Windmills

Fighting Big Wind Subsidies

Senate Finance Committee Chairman Ron Wyden just released his plan for dealing with the tax extenders – a group of roughly 50 tax provisions that expire regularly. The Heritage Foundation has long called for Congress to remove specific policies in the extenders package that are unnecessary for a sound tax code, and then replace those policies with pro-growth changes so as not to cause a tax hike. Heritage’s Curtis Dubay wrote how Congress should follow such a process this week.

Senator Wyden, to his credit, eliminated a dozen policies in his plan, although he undoubtedly should have eliminated more. One of the policies Wyden would eliminate is the renewable electricity production credit – better known as the wind tax credit.

The wind credit allows electric producers that use wind energy to take a credit of 2.3 cents per kilowatt-hour for the energy they generate with wind. Producers can also claim an investment credit it lieu of the production credit. The credit may not sound like much, but 2.3 cents is over half the average wholesale price in some of the big wind-producing areas.

The wind credit is the exact type of policy that Congress should be looking to eliminate in the tax extenders bill. It distorts the energy market by tilting it in favor of wind energy, and other forms of renewable energy that qualify, against traditional forms of energy.  In fact, this heavy subsidy has frequently pushed the spot price of electricity below zero, wreaking havoc on the ability of producers of reliable, baseline producers (such as nuclear) to cover their investment costs. The tax code should not pick winners and losers in the market.

However, just as soon as the Wyden bill came out with it eliminated, Senator Chuck Grassley (R-IA) filed an amendment in committee to put the credit back into the package. That sets up a debate and vote next week in the Finance Committee on whether to reinstate the credit, which expired at the end of last year.

Although the debate and vote may fly under the radar, it is extremely important.  Fighting to restore disruptive, costly and unnecessary corporate subsidies will only serve to reinforce the narrative that conservatives are only interested in serving big business.  Conservatives should stand together to block the renewal of the wind production tax credit.

Does your Representative support eliminating energy tax subsidies?

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