The Wind Energy Taxpayer Boondoggle

Modern Energy Roundup - August 22, 2012

Written by Brian Hicks
Posted August 22, 2012

Companies like Gamesa (PINK SHEETS:GCTAF) and Vestas (PINK SHEETS:VWDRY) were once all the rage as the wind energy industry embarked on a tremendous growth trajectory.

But like all industries that experience rapid growth, eventually the party comes to an end, and reality sets in.

Although the wind energy industry continues to grow dramatically all over the world, recessionary headwinds, loss of government support, and dirt cheap natural gas are creating a temporary slow-down. As a result, the wind energy industry is going to have a rough time in 2013.

Truth is, we've seen plenty of indications of this throughout 2012. Particularly with so many wind turbine manufacturers idling or shutting down plants, lowering guidance and laying off workers. In fact, we learned today that Vestas is now set to go forward with its second round of lay-offs this year. This time around, 1,400 folks will lose their jobs.

The company has not made it clear where the jobs will be cut, but you can bet that a sizable portion will be from the US, where there just doesn't seem to be enough support in Washington to extend the wind energy tax credit for another year.

Although I would argue that a one-year extension is of little use at this point.

The best way to move forward on this is to extend the credit for four to six years, with the understanding that it will never be extended again. This will at least give the wind industry enough clarity to make long-term decisions and prepare accordingly. That's not possible when you keep handing out these tax credits every year or two. As well, it'll keep the industry from turning into a decades-long tax payer money sucker. We've already gone down that path with nuclear.  We don't need to make the same mistake twice.

As stated in a 2011 report published by the non-partisan group Union of Concerned Scientists, after decades of government support, nuclear power is still not viable without subsidies.

The report also notes that government subsidies to the nuclear industry over the past 50 years have been so large in proportion to the value of the energy produced that in some cases it would have cost taxpayers less to simply buy kilowatts on the open market and give them away.

And as reported in Forbes. . .

“Nuclear power is no longer an economically viable source of new energy in the United States, the freshly-retired CEO of Exelon, America's largest producers of nuclear power, said in Chicago Thursday. And it won't become economically viable for the foreseeable future.”

Not economically viable?  After 50 years of taxpayer subsidies?!

Now understand, this is not an attack on the nuclear industry. It's merely an observation of how subsidies can become dangerous and addictive. We simply can't afford any more of these decades-long subsidies burdening taxpayers. Not for anything.

I don't know if the wind energy tax credit will be extended before the end of the year.  I am doubtful.  But if it is extended, and it's only extended for one year with the possibility of going through this same song and dance next year, and the year after that, and the year after that - well, we're just wasting valuable time and money.  And that's not going to help anyone.