The wind production tax credit (PTC), is wasteful, distorts markets and has been on the books long enough for the industry to stand on its own, a new study says.
“Wind Intermittency and the Production Tax Credit: a High Cost Subsidy for Low Value Power” makes those points and more in an Exelon(NYSE: EXC)-commissioned study released this week.
“We find that the vast majority of the Nation’s wind resources fail to produce any electricity when our customers need it most, and that the subsidy is adding billions of dollars of hidden costs while undermining the reliability of the grid,” the study says.
The study was done by Jonathan A. Lesser, president of Continental Economics.
Exelon, the biggest owner of nuclear generation in the U.S., was tossed out of the wind energy’s trade association for lobbying Congress to let the PTC expire. Exelon also owns 900 MW of wind generation.
The study analyzed four years of data from the Electric Reliability Council of Texas (ERCOT, with 10,000 MW of capacity), the Midwest ISO (MISO, with nearly 12,000 MW), and PJM Interconnection (PJM, over 5,000 MW).
“In all three regions, over 84% of the installed wind generation infrastructure fails to produce electricity when electric demand is greatest,” the study says.
Wind generation is most prolific in the spring and fall, when the demand for electricity is lowest, and the smallest amounts of wind generation occur in summer, when the demand for electricity is greatest.
The study also says integration costs, including back-up gas-fired generation and maintaining power system quality due to wind’s fluctuations, add an additional $500m per year nationwide. The study advocates abolition of the PTC, which a Senate-proposed extension would cost the federal Treasury $12.2bn.
The American Wind Energy Association dismissed Exelon from its board and banned in from the organization in September when the company lobbied against that proposal.
A long-term extension of the PTC has been AWEA’s top legislative priority for several years and it is currently advocating an extension after the election when Congress revisits a series of expiring tax credits across all business sectors.
Wind generation has benefitted from government support since 1978, first from the Public Utility Regulatory Policy Act, and then since 1992, with the first passage of the PTC, the study says.
“After over three decades of increasing subsidies and increasingly stringent environmental mandates for fossil-fuel resources, it is past time for the well-established wind industry to stand on its own two feet,” the study concludes.
The PTC is set to expire at the end of the year, and uncertainty in the industry has led to a boom in development of perhaps 12 GW to take advantage of the expiring credit, followed by project cancellations for 2013.