The “big, beautiful” budget bill passed by the House of Representatives, if enacted in its current form, will eliminate clean-electricity tax credits, including for wind and solar power, starting in 2029. It will require projects seeking to receive those subsidies to begin construction within 60 days of the legislation becoming law, and to start operating by 2028.
This is great news for both fiscal sanity and energy reality, both of which have been in short supply for far too long.
This “temporary” tax credit was first enacted in 1992 to help the then-nascent onshore wind and solar industries.
Congress always set it to expire years into the future, providing ample opportunities for politicians to extend and enlarge it. They have done so 12 times.
The Investment Tax Credit used by offshore wind developers like the Norwegian government-owned Equinor, which is relying on it to build Empire Wind off the coast of New York, has been around even longer — it was first enacted almost a half-century ago. But the ITC was greatly expanded under President Joe Biden’s ill-named Inflation Reduction Act, enabling offshore wind developers to qualify for up to 50% of their construction costs.
Far from being temporary, these tax credits have become a permanent crutch. As Warren Buffett commented back in 2014, the only reason his MidAmerican Energy company built wind turbines was to capture the tax credits.
Wind and solar developers have been allowed to stick taxpayers and ratepayers with the bills, assuming they would continue to do so for many years.
Consequently, the proposed rapid demise of these tax credits has ignited howls of outrage from green energy advocates, as well as politicians from both sides of the aisle, who contend it will devastate state economies and destroy thousands of jobs.
In New York, Gov. Kathy Hochul claimed that transforming the South Brooklyn Marine Terminal into the nation’s largest offshore wind port would be “a large step forward in our commitment to build a sustainable future and foster economic growth.”
In New Jersey, where Gov. Phil Murphy’s dreams of an offshore wind nirvana have sunk, officials lamented the House bill’s passage.
“It’s very strange to me, very, very strange,” said Tim Sullivan of the NJ Economic Development Authority. “I’ve never seen a situation where elected officials are celebrating something that is killing jobs.”
It’s not just Democrats: Iowa’s Republican Sen. Chuck Grassley has been a consistent defender of wind-energy subsidies.
But whether it’s tax credits or long-term contracts that force ratepayers to pay above-market prices for these intermittent energy resources, the pro-subsidy crowd ignores economic reality.
Sure, subsidizing an industry or an individual firm can “create” jobs — but those subsidies must be paid for by someone.
We pay in the form of soaring electricity rates. In New York, residential customers paid an average of over 24 cents per kWh last year, 50% higher than the US average and 25% more than they paid in 2020.
Commercial customers, including thousands of small businesses, also paid rates 50% higher than the rest of the country.
It’s basic economics that, if you are forced to pay more for electricity, you have less money to spend on everything else.
Whether it’s households forced into energy poverty or businesses that cannot afford to invest and expand, the adverse effects of high-priced electricity ripples through the entire economy.
Moreover, the subsidized jobs the green-energy advocates and their political enablers wish to create are hugely expensive.
Over the life of an offshore wind project, including the now-greenlit Empire Wind, the average costs are over $1 million per job — each and every year.
That’s obviously far more than any of the project’s workers will be paid.
It’s an overarching economic fallacy to justify any green-energy subsidy on the promise of new jobs — because an investment’s economic value isn’t measured by the number of jobs it creates.
The purpose of investing in electricity-generating resources and infrastructure is to ensure that our power supplies are adequate, reliable and affordable. If job creation was the goal, the most valuable energy resources would be the most labor-intensive ones.
Subsidy advocates ignore these basic economic realities. And campaign contributors are the loudest voices in many politicians’ ears.
Eventually, however, reality always wins. Senators would be wise to remember that as they debate the “Big, Beautiful Bill” in the coming weeks.