Let Production Tax Credit Expire

Joanna Schroeder Alternative energy, Electricity, Energy, Renewable Energy, Wind

A new report has been released from the Texas Public Policy Foundation analysts Bill Peacock and Josiah Neely reviewing the impact of the Production Tax Credit (PTC) for wind energy.  According to The Cost of the Production Tax Credit and Renewable Energy Subsidies in Texas, the PTC’s current annual cost in Texas alone is nearly $567 million. If the PTC continues, the cost of the tax credit would run about $4.1 billion through the 10 years ending in 2015.

“The continuation of the Production Tax Credit will cause more disruption in electricity markets and impose higher costs on consumers and taxpayers,” said Bill Peacock, the Foundation’s Vice President of Research and Director of the Center for Economic Freedom. “The negative consequences of the Production Tax Credit are even more apparent in Texas, as it has more wind-generated electricity than any other state.”

For wind producers in Texas there are several programs to aid in development: the PTC, Renewable Energy Credits (RECs) under the state’s Renewable Portfolio Standard, federal grants as part of the 2009 stimulus bill and access to transmission through the Competitive Renewable Energy Zone (CREZ) program. When combined, the programs will cost taxpayers about $12.8 billion through 2015 and the cost of subsidies in the state are on the rise.

“Texas is undergoing a major debate over whether price signals are adequate to maintain resource adequacy,” said Josiah Neeley, policy analyst for the Foundation’s Armstrong Center for Energy and the Environment. “A significant portion of the problem with price signals can be directly attributed to the subsidies for wind generation, particularly the Production Tax Credit.”

Peacock added, “Electric competition is working in Texas; rather, it is government interference with the market led by the Production Tax Credit that is causing today’s concerns regarding reliability. Congress should allow the Production Tax Credit to expire. If not, consumers, taxpayers, and Texas’ world-class energy-only electricity market will pay the price.”

Alternative energy, Electricity, Energy, Renewable Energy, Wind