Published on December 6th, 2013 | by Silvio Marcacci7
Which States Win And Which States Lose On The Production Tax Credit?
December 6th, 2013 by Silvio Marcacci
Members of Congress from Texas, Iowa, North Dakota, and Oklahoma might want to consider any opposition they have for extending the wind industry’s Production Tax Credit (PTC).
It may seem ironic, considering Republican-led opposition to the incentive, but these four states earned hundreds of millions more in revenue from the PTC in 2012 than they paid into it through taxes, according to a new study from the Institute for Energy Research (IER).
While IER’s thesis that tax credits designed to boost renewables are unfair won’t win any favor among wind energy advocates, the report is worth a look to see exactly who’s winning and losing when it comes to the PTC equation.
A Complicated Formula With Clear Winners
IER compiled their findings by subtracting wind generation levels in 2002 from wind generation in 2012, removing generation that was ineligible for the PTC, then multiplying actual kilowatt-hours (KWh) of power production from eligible wind farms by the PTC’s 2.2-2.3 KWh incentive. That figure was then compared to federal taxes paid by each state and each state’s wind power subsidies. Considering 2012 was a record-setting year for new wind installation, it seems like a good starting point.
It’s may be a complicated formula, but the results seem legit. Texas was by far the biggest PTC “net taker,” pulling in $394.5 million more in wind subsides than it paid into the tax system. That’s not too surprising considering the state set new records while producing more than 29 million megawatt-hours (MWh) of wind power in 2012 and is by far the national leader in installed wind capacity with 12.2 gigawatts (GW) installed capacity as of the end of 2012.
Iowa, North Dakota, and Oklahoma also made out well, with each state obtaining a net gain of more than $100 million from the PTC. IER credits their success, as well as that of Texas, to favorable wind energy potential and government policy. Those same trends are apparent across the top ten net taker states, which combined to receive more than 72% of all PTC incentives in 2012.
Surprising Production Tax Credit Losers
But as always, when there are winners, there are also losers. IER reports that 30 states and the District of Columbia paid more to support the PTC than they received in subsidies. 11 states and D.C. had no wind production and received zero subsidies.
Results like these likely lead to the assumption that the states with no wind production would be the largest “net payers” but the top five aren’t necessarily who you’d expect. California and New York are the two largest net payers, running PTC deficits of $195 million and $162 million respectively. Florida, New Jersey, and Ohio round out the top five and all paid more than $100 million than they received.
California and New York’s rankings are surprising considering they respectively had 5.5GW and 1.6GW installed capacity at the end of 2012 and respectively earned $134 million and $65 million in PTC subsidies in 2012, but IER attributes the discrepancy to their higher relative tax burden compared to other states.
What If These Findings Aren’t Actually Bad News?
Ultimately, IER’s analysis will be read one of two ways: Either as an indictment of the PTC as a wasteful subsidy, or as a clear measure of the value installing wind energy has on a state’s economy.
Considering IER doesn’t consider the value of green jobs, new tax revenue, or added manufacturing needed to support the growth of wind energy across America; nor the overwhelming subsidies paid to fossil fuels, the free-falling costs of new wind, or the climate and environmental benefits of reducing emissions, count me firmly among the latter. Hopefully we’ll be able to say the same thing about Congress.