Written by IER
WASHINGTON — In a study released today assessing the distributional impacts of federal wind subsidies, analysts from the Institute for Energy Research found that 30 states and the District of Columbia are marking up net losses to fund the wind Production Tax Credit (PTC) and pour millions of their taxpayer dollars into the pockets of wind producers. In fact, producers in the top ten "taking" states received more than 72 percent of the total PTC subsidy transfers in 2012, while entire regions of the country receive zero subsidies but are forced to pay an unfair share of the tax burden related to federal wind subsidies.
According to IER researchers, five U.S. states were net payers of more than $100 million in 2012, meaning that the burden of these states to pay for the wind Production Tax Credit surpassed the subsidy benefit received by producers in those states. Meanwhile, producers in states like Texas, Oklahoma, and Iowa are being paid hundreds of millions of dollars in subsidy transfers from poorer states. On a regional basis, the Northeast and Southeast were the biggest net payers, subsidizing other areas with net losses of $591.8 million and $559.3 million, respectively.
"Federal wind subsidies impact every state and region in the country," the report states, "and subsidies such as the wind PTC are inefficient policies that distort energy markets, threaten grid reliability, and encourage rent-seeking rather than energy production."
"A majority of U.S. states — generally states that lack the geography and wind supply to support wind power — unfairly shoulder the burden of these subsidies . . . This report shows that federal wind subsidies are terribly inequitable."
Highlights from the study:
New York is the second biggest net payer state in the country, shouldering net losses of more than $162.5 million in 2012. Despite producing the most electricity from wind of all the states in the Northeast region, New York remains the largest net payer in the region.
States in the Southeast paid, in total, $559.3 million more in taxes in 2012 than wind producers in those states received in federal wind subsidies.
Florida is the third largest net payer state nationwide and the biggest net payer in the Southeast. Because Florida had zero wind generation in 2012 but a high share of the federal wind subsidy tax burden, federal subsidies to wind power imposed a heavy tax on Floridians without conferring "benefits" to the state.
Despite the Midwest region being a net taker of federal wind subsidies, Michigan, Missouri, Ohio and Wisconsin are net payers. Each of these states also has Renewable Portfolio Standards (RPS), though they do not produce much wind and are likely forced to purchase wind energy from net taker states in the region.
Ohio taxpayers subsidize wind producers in net taker states not only through their federal tax dollars, but also through the state RPS — which utilities cannot meet without purchasing electricity from wind producers in neighboring states.
Texas is the biggest net taker of federal wind subsidies nationwide, raking in $394.5 million more in wind subsidies than its share of the federal wind subsidy-related tax burden.
7 out of 11 Western states are net takers, and wind producers in Oregon are the biggest net takers in the region, hauling in more than $99 million in 2012.
California had the second highest installed wind capacity in the country in 2012, and it was also the seventh largest net taker in terms of subsidies. However, because California contributes the largest share of the federal tax burden, the Golden State is actually the biggest net payer of federal wind subsidies with 2012 losses reaching nearly $200 million.
To register to attend IER's Wind Welfare Policy Summit hosted on Capitol Hill this Tuesday, click here.
The Institute for Energy Research (IER) is a not-for-profit organization that conducts intensive research and analysis on the functions, operations, and government regulation of global energy markets. IER maintains that freely-functioning energy markets provide the most efficient and effective solutions to today's global energy and environmental challenges and, as such, are critical to the well-being of individuals and society.