TCC Wind Production Tax Credit Letter

TCC ! P.O. Box 2659, Austin TX 78768 ! 512-‐474-‐1798 ! txcc.org 1

June 27, 2014 To the members of the Texas Congressional Delegation: The federal wind-‐production tax credit, which gives wind producers 2.3 centers per kilowatt-‐hour of electricity they produce, expired at the end of 2013. Congress is currently considering a proposal from the U.S. Senate Finance Committee to extend the production tax credit retroactively from January 1, 2014 through December 31, 2015. The two-‐year extension is estimated to cost taxpayers $13.35 billion over ten years.i We strongly oppose the renewal of this tax credit. When the wind-‐production tax credit was originally considered in 1992, the justification for it was that the credit would help to get a new industry on its feet. As it is with solar, coal, oil and gas, or any form of energy, government should not be picking winners and losers in the marketplace. The non-‐partisan Tax Foundation wrote in 2012 about the wind production tax credit, making this point quite succinctly:

[The wind-‐production tax credit violates] the neutrality principle: when the government gets to pick the winners and losers in a particular industry, it distorts the market and reduces the incentives for innovation. (When politicians play venture capitalist with tax dollars, they also sometimes pick the wrong players, as with Solyndra.)ii

Texas is the largest wind energy producer in the nation. Indeed, on March 28, 2014, the Electric Reliability Council of Texas (ERCOT)—which manages 85 percent of Texas’ total electric load—announced a new wind power record. In its press release, ERCOT noted the extent to which wind power is utilized in Texas:

Texas continues to have more wind power capacity than any other state. The ERCOT region has more than 11,000 MW of commercial wind power capacity, with nearly 8,000 MW of new projects in development and more than 26,700 MW under study. Wind power comprised 9.9 percent of the total energy used in the ERCOT region in 2013, compared to 9.2 percent in 2012.iii

No matter how you came down on incentivizing wind energy when it was first considered, it is clear that incentives are not necessary today, as wind is firmly established in Texas and the United States.


Even the National Renewable Energy Laboratory (NREL) —which is in favor of extending the wind production tax credit—recently conceded that wind energy doesn’t compete well with other forms of energy on the market. In an April 2014 report, NREL noted the following:

In the current low-‐priced natural gas regime, modeling results indicate that future wind deployment will be relatively low unless additional incentives are provided that result in wind being cost competitive with existing gas-‐fired generation.iv

Extending the wind production tax credit would force taxpayers to subsidize one form of electricity generation to the detriment of the energy market and its consumers. If wind is a viable energy source, it should stand on its own. There is evidence that wind is viable in the energy market. In a recent presentation at the University of Chicago’s Booth School of Business, Alliant Energy CEO Patricia Kampling explained that cheap natural gas is actually making wind energy a more attractive option—without federal tax credits. A major shortfall of wind energy is that unpredictable variations in wind make production somewhat unreliable. However, modern gas plants can ramp up quickly to pick up the slack when wind goes offline, which makes wind more attractive as the two kinds of energy can reliably work together. Alliant’s interest in wind energy exemplifies the way that true demand can only be created by the market. Kampling explained that Alliant will expand its wind operation without being incentivized by government:

When I say we have wind in our future, that’s without the tax subsidy. With our portfolio and our planning, we’ve got enough flexible assets, we can bring wind in . . . We don’t need a tax subsidy. If we get it our customers will benefit. Our shareholders don’t benefit from a tax subsidy; it all goes to our customers.v

Wind energy is sufficiently established in Texas and the rest of the country. It can stand on its own without the support of the federal government, and the extent to which it succeeds will be determined by market forces. The federal wind-‐production tax credit has expired, and should remain so. Please reject any and all proposals to extend the wind production tax credit. Sincerely, Senator Brian Birdwell Senator Donna Campbell

Senator Kelly Hancock Senator Larry Taylor


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State"Representative"Bill"Zedler""

Representative Charles “Doc” Anderson Representative Cecil Bell, Jr. Representative Dennis Bonnen Representative Cindy Burkett Representative Myra Crownover Representative Dan Flynn Representative John Frullo Representative Craig Goldman Representative Lance Gooden Representative Linda Harper-‐Brown Representative Jason Isaac

Representative Tim Kleinschmidt Representative Stephanie Klick Representative Jodie Laubenberg Representative George Lavender Representative Jeff Leach Representative Rick Miller Representative Jim Murphy Representative Chris Paddie Representative Scott Sanford Representative Kenneth Sheets Representative Ralph Sheffield


Representative Ron Simmons Representative Ed Thompson

Representative Steve Toth Representative Scott Turner Representative James White Representative Bill Zedler

ENDNOTES

i 05/01/14 Final Summary of EXPIRE ACT as reported, http://www.finance.senate.gov/legislation/details/?id=67094f10-‐5056-‐a032-‐52ff-‐257830e0a938 ii http://taxfoundation.org/blog/winding-‐down-‐wind-‐tax-‐credit iii Ibid iv Implications of a PTC Extension on U.S. Wind Deployment, National Renewable Energy Laboratory; online at: http://www.nrel.gov/docs/fy14osti/61663.pdf v http://www.forbes.com/sites/jeffmcmahon/2014/04/18/gas-‐makes-‐wind-‐affordable-‐even-‐without-‐tax-‐credit-‐alliant-‐ceo/

Documents

TCC Wind Production Tax Credit Letter