The Federal Wind Power Subsidy pays for about Half the Cost of Wind-Generated Power

Posted by PITHOCRATES - August 19th, 2012

Week in Review

Taking money from Peter to give to Paul to spend does not increase net economic activity.  Yes, Paul’s spending increases which adds to economic activity.  But Peter’s spending decreases.  Which subtracts from economic activity.  This is the fatal flaw of stimulus spending.  There is no net gain in economic activity.  But the Keynesians don’t understand this.  If they take money from Peter to pay Paul to dig a ditch and then fill it back in they see only Paul’s contribution to the economy when he spends his wages.  They don’t see the reduction in Peter’s spending.  Why?  Because it’s not about economic stimulus.  It’s about the spending.  The taxes.  And the power it gives them (see Morning Bell: Wind Energy Subsidies Are As Useful As VHS Tape Subsidies by Amy Payne posted 8/16/2012 on The Foundry).

The wind production tax credit is set to expire at the end of this year, which has the industry crying out for continued subsidies.

And for good reason.

The subsidy is already equivalent to 50 percent to 70 percent of the wholesale price of electricity.

Wind power makes up a small sliver of our power generation.  Can you imagine the taxpayer cost if it made up a large portion of our power generation?  One shudders to think of a greatly expanding wind power sector and the additional taxation it would require.

Wait a minute.  If the fuel is free why does government have to subsidize the generation of this power?  Good question.  For although the fuel is free (as in sunshine and wind) the infrastructure to convert this free fuel into electricity is very expensive.  It takes an enormous amount of solar panels and windmills to generate useable power.  As well as ancillary equipment to store it or attach it to the grid.  And if the government didn’t pay at least half of this cost solar and wind ‘power plants’ couldn’t generate power at market prices.  Either they would produce power that no one would buy.  And after operating awhile without any revenue they would go out of business.  Or they would simply go out of business without even trying to generate power that no one would buy.  Simply put their power would come with a much higher price tag without those subsidies.  And it’s really hard to charge more for something that is identical to something selling for far less.  Like electric power coming from a coal-fired power plant.

All electric generation probably receives subsidies.  Because that’s what politicians do.  They go to Washington and try to get federal money for their district.  But that’s just the usual graft.  Fossil fuel and nuclear power generated power don’t need subsidies.  They are so reliable and cost efficient that they form the backbone of our baseload power generation.  They run all of the time providing reliable inexpensive electric power.  Natural gas-fired turbines come on to help with peak load demands.  And solar power and wind power are so unreliable and costly that they serve neither baseload power requirements nor peak load requirements.  They are little more than novelties.  And a vehicle to funnel vast sums of taxpayer funds to political allies.  Think Solyndra.  And the Obama administration.


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