Why The Renewable Energy Tax Credit Won’t Help Wind as Much as Solar

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Solar PV array

When US lawmakers voted to extend lucrative federal subsidies for renewable energy as part of the $1.15 trillion spending deal last month, wind and solar companies celebrated as they looked forward to passing those savings along to customers and reducing their own production costs.

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But are some renewable technologies more promising than others?

You can install PV panels on our roof, collect a tax credit and bring down your own electricity bill. A wind turbine? Not so much. Source: Adobe Stock/rob245.

You can install PV panels on your roof, collect a tax credit and bring down your own electricity bill. A wind turbine? Not so much. Source: Adobe Stock/rob245.

For solar, this is an unqualified windfall as the consumer products manufacturers such as SolarCity and SolarWorld make, mostly silicon photovoltaic panels, can qualify homeowners, banks and other end users for tax credits, but the picture is still murkier for far more costly and technically challenging wind power.

Solar’s Sweet Deal

The legislation allows solar power companies to keep claiming federal tax credits at 30% of the price of a solar array. The credits, which apply to home solar kits as well as big commercial installations, will be good through 2019. After that, though, the credit will begin to drop, declining to 10% in 2022. It will remain at 10% unless legislation eventually eliminates the credit before or after 2022.

So the credits ultimately can go to homeowners who buy solar arrays. If they lease solar equipment from providers like SolarCity, the tax credits go to those that finance home installation projects, usually banks.

Why Wind’s Deal Isn’t As Sweet

Tax credits for wind projects weren’t extended for nearly as long. Newly built wind turbines will be able to claim a credit of $0.023 cents for each kilowatt-hour of electricity they generate under the legislation. That credit will be in effect through the end of 2016, then fall each year until it expires entirely in 2020.

The US wind power industry employs more than 70,000 people in 43 states, many of them in Texas and California, the two biggest wind power markets, according to the American Wind Energy Association. Why the disparity?

Part of wind power’s stepchild relationship with the US government and its older sibling, solar, is technical. Wind simply does not work on a micro scale the way that solar does. Home and business owners who install small turbines on their buildings will likely see little to no return, depending on where these mini-turbines are mounted.

Wind requires a high-wind corridor to create even remotely consistent generation. This is why the Texas Panhandle is a perfect location for large wind turbine installations but these are mostly owned by utilities and there are no individual taxpayers who could spread out the benefit of the tax credit and offset the cost of mass installation. The problem of low-power generation even from sites considered “perfect” for wind generation is very, very real.

The Wall Street Journal reported that Michael Garland, chief executive of Pattern Energy Group Inc., which develops big wind farms in the Panhandle, said the move to revive renewable subsidies “will save jobs.” Notice, though, that he didn’t focus his remarks on expanded installation.

Why You Should be Glad the Playing Field Isn’t Even

Utilities are dependent on municipalities to purchase power from them to offset windfarm construction costs and without cities such as Georgetown, Texas, buying available wind-generated power, the technology faces a much steeper climb to adoption than solar panels which a homeowner can slap on his roof, collect a hefty tax break from and even possibly see his energy bill fall to zero. Even the Texas community above balances its wind purchases with solar to avoid blackouts during low-wind hours. Georgetown also has an upgraded grid that can efficiently move wind from the turbines to its customers. Many grids in the US can’t transmit wind-generated power at all.

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With all of this understood, perhaps it makes more sense, then, for the government to spend our tax dollars heavily subsidizing the more applicable, mature technology of solar while still giving wind the smaller boost it has received. Markets have winners and losers, after all, and, right now, solar is kicking wind in the proverbial… umm… turbine when it comes to adoption. US installed capacity of photovoltaics stands at 7.4 GW, an improvement over 6.3 GW last year.

What’s All of This Cost?

There’s also the cost to the taxpayers to consider. The nonpartisan Joint Committee on Taxation estimates that extending tax credits for wind power will cost taxpayers $14.5 billion, while continued solar tax credits will cost $9.3 billion. Solar power is not only easier to use, generates better returns for home energy savings and gives building owners skin in the game, but its tax credits — which run far longer than wind’s — are less expensive.

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