree upward will start the unstoppable process of melting.
As the Intergovernmental Panel on Climate Change has been warning for years, the gargantuan amount of barely-frozen methane in the sea is the trigger that ends the game for all of us. Once this methane begins to release into the atmosphere, it will drive global temperatures higher faster than we can possibly prevent. Game over, as they say, for life as we know it.
The very latest studies now suggest that the Earth’s sixth major extinction event may have already begun, and we’re causing it. The most recent extinction event – the fifth one that occurred sixty five million years ago – killed all the dinosaurs and 75% of all the species on Earth. We know that that event was caused by an asteroid impact. The event before that – the fourth one that occurred 200 million years ago – was caused by rising CO2 levels in the atmosphere. That CO2-related extinction event was worse than the asteroid impact and it took far longer for the Earth to recover.
If there’s any good news, it is that the sixth major extinction event may still be preventable with conservation and by aggressively replacing fossil energy with clean renewable energy technologies. So ask yourself, what would you use as a benchmark to measure the success of renewable energy? Would it be our ability to sell renewable energy below the cost of fossil energy? Or perhaps it’s time we all realized that our planet is worth saving atany cost?
It’s not always what it appears to be
I’ve spent the last couple of weeks trying to understand what may be the most outrageous case of cognitive dissonance in human history. If you missed it in the news, the NOAA-operated Mauna Loa Observatory in Hawaii reported that CO2 levels have reached 400 parts per million for the first time in more than 800,000 years. The report went on to say that the last time CO2 was at 400 parts per million, humans didn’t even exist.
Articles I’ve read on the topic speak of how we are now certainly past the tipping point. There are expressions being used such as “game over,” “dire situation” and “point of no return” along with predictions of the northern ice cap being completely gone in the next several years and global sea rise approaching eight feet or more in the next 25 years.
Yet, when I look at today’s online news sources, the leading stories are: Police name suspect in New Orleans’ parade shooting; 3-man crew returns safely to Earth from International Space Station; UN Security Council condemns deadly car bombing in Benghazi; Syria wants details before deciding to attend peace conference; The Shore gets ready for Prince Harry; Both Sides Condemn Convicted Pa. Abortion Doctor; Samsung Advances Toward 5G Networks. To find any news about climate change, you would have to go to the Science News section. And here’s where I find the cognitive dissonance.
If it really was “game over” for the way we all live our lives, if the sea really was going to rise as much as eight feet (which would destroy Houston, New York City, Los Angeles, San Diego, Miami, New Orleans (again), Washington D.C., Boston, and also Amsterdam, Dubai, Alexandria, Cairo, Copenhagen, Singapore, Melbourne and Sydney and nearly every other coastal city on Earth), don’t you think it would be the leading story in the news every day, seven days a week? If a clear and present threat to billions of people worldwide really did exist, would the news agencies continually shuttle this information all the way back to the Science section – perhaps one of the least-read sections of the news? Wouldn’t this at least be the leading World News story?
I’ve tried to draw a comparison with the amount of news coverage given to other important issues of global significance in the past. For example, when the Allies were fighting in Europe during WWII, practically every newspaper in the world carried the news of each day’s war events right on the front page. Many major newspapers continued the war story to the inside pages along with related human-interest stories…day after day, month after month. And with so much news about the war being consumed daily, people couldn’t help but believe that the war was very important – clearly, it was the most important story of the time.
Today, news agencies are giving climate change about the same level of coverage they give to the political unrest in Syria. Is it any wonder that news about the catastrophic impact of climate change is being received by the public with skepticism? At the same time, a recent study showed that out of nearly 12,000 peer-reviewed scientific papers on climate change, only 84 of them disagreed with the vastly supported conclusion of the scientific community. Hardly any scientific conclusion…ever…has been supported by such a consensus among experts.
I believe we all must feel some sense of this dissonance.
If people are ever going to unite behind the effort it will take to reduce the level of greenhouse gases in the atmosphere – and any solution is going to require massive global cooperation – it will only come after a purposeful and prolonged campaign by the mainstream media to inform the world. Until this happens, and as long as a few climate skeptics along the fringe continue to be given the headlines for their self-aggrandizement, we will continue to make little progress.
Let’s create a new PTC that better serves our nation
The election is over, the continuation of the Production Tax Credit is now a foregone conclusion, but there’s a lot of work to do still. With a lame duck congress, it will be an uphill battle to get this done by the end of the year.
But the current strategy of time-limited extensions to the PTC is too…well, arbitrary. There is no planning behind the timetable, and the approach doesn’t result in the achievement of any specific goal. The on-again-off-again uncertainty of this approach makes it a very chaotic incentive for the investment world, and this creates an obstacle to the very purpose of the incentive — to encourage commercialization. So I want to propose a better – much better – approach.
The Department of Energy, in their now famous “2030 Report”, established a clear stretch goal for the wind industry. The report carefully looked at all of the implications of achieving 20% of the nation’s electrical power from wind energy by the year 2030. Ambitious, to be sure. We know that to achieve that goal the industry would have to step up to a level of manufacturing, training, planning, permitting and installation never before achieved anywhere in the world. I won’t go into the numbers here, but it would require an enormous amount of new effort in a relatively short time.
But, let’s use the report as a goal (because it was very thoroughly studied), and let’s align the tax incentive to the meaningful pursuit of that goal. So, rather than arbitrarily limiting the PTC to one or two or five years, let’s rewrite the PTC to remain in place until a certain level of capacity is achieved. If our national goal is 20% wind, then write the PTC to remain in place until we achieve 20%, or some significant portion of that.
The biggest advantage of this approach is that we can all calculate pretty easily how much domestic manufacturing we can create with the assured certainty of this tax incentive. If the industry knows that the PTC will provide a reasonable profit margin for some number of megawatts of new wind energy, then it will be a pretty simple investment calculation to know how many turbines will have to be manufactured, how many factories will be needed throughout the entire supply chain to build them, and most importantly how many skilled jobs this will create. The DoE report detailed all of this very thoroughly.
What I propose is a more sensible PTC that is better aligned with the nation’s priorities. The government shouldn’t offer incentives that are established against meaningless deadlines, but should rather establish incentives that support a plan to achieve a measurable outcome. In this way, the eventual retirement of the incentive will always be known and will not come later as a surprise.
I would like to urge the American Wind Energy Association to consider this approach as they lobby Washington for the next PTC extension. Now is the time to contact your representatives and propose that the PTC be rewritten in this way.
Mr. Romney, let’s be honest about subsidies to renewable energy
A note to my readers: I have received many responses to the letter below, and I wanted to take the opportunity to clarify and correct a couple of points. I appreciate the input from my readers and I believe this letter has been made stronger as a result of the input. Please link this letter to as many websites, Twitter and Facebook pages as you can as it is crucial to get the word out prior to the upcoming election. Feel free to use this information, but remember to credit the Environmental Law Institute as the original source for the data.
What follows is my open letter to Governor Mitt Romney’s campaign. I hope enough people link to it that the campaign and the news media will have to address it. Please get the word out as quickly as possible.
Wally
Dear Mr. Romney,
A lot of attention was given to you by the media when you declared you would allow the Production Tax Credit for wind energy to expire at the end of the year. Your campaign went further to claim that you will “end the stimulus boondoggles, and create a level playing field on which all sources of energy can compete on their merits.”
If you truly wish to create a level playing field for all sources of energy, please tell us what you intend to do about tax credits — those that you call stimulus boondoggles — that currently exist for coal, oil and gas. Many of these tax incentives have existed for decades while the fossil fuel-based industry continues to set new records for multi-billion dollar profitability year after year. What is your position on the fact that the vast majority of federal subsidies for fossil fuels and Ethanol were spent to support energy sources that emit high levels of greenhouse gases when used as fuel?
How will you reconcile the fact that the federal government has historically provided, and continues to provide, substantially larger subsidies to fossil fuels than to renewables while fossil fuels produce multi-billion dollar profits? Fossil fuels are a mature, well-developed industry that has enjoyed government support since its inception over 100 years ago, totaling approximately $72 billion between 2002 and 2008. During the same period, renewable fuels, which are a relatively young and undeveloped industry, totaled merely $29 billion and 80% of that went to Ethanol subsidies.
How will you address the fact that the Production Tax Credit for wind energy repeatedly approaches expiration on a regular basis unless Congress and the President decide to extend it, throwing costly uncertainty into the renewable energy business model; while the largest subsidies to fossil fuels have been written into the U.S. Tax Code as permanent provisions? It appears that you like to criticize special tax credits for wind and solar and pretend that the tax incentives to fossil fuels don’t exist. Since powerful lobbyists for the fossil fuel industry have gotten their incentives permanently added to the tax code, you seem to believe that they aren’t tax incentives any longer but just ordinary adjustments to corporate balance sheets.
Since so many Americans are spending a lot of time discussing the upcoming expiration of the PTC, can you please address your plans for…
– the Credit for Production of Nonconventional Fuels – IRC Section 45K. This permanent tax provision provides a lower tax rate for companies who produce certain fossil fuels.
– the Oil and Gas Exploration & Development Expense – IRC Section 617. Also known as Intangible Drilling Costs (IDC). This tax provision allows fossil fuel companies to deduct the cost of wages, machinery, or unsalvageable materials. The term “unsalvageable materials” is left ambiguous so it can be applied to a broad range of intangible costs.
– the Oil and Gas Excess Percentage over Cost Depletion – IRC Section 613. This permanent provision in the tax code allows independent producers and royalty owners to deduct 15% of gross income earned from oil, gas and oil shale deposits. The nature of this tax incentive is nearly equivalent to the wind energy PTC, except that this one has been made a permanent provision in the tax code for fossil fuels.
– Coal Royalty Payments as Capital Gains – IRC Section 631(c). This permanent provision allows income from the sale of coal under royalty contract to be be treated as a capital gain rather than ordinary taxable income, thereby reducing the tax liability for qualifying individuals. Would you please explain who these qualifying individuals are, and why they deserve this special treatment when profits in this industry are so high?
– the Credit for Enhanced Oil Recovery Costs – IRC Section 43. This tax credit, also permanently written into the tax code, is available specifically for companies who use hydrocarbon-based tertiary injectant methods.
– the Exclusion of Alternative Fuels from the Fuel Excise Tax – IRC Section 6426(d). This section further reduces the tax liability specifically for liquified petroleum gas (LPG), P-series fuels, compressed natural gas (CNG), liquefied natural gas (LNG), liquefied hydrogen, liquid coal, and liquid hydrocarbon from biomass.
Those are just a small number of the many tax incentives given to fossil fuel companies that have been written into the tax code as permanent provisions. You have not addressed these in your campaign platform. Do you intend to remove these from the permanent tax code?
Let’s be honest.
I come with an idea. I propose that we extend the PTC long enough for the government to remove the special incentives for fossil fuels from the tax code, thereby leveling government support for all energy sources. Or, we can agree to extend the PTC until the wind and solar industries have managed to add equivalent tax incentives to the tax code that equally benefit them. You said you wanted to create a level playing field. I’m all for it. But allowing the PTC to expire on the basis of “leveling the field for all energy sources” while the fossil fuel industry continues to enjoy their special incentives is the height of government hypocracy.
Respectfully,
Wally Lafferty
A Sustainability Minute blogger
For more information on special tax incentives for all energy sources, see: Estimating U.S. Government Subsidies to Energy Sources: 2002-2008, by the Environmental Law Institute.
One of the questions that will be debated in the upcoming election campaign is what to do about nuclear energy. I don’t want you to be fooled by the political posturing of either candidate as they begin to tilt their positions to align with their largest campaign contributors. Nuclear power must become a very important part of our energy mix.
As I talk with people about energy, the discussion inevitably turns to nuclear power, and it only takes less than a minute for Fukushima to come up as an example of why nuclear power is bad. But I want to point out that the catastrophe at Fukushima was not the result of a technology failure. If it wasn’t for the tsunami that slammed into the plant following a magnitude 9.0 undersea megathrust, the Fukushima plant would still be operating safely today and no one would be thinking about shutting down their nuclear power plants.
No, the catastrophe at Fukushima was the inevitable result of a failed environmental policy, and nothing more. A properly conducted environmental assessment would never have allowed the plant to be built on the beach close to an offshore active fault line to begin with. Proper environmental regulations would ensure that the risks were identified and the power plant’s location would have been chosen to ensure the safety of the plant and nearby communities. That’s what environmental impact assessments are for.
But the critics of nuclear power have turned their fear and irrational sentiment into a religion. We should stay focused on the science — that is, the facts, the evidence, and the consensus among real experts. Today’s nuclear technology is safer than most other forms of energy — it is exponentially safer than coal.
Consider that the coal industry caused over 13,000 premature deaths in 2010, as well as almost 10,000 hospitalizations and more than 20,000 heart attacks. That was just in the US and in just a single year. If the nuclear power industry caused such hazards to human health, it would be out of business tomorrow. In contrast, how many deaths has the nuclear power industry caused? If you count the indirect deaths caused by Chernobyl, there have been less than 5,000 deaths in the industry’s entire 75 year history.
The point I want to make is that environmental regulations exist for a very good reason. Let Fukushima be remembered as an example of what happens when environmental policy is not given adequate attention. Let us all demand that our next President prioritize the utmost care for our environment. Let us not continue to point toward Japan as an example of a failure in nuclear technology — that simply isn’t true.
Obviously, nuclear energy isn’t sustainable energy. But, with combined cycle natural gas it may well be one of the two most viable solutions for reducing coal in our base load for the next 50 years. Together, natural gas and nuclear power should be our bridge into a fully sustainable energy future. In the mean time, truly sustainable energy will continue to evolve, and will one day provide the largest portion of our base load.
Debunking the most popular myths about wind energy
With the 2012 US Presidential election coming this fall, we can be sure that one of the topics being debated will be what to do about energy. The debate will include issues related to coal and “clean coal”, natural gas and fracking, risks of nuclear accidents, domestic oil drilling and its impact on the environment, and of course, renewables. All of the above.
Renewable energy sometimes seems to be the most controversial, with some believing that wind and solar can do a lot to alleviate our dependence on fossil fuels, and others believing that intermittent production and government subsidies make these technologies “non starters.”
I want to focus mainly on wind energy, and debunk some of the most common myths that are being sold today. Hopefully, this will give you what you need to formulate an informed opinion as you listen to the upcoming debates.
This is a photo I took while standing on top of a 3 MW wind turbine in Denmark. The coast line for the North Sea is in the background. Click to enlarge.
Myth No. 1: Wind energy is not commercially viable without help from the tax payers.
This is perhaps the most common myth about wind energy. This claim rests on the idea that the federal government must provide money to the wind producers in order to make the business profitable. Many argue that we can no longer subsidize wind energy while our nation is so far in debt.
It is true that up until the financial collapse in October of 2008, wind enery was more expensive than fossil fuel energy. But this has changed. The price per kilowatt-hour of wind energy has fallen year after year for many years. This is due to many factors, but the market has driven down the price. The American Wind Energy Association, which monitors all aspects of wind generation, claims today that the average price of wind energy is about 6 cents per kilowatt-hour, which is nearly the same price for energy that comes from a combined cycle natural gas plant. The group says wind energy is actually about 2 cents cheaper than coal-fired electricity.
Source: Clean Technica (http://s.tt/12tsQ)
The question then arises, if the cost of wind energy is on par with other resources, then why must we continue to provide government support? The answer is simple. While the price of energy is on par, the profit margins are not. Not yet, anyway. Natural gas and coal producers enjoy the benefit from having very mature and cost-efficient supply chains that allow for healthy investment returns. Wind energy producers are still working hard to build the necessary supply chains and put the statutory regulations in place that will make wind energy as profitable as other resources. Until this is completed, tax incentives will be necessary to increase the profit margins enough to attract investors.
But this is an important point. The Production Tax Credit is not a subsidy, and should not be viewed as one. A subsidy would be money that the government gives to wind producers — money that comes from pockets of the tax payers. The PTC is a tax credit, meaning that the wind producer has to produce the money himself and is able to pay a slightly lower tax rate, which increases his profit margin. The PTC currently allows a wind producer to keep 2.2 additional cents of the revenue he generates from each kilowatt-hour for the first 10 years of production. After ten years, the tax rate returns to normal. So money never flows from the taxpayer’s pocket to the wind producer, rather the wind producer pays taxes to the government at a slightly more attractive rate on the income he generates himself. Clearly not a subsidy.
I have argued many times that the PTC, in fact, is a tax revenue generator. History has shown that in each year when the PTC has been allowed to expire, there have been no new wind farms installed because the business model isn’t yet profitable enough for investors to take an interest without the profit margin that’s created by the PTC. This means that the tax revenue that the new wind farm could have produced, at only 2.2 cents below the standard tax rate, dropped all the way to zero because the wind farm didn’t get built. I would say that some tax revenue is better than no tax revenue at all.
I worry about the looming expiration of the PTC this year, particularly. In the past, wind turbines were imported from Europe. So when the PTC expired, we stopped buying turbines from overseas. Today, however, wind turbines are manufactured in the US. So this time if the PTC expires, American factories will close, creating an even greater manufacturing gap between the US and other countries. Extending the PTC is an obvious no-brainer.
Myth No. 2: Wind energy is intermittent — it doesn’t work when the wind doesn’t blow.
This is obviously a true statement, but also misleading in the way it’s commonly applied. Of course, if the wind doesn’t blow then there is no energy produced. Critics claim that this intermittency means we can never rely on wind energy for a substantial portion of the base load.
Yet Germany, Denmark, Scotland and the UK, and other European countries are expanding their own wind energy generation to provide 50% or more of their base load. Why do the Europeans not have the same challenges that prevent the US from adopting more wind energy into the base load? Do they have steadier wind?
No, they have no better wind resources than the US does. But the Europeans have figured out that when the wind stops blowing in one location, it doesn’t necessarily stop blowing in all locations — the wind is always blowing somewhere. The same is true in the US. But in the US, the tendency is to put large numbers of wind turbines all in one place. So, if you install 200 megawatts of wind turbines in one location, then you lose all 200 megawatts of the base load when the wind stops blowing. This creates havoc with the grid operators, and this is why critics cry about intermittency.
In Europe, however, wind turbines are distributed. Driving around Germany, for example, it is common to see five or six turbines in one location, seven or eight turbines several miles down the road, four or five further on, and so on. As you drive around, you are always passing small numbers of turbines, some turning and some not, depending on where the wind is blowing. When the wind stops at one area, wind turbines in other areas are still producing power. This means that some portion of the base load is always being produced by wind. Over the years, as confidence has grown in this distributed model, more and more of the European base load has been transitioned to wind energy with more of the base load being planned for the future. Much more.
An added advantage of distributing wind turbines is that grid connection is cheaper and easier. Large wind farms require very robust connections to the grid, and these connections become limiting factors to the amount of energy that can be produced. By distributing turbines around the region, smaller grid connections can be made that do not require large expensive substations and grid redesign efforts.
So, while this myth carries some element of truth, there are very practical ways to overcome the problem of intermittency.
Myth No. 3: The noise!!!
I have heard many claims about wind turbine noise. Some people complain about never-ending headaches, inability to sleep, and inability to concentrate. Some have even complained about the noise from turbines disturbing their livestock, keeping cows from producing milk and chickens from producing eggs.
If a wind turbine is making any noise at all, there is something wrong with it. I have heard wind turbines make noise when the main bearing is going bad, but I have also stood at the base of large turbines many times and had conversations with people without having to raise my voice at all. A properly operating turbine produces less noise than a person talking. Here is a link to a YouTube video that compares wind turbine noise to other common noises. Form your own opinion. From first hand experience, I can assure you that this video is very accurate. http://www.youtube.com/watch?v=JD0v9_zV2uk
Myth No. 4: The rare earth elements needed to produce magnets for wind turbine generators require the same mining operations that coal does, which has an equally bad impact on the environment. Also, these elements are rare, so there is not enough of them to produce all the turbines we would need.
Actually, these are both completely false claims. But, frankly, I hope this issue becomes a larger part of the debate. We have known for years that there is going to be a problem — not because neodymium and dysprosium are rare, but because China has been nearly the only producer of these elements, so they can manipulate the price. By the way, these elements were named “rare earth elements” before they were later found in abundance but the name stuck. They are not rare at all and are found today nearly everywhere. The US has plenty of neodymium and dysprosium reserves, so we can produce these materials ourselves if we choose to.
Now, to keep this in perspective, consider that it takes roughly 1,300 lbs of neodymium and dysprosium to manufacture the magnets for a permenant magnet generator for a wind turbine. That 1,300 lbs of material will keep producing enough electricity to power all of the lights, appliances, electronics, heat and air conditioning for approximately 1,000 homes for 20 years. That 1,300 lbs of material is never “consumed” but is put to use continually and can be recycled again at the end of the turbine’s 20-year life and put to use again.
Contrast that with coal. It takes more than 714 lbs of coal to power just one 100 watt light bulb for one year. The coal used to power that one light bulb is consumed and must be replaced with another 714 lbs of coal for the second year. And so on. That adds up to 14,280 lbs of coal to power just one light bulb for 20 years.
So while production of permanent magnets does require mining, it is a much more sustainable form of mining because the material removed from the earth is never consumed. I believe I will go with wind energy.
Myth No. 5: Wind turbines kill large numbers of birds.
Earlier models of wind turbines were relatively small with blades that turned at a much faster rotational rate than today’s larger multi-megawatt machines. Those smaller fast-moving blades were a challenge for birds and collisions did occur. The frequency of bird deaths at wind farms used to be around 10,000-40,000 bird deaths per year. Those were a lot of bird deaths, to be sure, but many fewer than the estimated 40 million bird deaths per year caused by impacts with fast-moving cars on interstate highways. Today, however, the larger wind turbine blades move much slower and have become a much smaller risk for birds resulting in rare occurrences of deaths.
— I hope this information was helpful. The debate over energy is one of the most important debates of all. Please take just five minutes to let your elected representatives know how you feel about wind energy. Just drop them an email demanding that the PTC be extended for five years. I’ve been told that it only takes about a dozen concerned citizens to get a representative’s attention. So your email or phone call really can make a difference. Please feel free to copy and paste any of this material if you can use it.
And, of course, your comments or emails to me are always welcome. You can reach me directly at wally.lafferty@yahoo.com.
Sun-Tzu: “Keep your friends close, but keep your enemies even closer”
Those who follow the wind industry have undoubtedly heard that the US House of Representatives failed last week to extend the Production Tax Credit for development of new wind farms — the PTC is scheduled to expire at the end of this year. The PTC is a government incentive that provides a tax deduction for up to one third of the cost of new wind projects. The PTC is technically not a subsidy — no money actually changes hands from the government to the wind farm developer. The PTC is a tax deduction. Over time, it allows wind farm developers to keep more of the money they earn from their wind power plants. Even with the PTC, a new wind farm would still pay taxes, albeit at a more favorable rate.
However, many Americans mistakenly believe that the PTC is a subsidy, and they feel that in this era of government over-spending we can not afford to keep handing money over to green energy projects. There has been a strong lobby effort — entirely by fiscal conservatives — to remove these incentives based on a dire need to control government spending. They somehow fail to realize that if new wind farms are not developed, then new tax revenues will not be generated.
The wind industry in the US, brought together by the American Wind Energy Association (AWEA), has spent recent months lobbying heavily to have Congress pass an extension to the PTC. AWEA has argued that extending the PTC will provide much-needed stability to the industry, will save jobs in the US and will allow the wind energy industry to continue its impressive growth. Indeed, the PTC has been allowed to expire three times in the past two decades, and in each of those periods there were virtually no new wind energy projects developed in the US. There is every reason to believe that last week’s decision will have a similar impact on the industry in 2012 and 2013.
The wind industry came together and put the US government on notice during the closing months of last year. Vestas and other leading turbine manufacturers stated very clearly that if the PTC failed to pass, they would have no choice but to close down their factories in the US and lay off wind energy workers. Based on Congress’ decision last week, I fully expect to see closure announcements coming soon.
My fellow executives in the wind industry should have read “The Art of War.” Most of the leading wind turbine manufacturers have built their US factories and pooled their resources in states that were already supporters of wind energy. Of course, it has always been a common practice to reward the states that support your industry by creating jobs there. But, in setting up factories in states such as Colorado, Oregon, and Illinois — states that already have a strong pro-renewables political base — the industry missed the opportunity to convert important senators and congressmen in conservative states to the side of sustainable energy.
When I set up the new R&D center for Vestas in Houston, Texas — at the time, the largest wind energy R&D center in the US — one of my principal objectives was to help build a pro-wind constituency in a very influential conservative state. If we had established our R&D center alongside our factories in Colorado or in another progressive state, we would have converted no one in the House of Representatives and would have gained no additional political support. I have to say, if more of my colleagues from other OEMs had considered creating jobs in conservative states, then the wind industry would have found itself right now with a much more diversified political power base and, I believe, much more support for important decisions such as the extension of the PTC.
I hope the industry learns from this. As Sun-Tzu so eloquently stated in his famous handbook, the power of political diversification must never be underestimated. I encourage the key players in the industry to consider the impact these decisions have when deciding where to build their factories and their supply chain. It is often tempting to reward those you consider to be your friends, but sometimes it’s more wise to take your opposition to the dance.
Here’s why we need a national energy policy right now
Scientists are predicting that this week will mark the milestone where the world’s population will reach 7 billion. Are you aware that the population reached 1 billion for the very first time in the history of the world only 200 years ago? It took millions of years for the population to multiply to 1 billion, and then in just two hundred short years we multiplied to 7 billion people. The same scientists are predicting that the global population will reach 8 billion by 2025!
Many cities have grown to population densities bordering on the extreme
These people are not all living in some undeveloped country in grass huts with nothing but a candle. The exploding population is buying a significant number of additional light bulbs, hair dryers, washing machines and dryers, smart phones, TVs, iPods, iPads, computers, and dishwashers. They are buying new homes, they are erecting new office buildings and they are consuming mountains upon mountains of food every day delivered in plastic, aluminum, glass, and other materials. All of this stuff must be produced and disposed of day after day after day.
We have to realize that it takes an enormous amount of energy to power all of our lives. And the cost of producing the additional energy we will need for an exploding population will be staggering. To point out one very expensive piece of the problem, the US has more than 160,000 miles of electrical transmission lines that are based on 70 year old technology. The inefficiencies in this antiquated infrastructure account for a loss of 50% of the electricity produced in the US.
That is no exaggeration! Can you imagine, half of the electricity that is produced in the US is lost in the lines we use to move electrons from one place to another. This transmission system was designed long before anyone envisioned an exploding demand for energy like what we have now, and long before smart grid technologies were created that could significantly increase the efficiencies in the way power is distributed and used. This entire system must be overhauled to meet our growing demand. But no one can make the necessary changes under the weight of volumes of rules and regulations that have been created over the last 50 years – regulations that were specifically created to ensure the perpetuation of this antiquated infrastructure! Overhaul of our outdated transmission system will have to begin with an overhaul of the regulatory statutes.
And the inefficiencies in our transmission infrastructure are not the only serious problem we face, and may not even be the most serious. All of the nuclear power plants in the US are reaching the end of their design life, and no new plants are under construction to take their place. The coal power industry continues to destroy mountains and pump pollution into the environment – nearly 500 mountains have been completely destroyed in the Appalachians in the last 50 years. Yet, NIMBYism has brought much of the renewable energy industry to a standstill.
Deep water oil drilling must continue for some time, but we have not seen the end of accidental oil spills and we have no really clever ways to deal with accidental spills when they happen. Furthermore, we must stop importing our energy from unfriendly nations, and stop paying subsidies to foreign governments to encourage them to produce oil for the US. The list of serious and costly problems goes on and on and on.
The responsible approach to fix all of these problems begins with the creation of a national energy policy. I am often asked why a “policy” is necessary to help us make the repairs necessary to fix all the problems – why can’t politicians simply do what needs to be done, with or without a policy? The answer is simple. Energy companies make investment decisions that affect their businesses for decades. These investment programs last for 10 to 20 years or more. The jobs these investments represent are real jobs that people can make a career out of and eventually retire from.
On the other hand, politicians can only make promises that are based on two or four year cycles, or until the next election. No matter what a political candidate promises, he can easily be overruled by his successor. These short-lived political promises create uncertainty in the industry and make it difficult for energy companies to find the necessary long term investors to fund long term projects.
A national energy policy could be written to provide the necessary guidelines for implementation of a new infrastructure; these guidelines would signal investors that future government regulations will support these efforts. The new policy could last a decade or more and would provide confidence to decision makers in the energy companies and in the investment community.
A national energy policy is crucial to the very survival of our way of life, because what we are currently doing is extremely wasteful. A new energy policy is the first meaningful step toward making everything work; and making everything work will create sustainable jobs. It will take a lot of people with a lot of different skills to change everything that must be changed. Without a national energy policy, our politicians and decision makers can only continue to kick these problems down the road. I would like to encourage you to write or call your elected representatives and demand from them a national energy policy. Let us collectively make this one of the key factors in this upcoming election.
My…what a mess we find ourselves in!
To put it quite honestly, our global energy future looks bleak. Everyone I know who has more than a shallow understanding of the energy industry believes that we will not be able to meet the growing global demand for electricity in the coming years. We can not do it. No one believes we will be able to do it. And it’s time to stop listening to politicians who tell us that if we’ll vote for them, they will fix the problem. They won’t.
Why not? Because the problem isn’t something that they can fix. Because the problem is in us.
We have become a society where we care more about being consumers than we do about being good citizens. As consumers, we care an awful lot about how much we pay for gasoline at the pump, and we care about how much we pay each month for electricity. But we don’t care enough about where that gasoline came from or how that electricity was produced to let such issues drive our buying decisions. We will complain about the importing of oil and how it costs us jobs, but we will continue to consume it.
A consumer simply lives his life inside his own bubble, buying what he wants and making decisions based on what it costs himself personally. Citizens differ from consumers. Citizens actively seek to know about public affairs, and they care about how their actions affect other people. Citizens care so much about the common good that they will often make decisions that may be inconvenient for themselves in order to promote a better way of life for all.
One of the most important things we need to keep our civilization running is energy. Consumers go through life rarely giving a thought to how much energy they consume — indeed, they become quite offended when challenged about their energy consuming behavior. How many commercial buildings can you think of where the lights are left on after they’ve closed, burning all night and all weekend long? How many people do you know who refuse to support renewable, sustainable energy because it costs them three or four more cents per kilowatt hour? Consumers, not citizens.
If we were good citizens, we would have a deeply held conviction for the common good. We would not support the import of foreign oil over our own domestic production and the jobs that are at stake. We would not buy electricity from an industry that pumps megatons of pollutants into the air or into the water. We would not buy a gas guzzling automobile when we only drive it back and forth to work. Consumers do those things.
Citizens are people who inform themselves about the issues. They cultivate their common interests and engage in public discourse to inspire other people to also engage. How many people do you know who say, “I don’t discuss religion or politics?” A real citizen wouldn’t be afraid to share their ideas on either. As for politics, too many of the people who live in our country feel that they have fully satisfied their obligation to the political process once they exit the voting booth. But they never dare open their mouths to discuss or persuade others on the issues. Perhaps they don’t want to be persuaded themselves.
So you see, our government can not solve this problem. We have to. If we truly care, if we are truly going to be citizens, then we need to educate ourselves individually and make better decisions about how we spend money on energy. We must never leave our responsibility with the empty promises made by politicians or corporations. We must never let them make the decisions for us. We need to understand the issues, discuss them openly, and decide for ourselves how we will spend our money. We each must decide whether we will contribute to the problem or to the solution. It is our decision, and ours alone.
Here is a link to an interesting short video from Harvard professor Dr. Michael Sandel regarding citizens and consumers. It makes a powerful point. I encourage you to enjoy it. http://www.justiceharvard.org/2010/10/citizens-or-consumers/
A Sustainability Minute 