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May 29th, 2012 12:53 pm
The New Math of Alternative Energy
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In a recent commentary piece here at CFIF, I noted how the green energy initiatives that President Obama has repeatedly sold as the cure for the nation’s economic ailments have been shown to lead to economic ruin in places like Spain. For those who still doubt that a similar outcome will result stateside, this piece of representative math, courtesy of the Heritage Foundation’s David Kreutzer, should give pause:

In a speech at a wind-turbine blade manufacturer in Iowa, President Obama called for extending two sets of subsidies that turn energy economics upside down and force higher costs on consumers and taxpayers.

The first extension is for the production tax credit (PTC), which is set to expire at the end of the year. It provides wind-energy producers with a subsidy of about 40 percent of the wholesale cost of electricity. So, when a wind-energy producer sells $50 worth of electricity, Uncle Sam adds another $20 for a total revenue of $70 to the producer.

The second extension is for the Advanced Energy Manufacturing Credit—originally funded in President Obama’s “stimulus” bill. This 30 percent credit cuts the cost of $100 worth of equipment to just $70.

So there you have it. Fifty dollars of actual revenue is bumped up to $70 with the PTC and $100 of costs are cut to $70 after the special tax credit. That is, $50 = $100 after taxpayers make up the difference.

Imagine for a moment if the federal government was proposing to use taxpayer dollars to double the incoming revenue of major Wall Street investment firms. It would rightly be denounced as the worst kind of crony capitalism. So why should the reaction be any different when that money is going into windmills?

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