Bad Policy Built on Bogus Study
Wind Industry's "Inflated Numbers" and "Erroneous Conclusions" Misled Washington Lawmakers To Gain Extension of Production Tax Credit
"The wind Production Tax Credit is bad policy built on faulty economic analysis that results in a net loss for the U.S. economy."
— AEA President Thomas Pyle
"The PTC leads to gross misallocation of resources in the public and private sectors. Taxpayers lose. Workers lose. The economy as a whole loses."
— NCPPR Senior Fellow Bonner Cohen
Washington, D.C. - 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 released today by the American Energy Alliance (AEA) and the National Center for Public Policy Research (NCPPR). Additionally, the report finds that 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. It lays bare the macroeconomic distortions and faulty modeling that the wind industry used to justify continued payments of its taxpayer-funded corporate welfare.
According to the Navigant study, 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."
"Congress blundered badly when, in the deal to avoid the so-called 'fiscal cliff,' it caved to special interests and pressure from the wind industry for another extension of the PTC," noted NCPPR Senior Fellow Bonner Cohen. "No amount of subsidies over whatever period of time will ever make wind power competitive against affordable, reliable, and plentiful sources of electricity generation. The PTC leads to a gross misallocation of resources in the public and private sectors. In the end, taxpayers lose. Workers lose. The economy as a whole loses."
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 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 natural 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 would cost as much as a staggering $4.8 million for each direct wind manufacturing and construction job added.
To read the entire study, click here.
About the Wind Production Tax Credit
The PTC was first enacted in 1992 to jumpstart a nascent wind industry and it currently provides wind producers a subsidy of $22 per megawatt-hour (MWh) of energy generated. It was temporarily extended early this year as part of the fiscal cliff deal with a new provision that allows wind energy projects that begin construction in 2013 to qualify for the credit. Extending the PTC cost American taxpayers more than $12 billion dollars, according to the Congressional Joint Committee on Taxation.
About The American Energy Alliance
Founded in May 2008, AEA is a not-for-profit organization that engages in grassroots public policy advocacy and debate concerning energy and environmental policies. AEA believes that freely-functioning energy markets provide the most efficient and effective solutions to today's global energy and environmental challenges and, as such, are critical to the well-being of individuals and society. AEA believes that government policies should be predictable, simple and technology neutral.
About The National Center for Public Policy Research
The National Center for Public Policy Research (NCPPR) is a not-for-profit communications and research foundation supportive of a strong national defense and dedicated to providing free market solutions to today's many public policy problems. Founded in 1982, NCPPR has provided top-flight research and communications operations for more than three decades, earning a solid reputation for its defense of private land ownership, sound energy and economic policies, and conservative approaches to regulatory reform. The National Center has never requested nor received funding from the federal government nor any state nor foreign government.