Wind Subsidies--the Production Tax Credit is Opposed by Senator Lamar Alexander

From the Chattanoogan.com:

Alexander Opposes Production Tax Credit, Wind Industry Subsidy

Wednesday, February 15, 2012

In a speech Wednesday on the floor of the United States Senate, Senator Lamar Alexander called on Congress to reject any efforts to “put in the payroll tax agreement a four-year extension of the so-called production tax credit,” calling it “a big loophole for the rich and for the investment bankers.”
Senator Alexander said: “Let's not even think about putting this tax break for the rich in the middle of an extension of a tax deduction for working Americans this week. Let's focus on reducing the debt, increasing expenditure for research, and getting rid of the subsidies.

Read the rest of the story here.

Voices from Germany

Below is the summary of "Economic impacts from the promotion of renewable energies:
The German experience".

Isn't it time we learned from others' experiences? Others' mistakes? Surely, that is the common-sense thing to do.

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3Summary and Conclusion

Although renewable energies have a potentially beneficial role to play as part of
Germany’s energy portfolio, the commonly advanced argument that renewables
confer a double dividend or “win-win solution” in the form of environmental stewardship and economic prosperity is disingenuous. In this article, we argue that
Germany’s principal mechanism of supporting renewable technologies through
feed-in tariffs, in fact, imposes high costs without any of the alleged positive impacts on emissions reductions, employment, energy security, or technological innovation.

First, as a consequence of the prevailing coexistence of the Renewable Energy
Sources Act (EEG) and the EU Emissions Trading Scheme (ETS), the increased use of
renewable energy technologies triggered by the EEG does not imply any additional
emission reductions beyond those already achieved by ETS alone. This is in line with
Morthorst (2003), who analyzes the promotion of renewable energy usage by alternative
instruments using a three-country model. This study’s results suggest that
renewable support schemes are questionable climate policy instruments in the
presence of the ETS.

Second, numerous empirical studies have consistently shown the net employment
balance to be zero or even negative in the long run, a consequence of the high
opportunity cost of supporting renewable energy technologies. Indeed, it is most
likely that whatever jobs are created by renewable energy promotion would vanish
as soon as government support is terminated, leaving only Germany’s export sector
to benefit from the possible continuation of renewables support in other countries
such as the US. Third, rather than promoting energy security, the need for backup
power from fossil fuels means that renewables increase Germany’s dependence on
gas imports, most of which come from Russia. And finally, the system of feed-in
tariffs stifles competition among renewable energy producers and creates perverse
incentives to lock into existing technologies.

Economic impacts from the promotion of renewable energies

Hence, although Germany’s promotion of renewable energies is commonly portrayed
in the media as setting a “shining example in providing a harvest for the
world” (The Guardian 2007), we would instead regard the country’s experience as a
cautionary tale of massively expensive environmental and energy policy that is
devoid of economic and environmental benefits. As other European governments
emulate Germany by ramping up their promotion of renewables, policy makers
should scrutinize the logic of supporting energy sources that cannot compete on the
market in the absence of government assistance. Such scrutiny is also warranted in
the US, where there are currently nearly 400 federal and state programs in place
that provide financial incentives for renewable energy (DSIRE 2009).
History clearly shows that governments have an abysmal record of selecting economically productive projects through such programs (Kahn 2009).

Nevertheless, government intervention can serve to support renewable energy technologies through other mechanisms that harness market incentives or correct for market failures. The European Trading Scheme, under which emissions certificates are
traded, is one obvious example. Another is funding for research and development
(R&D), which may compensate for underinvestment from the private sector owing to
positive externalities. In the early stages of development of non-competitive technologies, for example, it appears to be more cost-effective to invest in R&D to
achieve competitiveness, rather than to promote their large-scale production.
In its country report on Germany’s energy policy, the International Energy Agency
recommends considering ‘‘policies other than the very high feed-in tariffs to promote
solar photovoltaics’’ (IEA, 2007:77). This recommendation is based on the
grounds that ‘‘the government should always keep cost-effectiveness as a critical
component when deciding between policies and measures’’ (IEA, 2007:76). Consequently,
the IEA proposes policy instruments favouring research and development.

Lesser and Su (2008:986) concur with this viewpoint: ‘‘Technologies that are theoretically promising, but unlikely to be competitive for many years, may be best
addressed under other policies, such as publicly funded R&D’’. This reasoning is
particularly relevant for solar cells, whose technological efficiency is widely known
to be modest and, hence, should be first increased substantially via R&D.
Instead of a policy instrument that aims at pushing technological improvements,
however, Germany’s support scheme of renewable energy technologies resembles
traditional active labour market programs, which have been demonstrated in the
literature to be counterproductive (Kluve, 2006:13). It bears particular noting that
the long shadows of this economic support will last for another two decades even if
the EEG were to be abolished immediately.

CO2 Facts--Wind Farms are Redundant

A DETAILED ANALYSIS OF THEIR ALLEGED FUEL AND CO2 SAVINGS

The rationale behind our politicians´ enthusiasm for wind power and other renewable energies is not rooted in an objective analysis. We shall not speculate here on political agendas or corrupt behavior, but simply explain why wind farms serve no useful purpose.

In Western countries, public energy policy is based on this fundamental premise: wind farms are a mature technology for producing green energy, and are competitive. But, if they are competitive, why do they need enormously expensive subsidies, direct or indirect?

The wind farm industry routinely replies to this question by pointing to the “external costs” of producing energy with fossil fuels. These external costs are, in a nutshell, pollution, CO2, and global warming. The flaw in this line of argumentation is that the external costs in question equally apply to wind farming, as I shall now endeavor to demonstrate in easily understandable language.

I) – Wind farms cause conventional power plants to burn more fossil-fuels per KWh produced.

It is an undisputed fact that anyone driving in city traffic spends considerably more fuel than he would on the motorway. There are two reasons for this:

- An engine burns fuel more efficiently when running at its optimal cruising speed (about 100 kph for most cars).

- An engine burns fuel with low efficiency and produces more harmful gases when it accelerates. Who hasn´t noticed the blue smoke coming out of exhaust pipes when cars accelerate? (black smoke in the case of poorly-tuned diesel engines).


In city traffic, cars accelerate, come to a stop, accelerate again, stop again, etc. This causes more fuel consumption and more pollution. And we must add to this the burning of fuel for nothing when cars are stopped at red lights, of stuck in traffic-jams.

The same happens with fossil-fuel power plants: they consume and pollute more when accelerating and stopping frequently. And the crux of the matter is that wind farms force these plants to operate that way.

Here is how:

A) - When the wind is blowing, fossil-fuel power plants (FFPPs) must curtail their productions because electricity produced by wind farms enjoys priority on
the grid. As there are no batteries large enough to absorb electricity produced in excess of demand, the FFPPs are thus ramped down to lower levels of production. This is necessary in order to maintain the required frequency of 50 Hz on the national grid, failing which there would be crippling black-outs, something a modern economy cannot tolerate.

The optimal efficiency of FFPPs being when they operate at about 95% capacity, this ramping down causes them to burn more fuel, to emit more CO2, and to pollute more for each KWh produced.

B) - Conversely, every time the wind speed goes down, whether or not temporarily, FFPPs must ramp up their production rapidly to avoid black-outs. This ramping up is comparable to the acceleration of an automobile in that it burns fuel quite inefficiently and emits more gases.

As this ramping up and down occurs frequently during a single day due to the high variability of wind speed, fuel consumption, CO2 emissions, and pollution
increase greatly for each KWh produced by the FFPPs. And wind farms are responsible for it.

C) - Finally, when one or more FFPPs must stop producing altogether because an increased quantity of wind-generated electricity has entered the grid, they must continue to spin in stand-by mode, burning fuel and emitting gases but not producing any electricity. This is necessary because wind is unpredictable, and these power plants will be required to ramp-up again at a moment’s notice when wind speed will go down.

Coal-fired power plants need several hours to produce electricity from a cold start. Closed-cycle gas turbines (CCGT) can respond quicker, but not at the flick of a switch. Nuclear plants cannot ramp up rapidly. Hydro power can, but is kept in reserve for emergencies (e.g. a FFPP breaking down). Flick-of-a-switch open-cycle gas turbines (OCGT), which are relatively expensive to operate, are being kept in reserve like hydro or used for peak loads only, i.e. at the time of day when electricity demand is at its highest. In the circumstances, a number of coal-fired or CCGT plants must be kept operating in stand-by mode when the wind is blowing, just in case it would abate rapidly.

A, B and C cause fuel to be burnt for nothing. This is caused by the existence of windfarms, whose "non-dispatchable" (uncontrollable) production must be "balanced", or "backed-up", by dispatchable FFPPs.

The higher the installed capacity of windpower in a country, the higher the number of FFPPs that must be kept running in back-up when the wind is blowing, balancing the erratic production of windfarms; and the more fuel is burnt for nothing.


An example will help understand these constraints of electricity production:

- Suppose a country has 20,000 MW of installed capacity in wind power.

- Suppose that, on a windy day, these wind farms are producing at 95% capacity, i.e. 19,000 MW (there will always be a few turbines in need of repair).

- Now suppose that the wind abates rapidly, and that within 2 hours only 10,000 MW of wind power capacity are actually being used. All things being equal, e.g. the demand for electricity, the grid manager will have to ramp up 9,000 MW into the grid. If he doesn´t have at that moment a dozen or so FFPPs spinning on stand-by, he will not be able to avoid a black-out, or at least a brownout (this is when electricity supply is being cut to certain customers, generally industries that use a lot of electricity). Brownouts already occurred in California and Spain, and a black-out in Germany. Although wind farms were not made officially responsible for these costly disruptions (political correctness oblige), they did play a substantial role.

Recapitulation: extra fuel burnt to back-up wind power

1) More fuel is burnt by FFPPs spinning in standby, assuring against the risk of wind abating.

2) More fuel is burnt per KWh produced when FFPPs are ramped up every time the wind speed inches down.

3) More fuel is burnt per KWh produced when FFPPs are forced to ramp down and operate at a lower level of efficiency when the wind is blowing.

All in all, there is considerable suspicion that wind farms may be saving next to nothing (if at all) in fuel, pollution, and CO2 when their detrimental effects on the operation of FFPPs are considered. Yet these plants are needed to back-up wind power: without them there would be black-outs every time there is a change in wind speed, for the electricity´s frequency on the grid must remain steady at 50 Hz. To achieve this, the grid operator has to match supply with demand at all instants, with temporary variances in grid frequency not exceeding 1%.

Several papers, and a book, have been published on this matter, addressing some of the points raised above:

“The hidden fuel costs of wind generated electricity” - K. de Groot & C. le Pair

“Subsidizing CO2 emissions via wind power - the ultimate irony” - Kent Hawkins

Institution of Engineers and Shipbuilders in Scotland

Wind Power Important Questions And Answers

There are more papers and articles, all raising important questions, all calling for a comprehensive study on the unproved claim that wind farms save on fuel, pollution, and CO2. Unfortunately for taxpayers, consumers, and wind farm neighbors, who all pay dearly for this unreliable energy, no such study was ever made. Arguably, the results would be embarrassing for those governments that have been destroying so much landscape for nothing. This lack of transparency causes a growing number of people to think that wind farms are in fact useless, and just a means for a few to get rich quick at the expense of the many.

Internet is full of warnings from independent engineers, economists, and environmentalists. But the mainstream media ignores them, having abandoned investigative journalism long ago. Political correctness is so much more rewarding for them, and easier to follow than ethics.