Shale Boom Leaves Wind Power Desperately Seeking More Subsidies

  • Date: 07/04/14
  • Christopher Martin, Bloomberg

Wind power in the U.S. is on a respirator. The $14 billion industry, the world’s second-largest buyer of wind turbines, is reeling from a double blow — cheap natural gas unleashed by the hydraulic fracturing revolution and the death last year of federal subsidies that made wind the most competitive of all renewable energy sources in the U.S.

Without restoration of subsidies, worth $23 per megawatt hour to turbine owners, the industry may not recover, and the U.S. may lose ground in its race to reduce dependence on the fossil fuels driving global warming, say wind-power advocates.

They place the subsidy argument in the context of fairness, pointing out that wind’s chief fossil-fuel rival, the gas industry, is aided by the ability to form master limited partnerships that allow pipeline operators to avoid paying income tax. This helps drive down the cost of natural gas.

“If gas prices weren’t so cheap, then wind might be able to compete on its own,” said South Dakota’s Republican Governor Dennis Daugaard.

Consider that gas averaged $8.90 a million British thermal units in 2008 and plunged to $3.73 last year, making the fuel a cheaper source of electricity for utilities. Congress allowed the wind Production Tax Credit to expire last year, and wind farm construction plunged 92 percent.

‘Cheap Gas’

The shift in fortunes for the two fuels arrives at the moment when wind was beginning to rival gas on price alone, according to data compiled by Bloomberg. That means the industry’s future will be shaped by the debate over what counts as support from the government and when, or if, Congress moves to rethink the credit.

“Cheap gas has definitely made it harder to compete,” said David Crane, chief executive officer of NRG Energy Inc., which builds both gas and renewable power plants. He said that with the subsidy, companies were able to propose wind projects “below the price of gas.”

Both wind and gas cost about $84 a megawatt hour to install worldwide, excluding subsidies, according to Bloomberg New Energy Finance. That’s 3 percent higher than a coal-fired power plant costs and about half that of nuclear reactors.

The research group hosts a conference today in New York, where officials from the U.S. government’s energy research agency and Jeff Immelt, chief executive officer of General Electric Co., will debate the future shape of energy markets. GE is the biggest U.S. turbine supplier.

Lapsed Credits

Governor Daugaard joined Senator Ron Wyden, a Democrat from Oregon and chairman of the Senate Finance Committee, in pushing to extend the Production Tax Credit, which expired in December and is part of a package of 50 lapsed tax breaks the committee agreed on April 4 to extend.

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