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Wind Whips Subsidies into Shape

Last month, Investment Director Karim Rahemtulla wrote about the effect of wind subsidies on wind investment.

But what are these wind subsidies and how exactly have they worked in the lifespan of alternative energy?

The tax credit in 2013 for all U.S. wind projects was worth about $2 billion. That means wind farms – both private and public – received $23 per megawatt-hour of electricity that they generated.

The tax credit has helped lower electric prices in regions like Texas, where wind farming is huge.

But even with this immense subsidy, wind farms have occasionally “sold” electricity for less than $0 – meaning, even after government help, the wind farm paid to provide power.

After the completion of a wind project, the tax credit lasts 10 years. Any project underway by the end of last year will be ushered in on this standard. But wind projects from here on out won’t receive the help.

Why?

“The wind industry is all grown up,” says Deputy Director of the Energy Institute at the University of Texas at Austin, Michael Webber. The tax credit has done what it was created to do.

The allowed expiration of the credit is due to its success – over the past five years, 36% of all new electricity generation has come from wind. That’s six times more than what solar produces.

The boost that the tax credit was meant to give the wind sector has worked – and now, as Congress sits down to overhaul tax code, the question is, “What’s next?”

Currently, there are 42 separate energy subsidies. Some members of Congress are itching to change that.

Instead, they propose two simple tax credits – one for the production of clean electricity, another for clean transportation fuels. These proposed subsidies would expire only when the U.S. achieved specific reductions in greenhouse gases.

So while people like Mark Albenze, the Chief Executive Officer of the Wind Power Americas unit of Siemens AG (SI), are worried about business “drying up,” I’d say they have nothing to fear.

With the end of the current wind subsidy, another is being ushered in. What that looks like yet is hard to tell. But one thing is for certain: Until wind generation can stand on its own as a profit-making sector, I won’t be buying in.

On Monday, I’ll have a wind infographic for you.

And “the chase” continues…

Burns Foster