To Rein in Obama’s Climate Agenda, Speaker Boehner Should Oppose PTC
November 12, 2014 by Leave a Comment
Speaker of the House John Boehner issued the following statement today on President Obama’s climate deal with China:
“This announcement is yet another sign that the president intends to double down on his job-crushing policies no matter how devastating the impact for America’s heartland and the country as a whole. And it is the latest example of the president’s crusade against affordable, reliable energy that is already hurting jobs and squeezing middle-class families. Republicans have consistently passed legislation to rein in the EPA and stop these harmful policies from taking effect, and we will continue to make this a priority in the new Congress.”
We welcome and agree with the Speaker’s statement. The “deal” with China is a sham and a fraud—requiring nothing on behalf of China and taking credit for environmental improvements that American businesses and American individuals have already made. We encourage the Speaker to make sure that his comments apply to those policies like extending the wind production tax credit (PTC). If the Speaker is serious—and we are confident that he is—the easiest thing he can do to protect American families and businesses from the president’s plan to takeover the electricity system and drive costs up for Americans is to prevent extension of the wind PTC.
It’s pretty simple. A vote to extend the wind production tax credit is a vote for the President’s plan.
What if President Obama Supported Affordable, Reliable Energy?
November 12, 2014 by Leave a Comment
In a hypothetical world, our President would support America’s energy boom wholeheartedly. Unfortunately, that is not the world we live in.
Until that day comes, Andrew Stiles of the Washington Free Beacon has provided us with a speech the President would give if he actually supported the energy that keeps our lights on.
“What you should’ve asked me is what I plan to do about it [climate change]. Here’s what I’m not gonna do. I’m not going to support policies that will cause energy prices to “necessarily skyrocket,” as the president has said. That’s not a serious solution. Not when hardworking middle class families are still struggling to make ends meet.
You know, some of my opponents are out there literally arguing that we should stop drilling for oil tomorrow, and see if we can get by on wind turbines, or solar panels, or algae. Yes, algae. You know, the stuff that grows on ponds. Go figure.”
Wouldn’t it be refreshing to hear that kind of rhetoric from the White House instead of what we currently get? Stiles continues:
“Now, I understand that there are Democratic donors—some of them billionaires—who have investments in these sorts of companies and would do pretty well for themselves if my opponents got their way.
But I’m not interested in helping a handful of rich guys get even richer. I’m interested in making sure that hardworking Americans aren’t breaking the bank to heat their homes, or fill up the minivan. I would rather they spend that money on groceries, tuition, or maybe starting a new business.”
The entire piece is worth a read. You can find it on the Free Beacon’s website.
Obama’s Climate Photo-Op: Business As Usual
November 12, 2014 by Leave a Comment
WASHINGTON — American Energy Alliance President Thomas Pyle issued the following statement on President Obama’s climate deal with China:
“President Obama’s back room climate deal with China is a perpetuation of the status quo disguised as meaningful policy change. While China makes empty and non-binding promises that it ‘intends to try’ to halt its emissions growth a decade and a half from now, President Obama promises to accelerate the pace by which his policies raise our energy costs and harm our economy.
“Similar to past agreements, this deal will do little to reduce greenhouse gas emissions, let alone global temperatures. But it will surely stifle our economy and harm American families, particularly the poorest among us and those on fixed incomes.
“The reality is that a growing chorus of developed and developing countries is standing opposed to Obama’s reckless climate agenda. India, one of the fastest growing emitters, is noticeably absent from this deal because its leaders refuse to sacrifice its economic well-being at the altar of climate change.
“Voters sent a clear message in the midterms: enough is enough. Instead of listening to the American people, the president seems intent on distracting the public from the shellacking his policies took at the polls by doubling down on his failed energy and climate agenda. Americans want their elected leaders to focus on jobs and the economy, not a costly climate change agenda.”
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A Vote for the Wind PTC is a Vote for President Obama’s Climate Agenda
November 12, 2014 by 14 Comments
Outgoing Senate Majority Leader Harry Reid will soon lose his grip on a chamber he dominated for seven years. Before giving up the reins, however, Reid will dictate the Senate’s agenda during the lame duck session. At the top of his to-do list is a tax extenders bill that includes an extension of the wind Production Tax Credit (PTC).
We already explained why Congress should reject any effort to extend the wind PTC during the lame duck session. In short, the PTC is a flawed policy that harms American families and threatens power grid reliability. We also explained how the PTC is integral to President Obama’s climate agenda, the foundation of which is the Environmental Protection Agency’s (EPA) carbon dioxide rules for existing power plants.
A vote by Congress to extend the wind PTC is a vote in favor of the status quo, which the American voters rejected by giving Republicans control of the Senate. Opposing the Obama-Reid energy agenda doesn’t have to wait until the new Congress is sworn in—it can begin by opposing the wind PTC during the lame duck session.
Taking on Obama’s Energy Agenda Now
Incoming Senate Majority Leader Mitch McConnell said a top priority of his is “to try to do whatever I can to get the EPA reined in.” He can take action on this goal even before the new Congress is sworn in by opposing the wind PTC.
In April, the Senate Finance Committee passed a tax extenders package that includes a retroactive extension of the wind PTC, which lapsed at the end of last year. The full Senate has not taken action on the package, though Sen. Reid is intent on passing the extenders during the lame duck.
If soon-to-be Majority Leader McConnell is indeed serious about reining in the EPA, he should start by opposing an extension of the wind PTC in the lame duck session. In fact, rejecting the PTC is just about the only action the Senate can take during the lame duck to “rein in” the EPA.
Don’t “Clear the Decks” if the Decks Include the Wind PTC
The incoming 114th Congress is eager to show that it can govern. McConnell and his staff have indicated that they want to “clear the decks” for the incoming Congress. House Energy and Commerce Chairman Fred Upton said that the election gives Republicans a “chance to govern on energy and environmental policy.”
If Republicans want to be effective in the lame duck session, they must resist attempts to include the wind PTC in a tax extenders package, even if it helps to “clear the decks.” Cutting a deal that includes the PTC would support the agenda that the next Congress is tasked with unraveling.
Republicans should not trade in their values for a clean slate. The American people gave Republicans a majority in the 114th Congress to push back against Obama’s overreach, including his energy agenda. The new Congress will push to invalidate the EPA’s carbon dioxide regulations under the Congressional Review Act and use the appropriations process to stall the rule. Unfortunately, these efforts will ring hollow if Senate Republicans allow Sen. Reid to revive the wind PTC in the lame duck session.
Conclusion
On October 2, President Obama made sure the American people knew that his policies were on the ballot. He said, “I am not on the ballot this fall. Michelle’s pretty happy about that. But make no mistake: These policies are on the ballot. Every single one of them.” The American people have spoken and they repudiated President Obama’s policies by voting out a large number of Senators and Representatives in President Obama’s party. Opposing the wind PTC is the first step Congress can take toward fulfilling that mandate. Given the strong connections between the PTC and the President’s climate agenda, a vote to extend the PTC is inexcusable.
Wind PTC Inextricably Linked to EPA Power Plant Rules
November 11, 2014 by Leave a Comment
An earlier article explained that for President Obama, the American Wind Energy Association (AWEA), and the national environmental lobby, the wind Production Tax Credit (PTC) is at the top of the to-do list for the lame-duck session that will close out the 113th Congress. While lawmakers debate the PTC, the Environmental Protection Agency (EPA) is finalizing its first regulation on carbon dioxide emissions from existing power plants—the foundation of President Obama’s broader “climate” agenda. These two policies—the wind PTC and the most recent EPA regulations on power plants—not only independently support the administration’s climate agenda, but also reinforce each other in important ways. Therefore, if Republicans in Congress truly want to rein in the EPA, they must reject any attempt to revive the wind PTC.
The EPA’s Regulation of CO2 Emissions from Existing Power Plants
As we detailed in a recent report, EPA regulations will close a staggering amount of affordable and reliable power plants—upwards of 72 gigawatts in total. That is enough to reliably power over 44 million homes. These closures will do very little for the climate, but will impose staggering new costs on American families and businesses.
The latest of these regulations, EPA’s regulation of carbon dioxide emissions from existing natural gas and coal power plants, attempts to “address” climate change by imposing state-specific mandates for reducing carbon dioxide emissions. Specifically, it requires states to develop and submit their own implementation plans to the EPA to reduce global carbon dioxide levels by 1.5 percent by 2050.[1]
EPA’s regulation of carbon dioxide emissions from natural gas and coal plants will cost upwards of $366 billion and raise electricity rates for many electricity consumers by double digits. In terms of climate benefits, the regulation is designed to reduce global temperatures by a paltry 0.018 degrees Celsius by the year 2100.
To establish its state-by-state carbon dioxide mandates, EPA applied a four-part formula to each state’s electricity sector and assumed that, if each state could implement the required changes, the result would be an overall 30 percent reduction in carbon dioxide emissions (individual states have varying targets). EPA refers to the four parts of its formula as “building blocks.” Each state must do the following to meet EPA’s mandates:
Building block 1: Increase fuel efficiency at existing coal plants by 6 percent
Building block 2: Increase capacity factor of natural gas plants to 70 percent
Building block 3: Increase use of renewables, such as wind and solar power
Building block 4: Reduce total demand for electricity by 1.5 percent per year
EPA’s Plan Supports the Wind Industry
Building block 3 essentially imposes a renewable electricity mandate on all states, even states that have not implemented their own. To put it bluntly, this would be a massive handout from the EPA to the wind industry. The American Wind Energy Association (AWEA), the lobbying arm of the multi-billion-dollar wind industry in the U.S., is licking its lips at the prospect. AWEA’s CEO Tom Kiernan proclaimed, “Wind energy is one of the biggest, fastest, cheapest ways states can comply with the forthcoming EPA rule limiting carbon pollution from existing power plants.”
The Department of Energy agrees that the EPA is inflating the wind industry. In its recent Wind Technologies Market Report, the Department wrote: “Although the lack of long-term federal incentives for wind energy has been a drag on the industry, the prospective impacts of more-stringent EPA environmental regulations on fossil plant retirements and energy costs may create new markets for wind energy.”
According to AWEA, however, the EPA should go even further to support the wind industry. In recent Congressional testimony, Tom Vinson, AWEA’s Senior Director of Federal Regulatory Affairs, stated: “While AWEA supports the draft rule, we believe the details of the proposed building block 3 significantly underestimate the amount of cost-effective reductions that are available now and in the immediate future from renewable energy sources; and, as such, that the final rule can and should require emissions reductions that go further….”
National environmental groups echo the same message. The Union of Concerned Scientists (UCS) released a report that complements AWEA’s position and suggests the renewable energy targets in the EPA regulation are too modest. The UCS report calls for an increase in carbon dioxide emissions from 30 percent to approximately 40 percent below 2005 levels by 2030. Perhaps incidentally, the Department of Energy Secretary Ernest Moniz’s Chief of Staff, Kevin Knobloch, is the past president of the UCS. The Sierra Club’s “Beyond Coal” campaign supports the PTC, as does the League of Conservation Voters’ scorecard.
In other words, wind industry advocates say the EPA mandates are absolutely necessary to sustain the wind industry. Again, according to Vinson: “This rule is behind only the production tax credit and state renewables mandates as a potential market driver for wind energy.”
The Wind PTC Supports EPA’s Existing Source Rule
The PTC hides the cost of mandating unrealistic amounts of renewables (building block 3) and encourages states to implement renewable power mandates—that is why the Administration wants Congress to extend it. It is no accident that the same groups who advocate for President Obama’s climate plan are pushing aggressively to revive the PTC. They know EPA regulations will simply be too costly without big subsidies to wind power.
With the PTC in place, states that mandate increasing amounts of generation from renewables will get some help from taxpayers (you and me). The crucial link between the wind PTC and the EPA rule is that the PTC makes “building block 3” appear to be affordable on our electricity bills when, in reality, it merely jacks up our tax bill.
The PTC is also a “foot in the door” in the power shift from the states to the federal government. Much like a federal mandate for renewables, the PTC favors wind power above reliable sources even when the grid rejects intermittent wind-generated electricity. Unfortunately for the President and his agenda to increase the cost of electricity, most voters don’t trust the federal government to run the power grid, and most are pretty confident that the states—who have been regulating the electricity system for more than a hundred years—should keep doing that job.
Conclusion
There is no getting around the massive costs and miniscule benefits of the EPA’s new regulations on natural gas and coal-fired power plants. However, the wind PTC hides those costs from consumers and enables the Administration to claim that its “building blocks” are affordable. At the same time, the EPA regulations are a huge boon to the wind industry, which struggles in the absence of subsidies and mandates. The back-scratching taking place between the wind industry and the Administration on these policies is obvious once all the facts are considered. Stay tuned to Energy Townhall to learn how rejecting the wind PTC is the only meaningful vote this Congress will have against the Administration’s energy agenda.
[1] EPA’s plan will reduce carbon dioxide emissions from the U.S. electric power sector by about 30 percent. But carbon dioxide is a well-mixed gas and what matter is global levels, not merely U.S. emissions. According to the assumption here, if the world follows the IPCC’s RCP 6.0, the reduction caused by EPA’s plan will be 1.5 percent by 2050.
The Wind PTC: What It Is And Why Congress Should Reject It
November 10, 2014 by 3 Comments
When Congress returns for the start of the lame duck session this week, they will discuss whether to approve a retroactive extension of the expired Production Tax Credit (PTC), which primarily benefits foreign and domestic wind companies. For a host of reasons, they shouldn’t. Most importantly, they shouldn’t because the PTC is inextricably linked to the proposed EPA regulation of carbon dioxide on existing power providers, and therefore a vote in favor of reinstating the PTC is a vote in favor of President Obama’s climate agenda. I will explain why this is the case in subsequent blog posts, but first a brief review of the history and function of the PTC is in order.
In April, the Senate Finance Committee approved an $84 billion extension of roughly 60 expired tax provisions. The measure contains no offsets and includes a retroactive extension of the wind PTC, which expired at the end of 2013. The House has taken a piecemeal approach to the expired tax provisions, and it has not put forward an extension of the PTC.
The most vocal and active proponents of an extension of the wind PTC include wind industry lobbyists at the American Wind Energy Association (AWEA) and national environmental organizations like the Sierra Club and the League of Conservation Voters. The PTC’s opponents include the American Energy Alliance (my organization and the publisher of this blog), a growing group of think tanks, and many power grid experts and utility CEOs.
Background and History of the PTC
The PTC was initially enacted through the Energy Policy Act of 1992 as a temporary measure that expired in July 1999. Since the credit’s establishment, the measure has been temporarily extended seven times by subsequent pieces of legislation: the Ticket to Work and Work Incentives Improvement Act of 1999; the Job Creation and Worker Assistance Act of 2002; the Working Families Tax Relief Act of 2004; the Energy Policy Act of 2005; the Tax Relief and Health Care Act of 2006; the American Recovery and Reinvestment Act of 2009; and the American Taxpayer Relief Act of 2012.[1]
Senator Chuck Grassley, the original author of the PTC language, has repeatedly said the PTC is a temporary subsidy to get the wind industry on its own two feet. In 2003, when the subsidy was already 11 years old, he predicted, “we’re going to have to [subsidize wind] for at least another five years, maybe for 10 years. Sometime we’re going to reach that point where it’s competitive.” Now, another 11 years later, he’s asking for more subsidies because wind still can’t compete.
Who receives the PTC? The credit goes to owners of wind turbines for the first ten years of operation of any qualifying wind facility. For the first twenty years of the PTC’s existence, facility had to be operating before the PTC expired in order to qualify to receive the credit. However, in the most recent extension (through the 2013 calendar year), Senator Grassley expanded the qualification language to include facilities that had started “construction” before the PTC’s expiration.
In response to the language change, the Internal Revenue Service (IRS) released guidelines that defined “construction” in terms of financing as well as physical work. As a result, a developer can circumvent the need to physically start construction of a project and instead rely on mere financing in order to qualify for the PTC. Going one step further, the IRS also said a wind facility would qualify if it is placed in service before January 1, 2016, which amounts to a two-year extension of the PTC (through calendar years 2014 and 2015) under the original terms of the legislation.
Basic Function and Purpose of the PTC
Wind is an expensive way to generate electricity. Without the support of the PTC and other subsidies, wind turbines cannot compete with conventional sources. Some wind facilities would have been built without these subsidies, but nowhere near as many facilities as have actually been constructed.
The PTC is not a subsidy to consumers. Rather, it is a business subsidy that goes to developers of industrial wind turbine facilities and works through the mechanism of project finance. It lowers the cost of industrial financing and offers big investors like Warren Buffett a convenient way to lower their tax rate. As Buffett recently commented, wind turbines “don’t make sense without the tax credit.”
The PTC functions by providing a tax credit on a per-kilowatt-hour basis to businesses that operate qualified wind facilities. Originally, the credit was disbursed at a rate of 1.5 cents per kWh (in 1993 dollars), but it has been increased in order to keep up with inflation. When it expired in 2013, the PTC had been raised to 2.3 cents per kWh for wind technologies.
To put the size of the subsidy in context, the PTC offers the equivalent of 30% to 50% of the average wholesale price of power, depending on the region, for the entirety of a ten-year period. This subsidy is so substantial that wind producers can afford to pay the grid to take their unwanted power and still make money. This phenomenon is known as negative pricing, and it threatens the long-term reliability of the power grid.
It is no surprise that a subsidy so large would drive businesses to build wind turbines, and the data reflects the wind industry’s reliance on the PTC. When the PTC has been available, installations have jumped. When it has expired, as it did in 2000, 2002, 2004, and 2013, installations fell off sharply. For instance, between 2012 and 2013, installations of new wind capacity fell from 13,000 MW (2012) to only 1,100 MW (2013).
Source: American Wind Energy Association
In essence, the PTC is a catalyst that gets uneconomic wind power projects built. It is particularly effective at financing projects that would not otherwise be built.
Conclusion
Congress should reject any attempt to revive the wind PTC. Since 1992, this taxpayer-funded subsidy has been extended seven times, yet wind energy remains scarce and expensive. While it lines the pockets of wealthy investors, the wind PTC raises energy prices on American families and threatens grid reliability. Much worse, the PTC is integral to the success or failure of even worse public policy, namely the EPA’s power plant rule. Stay tuned to Energy TownHall to learn how.
U.S. Electricity Grid Overseer Concerned EPA Regulations Harm Reliability
November 10, 2014 by Leave a Comment
Will EPA’s regulations on carbon dioxide emissions from power plants result in reduced reliability of the electricity grid? Yes, according to the national electricity grid overseer—the North American Electric Reliability Corporation (NERC).
NERC recently released an initial reliability review of the potential risks to reliability. Using the assumptions in EPA’s report, NERC found that “Essential Reliability Services may be strained” and that “more time for CPP [EPA’s regulation] may be needed to accommodate reliability enhancements.”
In terms of Essential Reliability Services (ERS), NERC explains:
“ERSs are the key services and characteristics that comprise the following basic reliability services needed to maintain BPS reliability: (1) load and resource balance; (2) voltage support; and (3) frequency support. New reliability challenges may arise with the integration of generation resources that have different ERS characteristics than the units that are projected to retire. The changing resource mix introduces changes to operations and expected behaviors of the system; therefore, more transmission and new operating procedures may be needed to maintain reliability.”
Regarding accommodating reliability enhancements, NERC points out:
“State and regional plans must be approved by the EPA, which is anticipated to require up to one year, leaving as little as six months to two years to implement the approved plan. Areas that experience a large shift in their resource mix are expected to require transmission enhancements to maintain reliability. Constructing the resource additions, as well as the expected transmission enhancements, may represent a significant reliability challenge given the constrained time period for implementation. While the EPA provides flexibility for meeting compliance requirements within the proposed time frame, there appears to be less flexibility in providing reliability assurance beyond the compliance period.”
NERC did not examine the costs of all of these additional features required to maintain reliability after EPA regulations come into effect. The costs will be substantial. EPA regulations cause reliable and affordable power plants to close, and they will require the building of newer and more expensive plants. Since EPA is providing incentives to build non-reliable sources of generation, such as wind and solar, the electric grid will require, as NERC points out, more transmissions, more resources for voltage support, and more resources for load and resource balancing. Cumulatively, implementing these necessary features will lead to higher costs than EPA originally suggested.
What does EPA have to say about this report? It implied that it knows more about grid reliability than NERC does, even though NERC is the recognized expert in grid reliability. EPA’s spokeswoman Liz Purchia said, “Our analysis finds that the proposal would not raise significant concerns over regional resource adequacy or raise the potential for interregional grid problems…Any remaining local issues would be managed, as they are today, through standard reliability planning processes.”
Who are you going to trust when it comes to grid reliability: NERC—an organization devoted to grid reliability—or EPA—an organization that (when viewed in the most favorable light) is supposed to protect the environment? EPA should take heed of NERC’s evaluation and seriously consider the negative impacts of its environmental regulations on grid reliability.
Hope for Keystone XL in Montana
November 7, 2014 by 9 Comments
Radical environmentalists and the Democrats they support consistently and opportunistically denounce the Keystone Pipeline as a harbinger of environmental harm. Frankly, their claims are patently false. Even worse, the wait for Keystone’s approval has caused a great deal of economic instability in the regions dotting its proposed path. Montana’s floundering economy best exemplifies the consequences of the Obama Administration and State Department’s political posturing over the past six years.
Aside from a small increase in 2013, Montana’s oil production has dipped significantly every year since 2005. Small towns close to neighboring North Dakota, a state that epitomizes the positive effects of America’s oil boom, are suffering from rising taxes and housing costs without the higher income to pay for them. And in struggling towns like Glasgow, schools in desperate need of renovations wait for better times, moving money around just to get by.
According to Dan Bucks, the director of Montana’s Department of Revenue, Keystone XL would be an immediate remedy for many of these problems.
“…TransCanada will pay about $80.3 million in total Montana property taxes in its first year of operation, of which $16.3 million will go to the school equalization fund and $1 million will go to the university system. The rest (about $63 million) will be divided among the counties and school districts within the counties, and other tax districts such as fire, cemetery and soil conservation districts. In McCone County, Montana, TransCanada would be paying an expected $10,403 in revenue for each of McCone County’s 1,734 residents.”
—IER, 7/8/14
For these reasons and many more, Keystone XL should be a no brainer; for Montana, it is. Widespread and visible energy production is nothing new for a state sitting on a veritable goldmine of natural resources – and Montanans are ready to use them. Communities like Baker have seen firsthand the numerous economic benefits of oil production in North Dakota. Yet as long as Keystone XL remains unapproved, they’re forced to sit idly by as ghost towns spring up and dilapidated schools begin to fall apart. If there is anything positive to be taken from the suffering of these small towns, it is the unification of their citizens.
And since 2014’s red wave gave Republicans the Senate Majority, that unity might finally be paying off. Politico reports:
“Republicans will command a filibuster-proof Senate majority in favor of the Keystone XL pipeline after Tuesday’s election victories — and they could be within striking distance of assembling a veto-proof bloc for the project, increasing their leverage over President Barack Obama. The GOP says Keystone will be the subject of one of the first votes in the newly GOP-controlled Senate, when Republicans will be able to join forces with several Democrats who have already publicly backed the Alberta-to-Texas oil pipeline.”
—Politico (11/5/14)
This doesn’t mean that Keystone XL will definitely be approved in the coming months, nor does it mean that our fight for American energy has gotten any easier. It does, however, give Montanans a new hope. And that is something to be thankful for.
Empty Handed
November 7, 2014 by Leave a Comment
It turns out, $85 million just isn’t enough to buy an election. Tom Steyer and his group NextGen Climate Action lost nearly every race they played in. As the Wall Street Journal reported:
This year’s environmental debate boiled down to Democratic support for Mr. Obama’s climate rules and green subsidies against full-throated Republican support for energy production of all sorts, including coal, oil and natural-gas fracking, more pipelines and greater fossil-fuel exports. These GOP candidates won nearly everywhere.
Future candidates and the newly elected class Congressman would do well to remember these results. Those who choose to block domestic energy production, increase electricity prices via mandates, and drown expensive and unreliable sources of energy in subsidies and tax credits will be held accountable for their choices.
