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Policy: Environment & Energy

Veronique de Rugy: Hard to find the return on green energy investments

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Wind energy is the darling of the green energy sector. Over the past 35 years, the industry has received nearly $30 billion in federal subsidies and cash grants, and Washington has promised another $12 billion in subsidies over the next decade.

Thus, the argument goes, subsidizing wind energy will not only help boost economic growth and create jobs, it will also promote a cleaner environment. However, evidence shows these arguments to be at best a stretch, and at worst outright false. Let's review.

The wind industry's main subsidy, the Renewable Energy Production Tax Credit, was created in 1992 to provide temporary assistance for promoting investments in energy technology. But 21 years later, the subsidy is still in effect.

Department of Energy data show that as of March 1, 2010, 86 percent of all renewable-energy grants went to wind projects. From 2000 to 2010, federal wind subsidies grew by an average of 32 percent per year compared to the nearly flat growth rate in other energy sources.

Between fiscal years 2007 and 2010, annual wind subsidies grew from $476 million to nearly $5 billion -- a nearly tenfold increase.

What is the outcome of these extraordinary federal investments in wind energy? As it turns out, wind subsidies have not been found to stimulate the economy -- and the jobs created come at enormous cost.

The Manhattan Institute calculates a one-year extension of the wind production tax credit will cost about $329,000 per job and add more than $12 billion to the federal deficit. Even with these subsidies, the physical limitations of wind power make it uncompetitive with other energy sources.

No amount of federal support can predict when and where the wind will blow. And as the New York Times points out, "Wind sometimes blows the hardest in remote plains, far from cities that need the energy, which requires the building of transmission lines which is expensive and difficult."

So the alleged benefits of geographically dispersed wind turbines come with a huge cost from the additional transmission lines needed for city hubs.

To make matters worse, wind energy companies have become accustomed to large benefits from their political ties. In a recent op-ed in the Wall Street Journal, Patrick Jenevein, a green-energy businessman, argued that "government subsidies to new wind farms have only made the industry less focused on reducing costs, and more on producing a product that isn't as efficient or cheap as it might be if we focused less on working the political system and more on research and development."

As the Government Accountability Office reports, wind energy is subsidized through dozens of different federal credits, grants and loan guarantees, and many of these programs give wind producers unparalleled advantages over other more reliable sources of energy.

We should take heed of Jenevein's advice. "If Washington sent a little less 'green' our way, it would be good for the industry." We must eliminate these misguided subsidies. Taxpayers should not continue to shell out billions of dollars on subsidies for such a low-value energy generator that has already been heavily subsidized for 35 years.

Washington Examiner Contributor Veronique de Rugy is a senior research fellow of the Mercatus Center at George Mason University.

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Veronique de Rugy

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