War in Iran and Hot Air at Home

By Jonathan LesserPortia Roberts

“Never let a crisis go to waste,” a now well-known political mantra, is being deployed by wind energy developers. The recent run-up in world oil prices caused by the Iran war is the newest excuse for more subsidies, especially continuing the “temporary” federal tax credits enjoyed for over three decades.

Proponents claim wind energy can insulate markets from volatile oil prices as well as supercharge an energy transition. Neither claim is true.

Last year, wind supplied just 2% of total U.S. energy consumption. Worldwide, fossil fuels accounted for 87% of global energy supplies, while non-hydroelectric renewables accounted for less than 3%. And fossil fuel consumption continues to increase, driven primarily by heavy industry, development in ASEAN and emerging markets, and  all forms of transportation.

After the 1973 OPEC oil embargo, advocates claimed that subsidizing an “infant” wind industry would reduce US dependence on foreign oil. That claim spurred the passage of the Public Utilities Regulatory Policy Act of 1978, which forced electric utilities to purchase wind power, derided as “PURPA machines,” at inflated prices set by utility regulators.

Years later, the Energy Policy Act of 1992 changed energy markets and the nature of wind subsidies. Rather than being subject to regulation-mandated purchases, wind power became eligible for generous production tax credits. (An opportunity that Warren Buffet acknowledged and harvested in Berkshire investments.) Together with state mandates for utilities to purchase greater quantities of wind-generated electricity, investment in wind power soared.

As the foreign oil dependence argument evaporated when the U.S. became the world’s largest crude oil producer, wind advocates revised the subsidies rationale, promising, instead, an answer to climate change and, especially, economic development and jobs. Advocates, especially for high-cost offshore wind, have argued that larger subsidies not only would reduce fossil fuel dependence, but would also stimulate ever greater economic growth and “green” jobs, as if the money fell from the clouds, and not taxpayers and ratepayers.

Nevertheless, politicians – red and blue – eagerly latched onto these arguments, showering wind energy developers with money. The Biden Administration’s Inflation Reduction Act increased the tax credits, driven by green-energy enthusiasts and opportunities to spread taxpayer largesse to favored constituents.

Today, the so-called low-cost, half-century-old infant still howls for more subsidies. Last year’s One Big Beautiful Bill Act (OBBB) phases out the tax credits by the end of 2027. But there is growing pressure to restore and extend the subsidies.

As wind generation has grown, so have consequent physical and economic problems. Wind subsidies have driven out unsubsidized fossil fuel generators, a sort-of Gresham’s Law of green energy. The loss of those fossil fuel generators is a primary cause of a spike in electricity wholesale capacity costs in electricity markets like the PJM which serves over 65 million people across 13 states and the District of Columbia. Ironically, many of the politicians who earlier promoted wind generation have complained loudest about the resulting price spikes.

While wind, like all energy sources, has environmental drawbacks, not least in foreign lands where mining of the essential minerals occurs to build wind machines, that’s the least of the domestic issues.

The overarching problem with wind generation is its lack of value. The highest-value resources are those that help stabilize the power grid and provide electricity when demand peaks. But wind power, like solar, is self-evidently inherently intermittent. Such intermittency not only leads to higher costs to compensate but also destabilizes power grids, as happened in Portugal and Spain last year, leading to the risk of systemwide blackouts.

Consequently, more backup generation, called “reserve margin,” must be available to step in when the wind doesn’t blow. For example, a 2021 study by the New York State Reliability Council predicted that, to meet that state’s zero-emissions goal, the reserve margin would have to increase from its then-current value of 20% of peak load, to over 100%, i.e., and entire extra duplicate grid available when needed. That’s like having to buy a second car in case because the first one is unreliable and may not start in the morning. As Midcontinent ISO president John Bear stated, adding more wind and solar to the grid has, in fact, increased electricity costs.

Modern civilization needs ever greater quantities of affordable and reliable electricity, delivered in as environmentally benign way as possible. Wind power offers none of those things. Subsidies will never change that.

Jonathan Lesser is a Senior Fellow, and Portia Roberts is the Deputy Executive Director at the National Center for Energy Analytics.

This article was originally published by RealClearEnergy and made available via RealClearWire.