Inflated Numbers; Erroneous Conclusions

Claims by the wind industry that another year-long extension of the Production Tax Credit (PTC) would create American jobs are based on “self-serving industry interviews and unsupported wind capacity forecasts that have no credibility,” according to a study by the American Energy Alliance (AEA) and the National Center for Public Policy Research (NCPPR). Additionally, the report finds that the analysis conducted for the wind industry by Chicago-based Navigant Consulting significantly overestimated the number of jobs that would be lost as a result of scheduled expiration of the PTC on Dec. 31, 2012.  Congress voted to extend the subsidy at a cost of over $12 billion during last year’s fiscal cliff negotiations.

The study, “Inflated Numbers; Erroneous Conclusions: The Navigant Wind Jobs Report,” was conducted by Charles Cicchetti, Ph.D, a senior advisor to the Pacific Economics Group and Navigant. The study lays bare the macroeconomic distortions and faulty modeling that the wind industry used to justify continued payments of its taxpayer-funded corporate welfare.

The study’s key findings include:

• When calculating potential job losses, Navigant used the wind industry’s self-serving, inflated forecasts for wind capacity “lost” without the PTC, which exceeded the federal government’s non-biased forecasts by as much as 55%.

• Navigant’s analysis also incorrectly applied one model to determine direct job losses in key states, inflating them by at least 100%. Incorrectly applying another model resulted in questionable multipliers that inflated job loss estimates by at least another 72%.

• The Navigant report narrowly focuses on supposed jobs lost in the wind industry if the PTC isn’t extended but completely ignores the U.S. economy as a whole. If new generating capacity is needed and jobs are the measure, other sources of electricity, such as coal, nuclear power or atural gas, would create more direct jobs than wind power for an equal amount of new generating capacity. In a separate May 2010 report, Navigant actually acknowledged that wind power produces fewer jobs, direct and indirect, than other sources of electricity for an equivalent amount of capacity.

• Subsidizing wind is very costly per job created. A one-year PTC extension could cost as much as a staggering $4.8 million for each direct wind manufacturing and construction job added.

The Navigant study claimed that the U.S. economy stood to lose 37,000 jobs in 2013 if the PTC were to have expired. Yet Dr. Cicchetti’s analysis demonstrates that Navigant misapplied models used to substantiate this claim, with the result that potential direct job losses were inflated by at least 100 percent in the key states that were reviewed. As a result, lawmakers and the general public were misled to believe that an extension of the PTC would strengthen the U.S. economy. Regarding the Navigant study, Dr. Cicchetti concludes, “The Report’s resulting job loss numbers are meaningless and should not be used to justify spending billions of dollars in taxpayer money to extend an unneeded subsidy for the wind industry.”

“This study confirms what we have known all along: the PTC is bad policy built on faulty economic analysis that results in a net loss for the U.S. economy,” said AEA President Thomas Pyle. “A sounder approach would be to let the free market determine winners and losers among energy sources, instead of Washington doling out billions of dollars to prop up Big Wind at great loss to the federal treasury and the U.S. jobs market.”

To read the entire study, click here.

To view the appendix to the study, click here.