Ladies & Gentlemen: The following is for your information.
May 28,
2012
The Honorable
Mark R. Warner
United States
Senate
Washington, DC
20510-4606
Dear Senator
Warner:
I have great
respect for your knowledge of information technology. But, with all due respect, sir,
your May 24, 2012, response to my request that you oppose extension of the wind
Production Tax Credit (PTC) shows a serious lack of understanding of wind
energy, energy markets, and energy R&D.
The people of
Virginia are fortunate that the Menendez bill (S.2204) failed. Your support for that bill was
ill-advised and contrary to the interests of Virginia’s taxpayers and energy
users.
You appear not
to understand that the wind PTC, a tax shelter, results in shifting tax burden
from “wind farm” owners and developers to ordinary tax payers and/or results in
more debt that will have to be paid by our children and grandchildren. Furthermore, “wind Farms” are being
built primarily because of the Production Tax Credit, NOT because of their true
environmental, energy or economic benefits.
Frankly, the
following statement in your letter is rather naive if you are referring to
“investing” our tax dollars:
“In order to
retain its competitive advantage in the global economy and ensure a promising
future for our citizens, America must invest in research to develop new
technologies and efficiency improvements across all sources of energy.”
Are you not
aware that from 1973 to 2010 the US Department of Energy (DOE) and its
predecessors spent over $148 billion (2010$) of our tax dollars on “energy
R&D”[1]
and has yet to produce a single significant commercially viable energy
technology?
Clearly,
technological advances will ultimately be the means to assure that the US has an
adequate supply of energy at reasonable prices but there is NO reason to assume
that such advances are dependent on or result from actions by the US
government. In fact, the federal
government’s massive spending on “energy R&D” during the past 38 years has
failed because it is based on three fundamentally flawed assumptions;
specifically that:
1.
More R&D
spending will inevitably overcome technological hurdles to whatever technology
is being pursued.
2.
Economics of
scale will overcome economic hurdles for selected energy
technologies.
3.
Governments are
capable of picking technology winners.
Please check the
past 38 years of federal energy policies.
You will see that successive administrations, beginning with Nixon
(except Reagan) and Congress have picked dozens of what were claimed to be
“winning” energy technologies.
These were showered with a variety of tax breaks and subsidies, but none
has become commercially viable (i.e., without tax breaks and subsidies).
Wind energy is
merely one of the latest. Wind has
received billions in tax breaks and subsidies during the past 20 years but
remains a very high cost source of electricity that is low in value. The electricity that is produced is low
in true value because it is intermittent, volatile, unreliable and most likely
to be produced when least needed – not on hot weekday afternoons in July or
August when electricity demand is high.
There is no evidence that land-based wind energy will become commercially
viable and the prospects for off-shore wind energy are even
poorer.
New energy
technologies that are commercially viable have been and are being developed in
the private sector, not by federal or state governments. Advances in oil and gas exploration and
production technologies are a good example.
Your “All of the
above” fallacy.
Your letter
refers to “an ‘all of the above’ energy portfolio.” By adopting that catchy phrase (like
President Obama, VA Governor McDonnell, and numerous other politicians), you
illustrate another fallacy in your views on energy.
As a practical
matter, political leaders interested in defending the interests of citizens,
taxpayers and consumers should base
their views on energy on a careful evaluation of the true benefits and the true
costs of energy from various sources.
To do otherwise is inefficient and wastes money.
In fact, “all of
the above” is NOT an a real energy policy. Instead, it appears to be a campaign contribution policy with
the apparent goal of not offending lobbyists and potential campaign contributors
from any of the various energy industries.
Such a “policy” may keep campaign contributions flowing but it shouldn't
be presented as something that is in the public interest.
Your “dependence
on foreign oil” fallacy.
Your letter
asserts, incorrectly, that “Domestically generated wind power can … [help]
reduce dependence on foreign oil…”
This simply isn't true. Wind
turbines are built solely to produce electricity. Virtually none (about 1%) of the
electricity produced in the US is produced by oil-fired generating units. Many of the units making up this small
percentage are “peaking” units (turbine or internal combustion) that are used
primarily on hot days when electricity demand reaches very high levels – a time
when wind turbines tend to produce little or no
electricity.
Your “jobs”
fallacy.
You seem to
suggest that extending subsidies for “wind farms” would create jobs. In fact, “wind farms” create few
jobs. About 75% of the cost of a
“wind farm” is for the turbine, towers, and blades, a very large share of which
are imported. Even those turbines
assembled in the US make heavy use of components that are imported. Jobs resulting from construction
of “wind farms” are short term jobs (often 6-months or less) and very few
permanent jobs are created.
Investing an
amount equal to the cost of a “wind farm” in other electric generating sources
(particularly including natural gas) would result in more jobs – and more
reliable electricity.
Who benefits
from wind energy tax breaks and subsidies?
In fact, the
principal beneficiaries of the generous federal and state tax breaks and
subsidies for wind energy are primarily the “wind farm” owners and
developers. They are the big
winners. They have avoided billions in taxes and shifted their tax burden to
ordinary taxpayers and to our children and grandchildren who will bear the debt
that the Congress is loading on them.
Landowners
leasing land for the placement of wind turbines may be small winners – at least
in the short term since they receive additional income (but not in the long term
if they bear the cost of decommissioning the turbines at the end of their useful
life). Neighbors of these
landowners pay a heavy penalty in the form of noise, scenic impairment, and
other adverse environmental impacts.
Electric
customers in states where “wind farms” are being built receive some benefit
since tax breaks and subsidies help offset the high cost that they would
otherwise have to pay.
This last point
should be of particular interest to you since there are no “wind farms” in
Virginia. Therefore, as a practical
matter, extending the PTC would mean that your constituents – the taxpayers of
Virginia, their children and grandchildren – would be bearing the costs but
receiving no benefits. Instead, the
benefits go elsewhere, to “wind farm” owners and developers, landowners leasing
land, and electric customers in other states.
Current
expiration date for the wind PTC.
Your letter
indicates that the wind PTC expires at the end of 2013. In fact, under current law, the
expiration date is December 31, 2012.
In conclusion,
Senator Warner, the views expressed in your May 24, 2012, letter might have
appeared to make sense 5-7 years ago when the false and exaggerated benefit
claims made by the wind industry and other wind advocates had not yet been fully
exposed. However, there is now
ample evidence demonstrating that those claims are not accurate or true.
Please
reconsider your position on the wind PTC and other tax breaks and subsidies for
wind energy before the next attempt is made to push those measures through the
Senate later this year.
Sincerely,
Glenn R.
Schleede
18220 Turnberry
Drive
Round Hill, VA
20141
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