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East Coast Wind Farm's Success Predicated on Government Mandates


Posted by Chris Prandoni on Tuesday, October 12th, 2010, 2:26 PM PERMALINK


An above-the-fold New York Times article, Offshore Wind Power Line Wins Praise, and Backing, has reinvigorated the debate over renewable sources of energy, in this case, offshore wind. The article outlines plans for a wind farm off the Atlantic Seaboard which would provide energy to a handful of East Coast states. With projected costs around $5 billion, Google and a New York financial firm have agreed to take a 37.5 percent equity share in the project in hopes of encouraging additional investors.

After laying out the finances for the plan, the Times article interviews a slew of environmentalists or Administration officials who, unsurprisingly, are jumping head over heels for the proposed wind farm. “These kinds of audacious ideas might just be what we need to break through the wretched logjam,” said Melinda Pierce, the deputy director for national campaigns at the Sierra Club.

But it’s not all and sunshine and rainbows for taxpayers. “Generating electricity from offshore wind is far more expensive than relying on coal, natural gas or even onshore wind. But energy experts anticipate a growing demand for the offshore turbines to meet state requirements for greater reliance on local renewable energy as a clean alternative to fossil fuels,” the Times reminds us.

To extrapolate, offshore wind costs $218 per megawatt hour compared to coal which costs $78 per megawatt hour. As such, wind companies, investment firms, and environmentalists lobby state and federal legislatures to increase the price of coal or subsidize the price of wind, a practice called corporatism. When Wall Street banks lobbied Congress for TARP funds they were decreed parasites; yet, environmentalists employ the same rent seeking practices and are given a free pass—the inconsistencies from the Left are laughable.

On the East Coast, the artificial demand for wind turbines is brought about by the Regional Greenhouse Gas Initiative (RGGI), or more commonly know as a Renewable Electricity Standard (RES). RGGI is a plan by ten states to reduce their CO2 emissions from the utilities sector by ten percent by 2018. Forcing residents to consume expensive energy, the impetus behind an RES, inevitably leads to higher costs for consumers: In states where a RES is enforced, residents saw the cost of electricity rise by 39 percent.

Furthermore, the federal government facilitates inefficient wind farms providing a $0.022 tax credit for each kilowatt-hour of electricity produced by wind. This is bad tax policy. These tax credits should be repealed and replaced in a revenue neutral way.

Essentially, the government subsidizes wind production and then forces taxpayers to buy the expensive, already subsidized energy. Who wouldn’t want to invest in a market where the government pays you to make something and forces other people to buy it? Sounds like easy work if you can get it.

This gargantuan wind farm’s success is predicated on government skewing the energy market in favor of renewable sources. So while investment firms cash huge checks and liberal politicians appease their base, taxpayers get stuck paying higher energy costs.

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