When examining numbers – financial and otherwise – my father always instructed that “figures lie and liars figure.”
Such homespun sensibility has kept me in good stead, particularly when I recently came across a Dec. 25, 2012, Wall Street Journal editorial by former Texas Sen. Phil Gramm, who writes, “The costs of wind subsidies are extraordinarily high – $52.48 per 1 million watt hours generated, according to the U.S. Energy Information Administration. By contrast, the subsidies for generating the same amount of electricity from nuclear power are $3.10, from hydropower 84 cents, from coal 64 cents and from natural gas 63 cents.”
On the face of it, Gramm’s numbers appear legit. However, a closer look reveals that he chose to focus on a particular set of numbers to bolster his case.
At best, Gramm’s accounting is clearly misleading, explains Michael Goggin, research director at the American Wind Energy Association. For starters, the data used is based on incentives and total wind electricity production only in 2010 – an extreme outlier for wind incentive costs due to the popularity of the Section 1603 upfront cash grant created that year.
Typically, Goggin explains, a wind project would simply receive the $23/MWh production tax credit over the first 10 years of the project – and nothing after that. “Therefore, the lifetime average is very roughly around $15/MWh,” he notes. “However, the 1603 program effectively loaded all of those payments into that first year.”
But Gramm’s analysis completely overlooks the impact of hundreds of billions of dollars in cumulative federal subsidies that have gone to nuclear and fossil generators over the years. According to the Congressional Research Service, “For more than half a century, federal energy tax policy focused almost exclusively on increasing domestic oil and gas reserves and production.” Somehow, this level of detail escaped Gramm’s accounting.
Instead of conducting a pointless debate that centers on whose numbers you can trust, the U.S. wind industry needs to somehow reframe this argument around incentives. I’m told that part of the problem stems from the fact that there has been a paucity of high-level studies dedicated to energy subsidy reform. Perhaps wind advocates can begin there.
Otherwise, wind energy will always be forced to play a game where the rules are dictated by baseload generators and influential figurers like Gramm.