by Steven Waechter | Nov 28, 2012
The tax credit for wind energy is back on the agenda, and Iowaâ€™s own Chuck Grassley and Terry Branstad are taking leadership roles in fighting for the extension, going so far as to appear together at a press conference about it.
Wind energy is my favorite target at the moment, because it combines socialist economics, corruption, aesthetic vandalism, junk science, and cynical political machinations – all melting together into a hideous soup of wasted money and ruined skylines.
After the last election, targeting two of Iowaâ€™s best known Republicans for criticism is perhaps a risky business, but for those who think I – with my dislike of leftists – shouldnâ€™t be doing it, I offer the following historical analogy:
In the days of the Roman legions, the centurions were legendary for their swift discipline. One centurion developed a habit of breaking his staff over the backs of soldiers who had acted disobediently. â€œGive me another,â€ he would say to his aide when it happened, and it happened so often that â€œgive me anotherâ€œ became his nickname . In this way, withering cruelty became not a malicious attempt to destroy, but deep concern for long-term wellbeing.
Well, give me another.
Political Venture Capital
Wind energy is an odious political scam. First of all, the industry cannot survive without government subsidy, namely, the tax credits. The wind industry makes profits not from the power grid, but from their tax returns.
It is also ridiculously expensive and underproductive. When Alliant Energy built the Whispering Willows wind farm in Franklin County, they petitioned utilities regulators for a rate hike to help cover the cost. The market had reached a price for electricity, generated by coal, but at that price the wind farm was not economically viable – it wouldnâ€™t produce enough electricity to cover its cost.
They built it anyway. Even though the money in the wind industry is earned on the tax return and not the power grid, they didnâ€™t want to eat an operating loss, so rates have to increase. Consumers in central Iowa found themselves paying more money for the electricity they used – still mostly generated from coal – to pay for a wind farm erected so the utility could earn a tax credit.
The utility sells the power and claims the credits; the landowners earn fees for having these modern art sculptures on their land; the turbines produce just enough electricity to power a massive, metaphorical conveyor belt carrying money from the pockets of poor customers to the rich and the politically-connectedâ€¦ Because that is progress these days.
Grassley stated at the recent news conference that â€œWe have a 20 year investment in thisâ€¦ it would be terrible to throw a way a 20 year investment if it will mature in a short time.â€
We have been waiting for the wind energy industry to mature since the days when pioneer farmers could order a windmill from the Sears and Roebuck catalog. Most of them were dismantled after rural America was electrified. Now, the fantasy is that the same technology that was felled by electricity will be the future of electricity.
Nothing becomes outdated faster than a fantasy about the future. This is never more true than when the fantasy has its birth in the minds of politicians; a future brought to you by the same people who bring you inflation, wars, and prisons.
The general public is also rapidly becoming too poor to cover higher utility bills, but wind energy fits into the political rhetoric of our time and so they charge forward. Wind energy doesnâ€™t make power cheaper, reduce our trade deficit, strengthen the dollar, or generate tax revenue – but it can get you elected. Â It employs only a handful of people, especially when compared to the coal industry – which politicians have threatened to kill. The turbines themselves are insanely ugly, and provide a far too convenient backdrop for political photo opportunities.
I understand that this is politics. I also object to the fact that this is politics. The experience of subsidized public housing should have been enough to dispel the urge to make fantasy into reality, but it wasnâ€™t. We will all pay the price. Literally.
by Steven Waechter | Mar 7, 2012
I recently heard a radio commercial urging me to contact various members of Congress to voice my support for tax credits connected to the wind energy industry. On a lark, I went to the Iowa Legislature website and searched active bills for the word â€œwind,â€ and received several dozen hits, many of which seemed to be focused on state tax credits for manufacturing and installing wind turbines. Both state and federal politicians seem to be tripping over themselves to get into the wind energy craze.
Back in 2010 Alliant Energy was petitioning to be allowed to increase the rates they charged for electricity, and one of the supporting reasons they put forward was the $150 million project called the Whispering Willow-East wind farm in Franklin county. This was big news in Newton, where I was living at the time, as Newton is both the location of some wind turbine manufacturers, and within the area that would be affected by the rate increase.
This serves as perhaps a perfect litmus test for how people think about economics. If you are a progressive or a neo-Keynesian, then your reaction is likely to be that this is entirely appropriate; these wind farms are being built for our benefit, so of course we must pay. If you are an environmentalist or a socialist, then, of course electricity should cost more in your mind. As you are increasing your standard of living, at the unfair expense of the environment or the proletariat, it would be akin to questioning whether people should be locked up for committing assault, wouldnâ€™t it?
If you believe in Austrian economics, or just in free-market pricing in general, then this situation would seem a bit odd. The supply of electricity is presumably increasing because of new wind farms. Increases in supply tend to reduce pressure on prices, not cause them to increase. Yet here, the new wind projects are being cited as a reason to increase the rates per kilowatt hour to the end users. They have built a wind farm, and now demand to pay for it by charging more for electricity still produced mainly by coal which could have been provided for the old price if they hadnâ€˜t bothered to build the wind farm.
That is how capital investment works; if you couldnâ€™t make money by building houses in the current market, but you build a bunch of houses anyway, it doesnâ€™t cause the price of houses to go up. Wind energy doesnâ€™t seem to follow the script of wealth creation.
The rule of thumb seems to be that a wind turbine costs about $1 million per nameplate megawatt of capacity, so if a turbine has 3 megawatts of stated capacity then it would cost about $3 million. Then you have to factor in what the industry refers to as the â€œcapacity factor,â€ which is the percentage of the nameplate capacity that the turbine actually produces, and in Iowa the capacity factor is said to be about thirty percent. In plain terms, that means that if you want one megawatt of electricity, you need a three-megawatt wind turbine. However, it isnâ€™t as simple as that. Although Iowa might be the â€œSaudi Arabia of Windâ€ – proclaimed as such by people who have likely never been to Saudi Arabia, nor had difficulty paying their electric bills – our winds are not constant.
When the wind doesnâ€™t blow, the turbines donâ€™t turn. The same is true for when the wind is too strong – wind turbines are equipped with a braking mechanism to stop them during high winds. If that brake fails, the turbine blades can rattle the entire tower to pieces, if the generator doesnâ€™t catch on fire first – which you should look up on the internet because it is an interesting sight.
As a result of all the shortcomings of wind turbines, wind power costs about $90 per megawatt hour, compared to about $60 per megawatt hour for coal and even less than that for natural gas-generated electricity, yet we are told we need to fill our skylines with expensive wind turbines which spend most of their lives perfectly still and producing nothing – and then charge us for the cost of the electricity these intensely ugly things donâ€™t produce. The Iowa Wind Energy Association has a goal to increase Iowaâ€™s wind capacity from 4,500 megawatts to 20,000 megawatts by 2030 – so we can enjoy 6,000 megawatts of electricity doled out in intermittent intervals.
Germany announced its intent to decommission all of its nuclear power stations after the Fukushima incident, and the German government has been very supportive of wind energy, but not a single coal plant has been shut down. In fact, Germany is replacing its nuclear capacity with new coal power plants – as many as 26 new coal power plants are planned. The wind, like the sea, is a fickle lover as it would seem.
According to wind energy supporters, expanding wind energy creates jobs, and therefore none of the shortcomings in the technology or the economics are considered to matter. This attitude seems to be the source of the consensus among political leaders – or at least the appearance of consensus – as politicians go along with the wind energy movement lest they be accused of being â€œagainst jobs.â€ There are even pictures of wind turbines on Iowaâ€™s new driverâ€™s license design.
The wind energy addiction will end up being much the same as the other fads. State and federal tax credits, grants, and green energy targets are directing capital towards these wind energy projects. The jobs created in the short term are visible to politicians seeking reelection, but the damage is diffused across the entire economy and the effects wonâ€™t be felt until later. They can see the turbine blades going down the interstate, but not the higher utility bills of their constituents – including employers – nor the layoffs when the negative financial effects become impossible to ignore. Americans are too broke to pay for expensive wind-generated electricity, governments are too broke to continue subsidizing these projects, and the economy is too broke to carry an industrial sector which generates no profits, no useable increases in electricity, and no discernable tax revenue.
Wind turbines donâ€™t increase the standard of living; in fact they seem to make energy more expensive. They only work intermittently, wear out rather quickly without expensive maintenance, and are heavily dependent on government credits and grants for their manufacture and installation. They have also been known to kill eagles, which is reason enough to hate anything.
The future might be filled with wind turbines, but that wonâ€™t be a positive thing. They are too expensive and too underproductive to provide electricity in quantities and at prices that are necessary to make them profitable. Elected officials at all levels need to move past the rhetoric of the wind energy craze and do their own research into this matter.
Unless they do so, they have no business voting to appropriate public funds to support the construction of more public relations kitsch at $1 million per nameplate megawatt. Even now attention is turning towards natural gas as the real driver of future energy production while a combination of better exploration techniques and hydraulic fracturing makes natural gas properly cheap.
Alliant itself is looking at building a new natural gas power plant – in Iowa.