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Monday, October 17, 2011

The Realities of Wind Power

It's unfortunate. But the game of politics too often does not play by the laws of economics.

That has been glaringly the case when it comes to energy. Many politicians and their appointees talk glowingly, even movingly, about the use of renewable energy. Indeed, renewable energy has taken on the air of a crusade.

As a result, speeches and declarations can be made by elected officials or their appointees that simply ignore, or wish away, the real world of energy economics.

Consider an October 11 speech made by Interior Secretary Ken Salazar. The secretary spoke glowingly of a future with wind power, but failed to weigh down his airy presentation with any kind of serious look at the high costs and non-competitive status of wind energy.

Salazar, of course, presented a situation whereby if you're for renewables then you're for American leadership and know how; if not, you simply lack faith in this nation. He declared: "We as Americans face a clear choice today: We can listen to those in Congress who don't think we can lead the world in renewable energy technologies, or who say it's too risky or too difficult. They seem to think America doesn't have what it takes to innovate, create, and lead. So we can sit on the sidelines and fall behind in the international race to build a clean energy economy. Or, we can invest in our people, invest in our ideas, and invest in our companies that have the audacity to change the way our nation gets its energy."

But that's a false choice or scenario. Those of us that raise questions about renewables, including wind power, are not against such forms of energy. We simply would like to deal with economic reality.

And in terms of wind power, for example, those realities are quite costly. When compared to electricity produced via coal or natural gas, for example, wind energy costs range between 40% and 190% higher.

Why? As noted in a June 2010 report on wind energy, the U.S. Energy Information Administration (EIA) pointed out that "capital investment costs are significant," and since wind is intermittent, "a wind plant will generate less electricity than a conventional thermal or hydroelectric plant of the same size and over the same period of time." Indeed, since the wind fails to blow all the time, wind power requires back up facilities fueled by fossil fuels.

So, does Salazar seriously address these issues? Of course not. But he does allude to them vaguely. For example, he announces what he wishes for: "We need to overcome the roadblocks associated with installation, operations and grid connection."

That's nice. But how exactly is that accomplished? Salazar's predictable answer is to throw around taxpayer money in the hopes that his wish will be fulfilled.

So, he highlighted the use of public lands for wind farms, and noted $50 million being spent by the Department of Energy on "research and development" that is "strategically targeted at developing technologies that can lower the relatively high cost of offshore wind energy." I'm sure those resources are being spent well.

Of course, according to Salazar, more government employees are critical as well: "A few years ago, I elevated the Renewable Energy Program at the Bureau to reflect its priority status for the Department and for President Obama. The office now reports directly to the Office of the Director. Less than five years ago this office had 5 people working in it - and now there are more than 25 on board working full-time to make offshore wind a reality." Does he seriously believe that more government bureaucrats will help fulfill his wishes?

And don't forget about tax breaks. Salazar declared, "We need to keep the pressure on Congress to implement policy that makes for a long-term, sustainable wind industry. This includes an extension of the Investment Tax Credit and Production Tax Credit for wind energy, so there's financial certainty and so that we don't face the boom and bust that we saw in the 1970s with solar power."

It would be great if wind power became truly cost effective some day. But that moment is nowhere in sight, and wasting taxpayer dollars on wind power subsidies are not about to make that happen.

The Obama administration needs to reverse its energy policy that has been anti-fossil-fuel, while wasting resources on non-economic renewable ventures.


Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His new book is "Chuck" vs. the Business World: Business Tips on TV.

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