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Fact check: American Energy Alliance errs with attacks on wind

Fact check: American Energy Alliance errs with attacks on wind

The American Energy Alliance (AEA), a fossil-fuel funded organization, has released a new document attacking wind energy.  The document purports to be a “study” based on “research,” but contains no new information or analysis—it is simply an advocacy piece that is entirely subjective, funded by an organization with a particular point of view.

The AEA document contains a number of errors and misrepresentations concerning the U.S. windenergy industry.  Specific highlights:

While the U.S. wind industry is no longer an infant industry, it is not fully mature.  The industry has grown dramatically during the past decade, and currently employs 75,000 Americans, with nearly 500 factories from coast to coast producing wind turbines and components.  One of the key results of this growth is that the value of domestic content in new wind farms has increased from 25 percent in 2005 to more than two-thirds today.  However, the industry’s growth remains fragile, due to the continued sluggish economy and temporary historic lows in the price of natural gas.  A recent study by Navigant Consulting found that 37,000 wind energy jobs will be lost by the end of the first quarter of 2013 if the industry’s primary incentive, the Production Tax Credit (PTC), is not renewed.

Incentives for wind power are not unique—every U.S. energy industry is incentivized by the federal government.  There is good reason for supporting energy production, one of the central foundation blocks of a prosperous industrial national economy.  In the last century, broad government support totaling nearly $600 billion (or over 50% of the current $1.1 trillion U.S. budget deficit) has been provided to bolster the production of conventional fossil energy sources.  This investment has resulted in an abundance of fossil fuels–which now dominate the U.S. power mix–but it has also created an unbalanced energy portfolio which is too dependent on too few energy sources. Today’s energy issues of volatile pricing, water consumption and drought, are creating a need for a more diverse energy supply.

Production-based incentives, like the production tax credit for shale gas, or percent depletion allowance for oil & gas, as well as the PTC for renewables, are designed to encourage domestic production of energy.  Just since 2005, the PTC for wind has leveraged roughly $100 billion in private investment in new wind projects in rural communities and new domestic manufacturing – and returned tax payments to the Federal, state and local government more than covering the cost of the PTC.  In short, it has been an essential, and highly effective, part of a true “all of the above” energy policy, which the AEA now proposes to dismantle.

As a production-based incentive, the PTC, as Karl Rove has pointed out, “is a market mechanism; you don't get paid unless you produce the power, and we're not picking winners and losers, we're simply saying for some period of time we will provide this incentive”, driving development in the most efficient and productive locations–while returning tax payments in full to the Federal, state and local governments.

By diversifying America’s energy portfolio, wind power—a clean, homegrown, affordable energy source, benefits the economy and all Americans.  Wind power reduces health care costs by reducing air pollution, and benefits agriculture by generating electricity without using water.  Wind is also one of the only energy sources offering long-term contracts with locked-in power prices for utilities and consumers for 20 to 30 years, insulating them against risk.  Electric utilities across the nation are finding wind to be one the best options for new power, including Southern Co. and its Alabama Power subsidiary (Alabama has no wind, but itsratepayers will benefit from wind power nonetheless, with Alabama Power purchasing low-cost electricity supplies from Kansas wind farms).  That’s why a coalition of the finance community designated wind energy as one of the least risk energy sources for electric utilities and commissions.

While the AEA complains about the low cost of wind-generated electricity, the fact is that low prices are good for consumers and the American economy. For example, Synapse Energy Economics found that adding wind in the Midwest would reduce the electric bills of consumers in the region by $65-200 per month. Instances of power prices being lowered so far that they go negative are very rare, accounting for only 1 out of every 4500 electricity market price points last year, and these instances will be largely eliminated over the next several years as new transmission allows low-cost wind energy to reach more consumers. These rare instances are a trivial factor when it comes to affecting the economics of other generation, particularly when compared to factors such as low natural gas prices and low electricity demand, as confirmed by independent analyses that have looked at the issue.

The benefits of transmission greatly outweigh the costs, and “backup” power sources are more necessary for traditional power plants than they are for wind farms.  All transmission analyses have confirmed that the benefits of transmission expansion greatly outweigh the costs. These benefits include improved grid reliability, more efficient transport of electricity, consumer access to lower cost electricity, increased competition in electricity markets, and others. The private transmission investment that is occurring now is needed anyway, regardless of the addition of renewable generation. It is more accurate to talk about a need to "back up" large fossil and nuclear power plants, which fail instantaneously and without notice, than deal with changes in wind output, which occur slowly and are predictable and are therefore easier and less expensive to accommodate.

 

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Michael Goggin is Vice President at Grid Strategies LLC, a DC-area consulting firm working on grid and markets issues for clean energy clients including AWEA. He was previously head of Research at AWEA.

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