Thursday, August 9, 2012

The Politics Of Wind: 81% of Wind Power In Republican Congressional Districts

Ten years ago wind power was not on the political or energy radar screens of the nation.  Today that has all changed.

Wind will have installed more than 55,000 megawatts by the end of 2012 and produce nearly 4% of America's electricity.  The last 4-years registered average growth of 7,500 megawatts per year, an annual market valued at about $15 billion, and even more this year.

 The wind industry has grown up, employs about 70,000 people, and has some built political muscles too.  And it will need to flex those muscles, because wind's growth puts it on the radar screen and drawn attacks.

In terms of political strength, wind power is not the oil and gas industries, but it just may be stronger than the far from weak nuclear industry.  Wind's strength is rooted in the turbines, leases, tax payments, manufacturers, and vendors that are spread across America.  Turning turbines all across America mean that the days are long gone, when environmentalists stood alone in urging favorable policies for wind.

Indeed, a remarkable 74% of Republican congressional districts have a wind farm or wind manufacturing facility, and 81% of wind power is located in Republican districts. These local facts on the ground insure that wind power like all forms of energy enjoys supporters in both parties.

In Iowa, a key swing state in the Presidential election that gets 20% of its power from wind, the maxim that all politics is local means that the wind energy issue has caused state Republicans--Governor Branstad, Senator Grassley, and the entire Iowa Congressional delegation--to sharply disagree with Romney's plan to end the wind tax credit. Or is it his plan?

Governor Romney was in Iowa yesterday, saying warm and fuzzy things about wind once more.  The Governor embraced wind during the Iowa primary, touring a wind manufacturing company there, signing a wind blade.  After Iowa, he jumped on the "Solyndra" anti-green energy, right wing bandwagon that includes the anti-wind production tax credit position.  Today who knows where he will be. Notably, as a result of the production tax credit issue, a couple of top Iowa Republican wind energy businessmen have been campaigning for the President across Iowa.

Attacking wind now has political risks that include losing the support of owners of businesses, workers, landowners with leases or who want to have a wind lease, and local governments that receive significant tax revenues.  That democratic feedback process impacts both parties.

The bi-partisan strength of wind energy surfaced last week, when a key senate committee passed an extension of the wind production tax credit by a strong 19-5 vote.  And just this week, Harry Reid decleared that he was confident that the production tax credit would be extended by the end of the year and even possibly before the election. 

The politics of wind have never been more interesting or blowing harder.


  1. Remove all of the subsidies and forced purchase regulations and wind power is not economically viable! Mitt Romney is a "Crony Capitalist" and as such he is in favor of anything that promotes such plunder as long as he gets his cut of the pillage. The answer is not yet blowing in the wind and by subsidizing not market ready technology you are preventing actual market ready technology from coming to the market because you set the bar lower for entry to the market. If a producer can sell a product that is profitable to the producer through subsidies and forced purchase there is no incentive to improve the product and signals to the market that there is no need to raise the efficiency of their product due to the governments husbandry!

    1. What "market ready technology" is not subsidized? What energy source does not have tax credits, deductions, export-import bank support, loan guarantees? What energy source pays for the military costs of keeping the sea lanes open to bring it (oil) here? What energy source pays in its price its full environmental and public health costs that are now externalized? None is the answer.

      Without any subsidies of any sort, wind costs about 5 cents per kilowatt-hour and less than that in the best areas. And wind's production costs are about 0.5 cents per kwh, less than nuclear, coal, gas. Wind's total and production costs are attractive. And making it more attractive is that wind's price is locked in for 25 years. Most other sources of energy have significant price volatility and risk.

  2. What virtually no one realizes is that in restructured electricity markets, like Pennsylvania, wind energy (and other renewable technologies) are subjected to far more competitive forces than any of the existing legacy assets that currently power our electricity system. Virtually all of the existing power plants that serve Pennsylvanians were built under a government guaranteed, regulated rate-of-return. Until competition started in 1996, these power plant owners also had no fuel cost risk since fuel costs were automatically passed through directly to rate-payers regardless of supply costs. Further as a result of restructuring, these same legacy power plants received competitive transition charge payments (far in excess of any "subsidy" the state of Pennsyvlania provides to renewables) to recovery their capital costs. The result, the conventional power plants keeping our lights on in Pennsylvania were built with government guarantees that ensured profit and eliminated all risks associated with their construction and operation (including cost overruns for new construction). This was not and is not competition or a "market".

    Contrast that with today's renewable energy markets. It is true that wind energy and other renewables receive very important federal subsidies through the federal production tax credit and accelerated depreciation, however, these subsidies are a pittance compared to the legacy and ongoing subsidies and guarantees (such as Price Anderson for the nuclear industry) received by the fossil fuel and nuclear generators.

    Today's renewable energy investors must compete in the competitive wholesale energy markets just like any other power generator.

    Lastly, while states like Pennsylvania do require utilities to provide a certain percentage of their electricity from renewables, that is also an exceedingly competitive market with no guarantees that renewable generators will necessarily be able to recover their costs in that market.

    Thus, unlike the legacy power generation regulated system which ensured success without competition, renewable energy generators must compete both with existing power plants and each other. Renewable generators have no guarantee of success or cost recovery and as such are subjected to risk completely unknown to the legacy fossil fuel and nuclear industries. These competitive pressures are continually driving down costs and improving the performance of renewable generation.

    Is it a perfect market? No. Is it sigficantly more competitive with far more risk placed on the generation owner than the former regulated structure under which virtually all existing competitive generation was built. Yes, without a doubt.

    Obviously, we should keep working towards market solutions in the power sector, but until all environmental externalities are properly accounted for and market prices better reflect long-term capital investment costs and fuel price volatility, the current power market structure will be imperfect. As a result, in order to ensure fuel diversity and technological innovation its hard to see how it is not prudent to continue to provide the exceedingly modest public policy push which renewable are currently receiving.

    Eric T.

  3. All forms of power generation are subsidized and historically, fossil fuel generation has benefited the most. From 2002 to 2008, the federal government gave the mature fossil fuel industry over $72 billion in subsidies, while investments in the emerging renewable industry totaled $12.2 billion.

    This is not just a historic trend. A recent example is the state of New Jersey where two natural gas plants will receive massive state subsidies. The Newark 625-megawatt plant, operated by Hess, will receive a guarantee of sales and subsidies of about $56 million a year and at least $40 million in direct subsidies. The second 663-megawatt plant in Woodbridge proposed by Competitive Power Venture will receive guaranteed sales and subsidies, about $68 million to $95 million a year.

    Before we look to remove critical subsidies for a still-developing wind industry, perhaps one should take a step back to look at the public funds being dished out to the fully developed and highly profitable fossil fuel industry.

  4. All subsidies of any kind should be removed and let the most efficient form of energy prevail and the rent seekers die off. The Ethanol Industry used the same logic to protect their government subsidies and forced purchases and we're still suffering the consequences. Once the subsidies and forced purchases are removed from solar and wind they will not be used by many power producers. It is only under threat from government that they are forced to do so. We are going broke as a nation and needless waste of precious resources to satisfy rent seeking crony capitalist is not a wise choice! People will go without heat in the winter and without air conditioning in the summer because the price of energy is artificially driven up and made unaffordable due to government edicts concerning "Green Energy."

  5. The "facts" actually challenge your claim that energy prices have been driven up by "green energy." In fact, electricity prices are historically low in real dollars in most of the U.S. including Pennsylvania. I will concede that this is due primarily to two factors (one good, one bad). The first is the current abundance of low-cost natural gas which can only access the U.S. market, and (2) falling demand for electricity beginning in 2008 in part due to our troubled economy. However, as many studies have shown wind energy has done its part to lower wholesale electricity prices in regions where it has been deployed. A number of these are studies by independent system operators (or on their behalf) or the fossil fuel industry (Texas).

    Please see:

    Tudor, Pickering, Holt, and Company, "Texas Wind Generation," August 2009

    Synapse Energy Economics, Inc. "Rate Affects of Wind and Transmission in MISO," 2012

    NYSERDA, "New York State Portfolio Standard Evaluation Report," 2009

    PJM, "Potential Effects of Proposed Climate Change on PJM's Energy Market," 2009

    Southeast Energy Efficiency Alliance, by Georgia Tech and Duke Researchers, "Renewable Energy in the South," 2010

    "The Joint Coordinated Plan," Eastern U.S Grid Operators