Washington Politics Still Decide How Americans Produce Energy

Jan 21, 2013

When you hear praise for wind energy and the record production, you should take it with a grain of salt. Much of the "success" enjoyed by the industry comes as a result of a tax system that is skewed in their favor, which is a direct result of Washington cronyism. It's not a benefit to taxpayers, much less to consumers, but because the folks in the federal government have no qualms about it and the special interests on K Street demand it, the subsidies continue.

Interestingly, while 2012 saw record amounts of wind power capacity and record construction, the same optimism didn't spill over into 2013.

So what's the catch?

While the wind production tax credit was extended in the last minute fiscal cliff deal, it came too late to encourage those in the wind industry to undertake new building projects.

So let's go ahead and put two and two together, shall we?

The industry is dependent on the government. The left's whole mantra is that every person and every industry for that matter should be dependent on the government, so this development probably makes them feel really good inside. But if you're a lover of freedom, hard work, and independence,you probably don't like wind PTCs and the government dependence they create.

Missed by many in the fiscal cliff drama, the government largess to wind was generously extended. Now, companies don't even need to complete construction by the end of 2013 to receive the credits. Yet, they are so comfortable using taxpayers as a crutch, they refrained, since even the generous, last minute fiscal cliff deal didn't give them the level of confidence they'd had before.

Oh and by the way, let's please put "records" of this kind in the proper context. Record production for wind doesn't mean that the industry can compete yet in the free market with other energy sources. Heritage's Nick Loris explains that it is dangerous to be so dependent on the government, not only for the wind industry, but for any energy industry.

Government support that targets one group or industry artificially props up that market. Rather than increase competition, a special endorsement from the government gives one technology an unfair price advantage over other ones. Further, subsidies reduce the incentive for that technology to become cost-competitive and encourage dependence on the preferential treatment that government gives them. Those energy sources that need help from the government are those that cannot compete economically without them. If a project makes economic sense, however, the investments will occur without the subsidy.

It's simply not the place of government to manipulate the tax code or to use other forms of coercion to control which sources of energy consumers prefer to use. President Obama and Congress would do well to open their eyes to this reality.

As Nick Loris, Katie Tubb, and Jack Spencer remind us in their most recent research:

America's greatest energy success during President Obama's first term was the boom in oil and natural gas production on private and state-owned lands. This energy revolution was not the result of any specific federal policy, but rather emerged organically from the private marketplace. The President deserves credit for staying out of the way.

Again, the best thing the government can do when it comes to most things - particularly energy - is to stay out of the way and let the American people, consumers, and innovators decide what's best for them.