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Grab the Subsidies and Run

The Wind Lobby is Powered by Fossil Fuels

by ROBERT BRYCE

Lobbyists for the wind-energy sector are actively lobbying for a multi-year extension of the production tax credit, the 2.2 cents per kilowatt-hour subsidy given to producers of wind-generated electricity. To justify that lucrative  subsidy, which expires at the end of this year, the wind lobby continually portrays itself as being an alternative to fossil fuels.

Furthermore, the American Wind Energy Association’s spokesmen and their many boosters in the blogosphere regularly deride anyone who criticizes industrial wind projects as somehow being in the thrall of the fossil fuel sector. But their rhetoric doesn’t match reality. The hard truth is this: AWEA represents the fossil fuel industry.

AWEA’s biggest member companies may be promoting wind energy — and in the process they are reaping lucrative subsidies — but they are also among the world’s biggest users and/or producers of fossil fuels. Many of those very same fossil-fuel companies have garnered billions of dollars in tax-free cash grants and/or loan guarantees from the US government to deploy “clean” energy. An analysis of some 4,300 projects that won grants from the Treasury Department under section 1603 of the American Recovery and Reinvestment Act (also known as the federal stimulus bill) shows that $3.25 billion in grants went to just eight companies, all of which are either past or current board members of AWEA.

AWEA’s board of directors includes industrial companies like BP, General Electric, Iberdrola, and E.On. But the wind-energy business’s fossil fuel connection appears to be invisible to the Green/Left and to groups like the Sierra Club and Greenpeace, who actively promote wind energy at every turn. For instance, the Sierra Club recently launched a new “wind works” campaign to extol the job-related benefits of the domestic wind-energy business.

Of course, any industry can use the job-creation claim to justify more subsidies. But it’s equally apparent that AWEA and its member companies are using the guise of “clean” energy as a way to capture subsidies from American taxpayers.

Consider E.On, the German electricity and natural gas company, which has a seat on AWEA’s board. In 2010, the company emitted 116 million metric tons of carbon dioxide an amount approximately equal to that of the Czech Republic, a country of 10.5 million people. E.On owns and operates 11 wind projects in the US with nearly 2,000 megawatts (MW) of generation capacity. But E.On generates about 14 times as much
electricity by burning hydrocarbons as it does from wind. Nevertheless, E.On, which has market capitalization of $29 billion, has been awarded $542.5 million in stimulus money so that it can build wind projects.

Nine companies on AWEA’s board of directors have a combined market capitalization of $579 billion.

Exelon: $32

AEP: $19

E.ON: $29

GE: $202

AES: $9

Iberdrola: $19

BP: $121

NextEra: $23.5

JP Morgan: $125

Another company with a seat on AWEA’s board that has collected huge subsidies from US taxpayers: Spanish utility Iberdrola SA, which sports a market cap of $19 billion. The company is the second-largest wind operator in the US, with about 4,800 MW of wind capacity. However, the majority of the electrons Iberdrola produces are manufactured from fossil fuels, not wind. In 2010, the company produced 154,000 gigawatt-hours (GWh) of electricity, of which 52 percent came from burning coal or natural gas. For comparison, the company produced about 25,000 GWh from its wind projects. Put another way, Iberdrola produced about 3 times more electricity in 2010 from hydrocarbons as it did from wind.

In its 2010 annual report, the company cited the US as a “key country” adding that it “has received almost 1,000 million dollars in stimulus funds (grants) for renewable energy offered as incentives to companies by the US Treasury Department.” To put that $1 billion in context, consider that in 2010, Iberdrola’s net profit was about 2.8 billion Euros, or around $3.5 billion.

Another company on AWEA’s board is General Electric, which had revenues last year of $147 billion. Of that sum, about 25 percent came from what the company calls “energy infrastructure.” Sure, some of that revenue comes from GE’s wind-turbine-manufacturing business, but the majority comes from building generators, jet engines, and other machinery that burn hydrocarbons. Furthermore, more than ten percent of GE’s employees – some 33,000 people – work for GE Oil & Gas, which provides a myriad of products and services to the oil and gas industry.

Like the other members of AWEA’s board, GE is grabbing as many subsidies as it can. As the New York Times explained last November, GE “lobbied Congress in 2009 to help expand the subsidy programs and it now profits from every aspect of the boom in renewable-power plant construction.”

Indeed, GE has a starring role in one of the most egregious examples of renewable-energy subsidies: the Shepherds Flat wind project in Oregon. The majority of the funding for the $1.9 billion, 845-MW project is coming courtesy of federal taxpayers. Not only is the Energy Department providing GE and its partners a $1.06 billion loan guarantee, but when GE’s 338 turbines start turning at Shepherds Flat, the Treasury Department will send the project developers a cash grant of $490 million.

The deal was so lucrative for the project developers that in 2010, some of President Obama’s top advisors, including energy policy czar Carol Browner and economic advisor Larry Summers, wrote a memo saying that the project’s backers had “little skin in the game” while the government would be providing “a significant subsidy (65+ percent).” The memo went on to say that the project backers would provide equity equal to only about 11 percent of the project’s cost, even though they would receive an “estimated return on equity of 30 percent.” That’s a huge return for the utility sector, which has an average return on equity of about 7 percent.

The memo also pointed out that the carbon dioxide reductions associated with the project “would have to be valued at nearly $130 per ton CO2 for the climate benefits to equal the subsidies.” That per-ton cost, the memo said, is “more than six times the primary estimate used by the government in evaluating rules.”

While the Shepherds Flat wind-energy case is notable, other fossil-fuel companies are getting big subsidies to build solar projects. New Jersey-based NRG Energy and its partners have secured $5.2 billion in federal loan guarantees to build solar-energy projects. NRG is not a renewable energy company. The company currently has about 26,000 MW of generation capacity. Of that, 450 MW is wind capacity, another 65 MW is solar, and 1,175 MW comes from nuclear. The rest comes from burning hydrocarbons.

So why is NRG expanding into renewables? The answer is simple: profits. Last year David Crane, the CEO of NRG, told the New York Times that “I have never seen anything that I have had to do in my 20 years in the power industry that involved less risk than these projects.”

The Green/Left, along with the Occupy Wall Street crowd has long opposed both Big Business and corporate welfare. But I defy you to find a single instance where major environmental groups – Sierra Club, Greenpeace, etc. – or leftist think tanks like the Center for American Progress, or publications like Mother Jones or The Nation, have weighed in with any substantive criticism of the subsidies being given to the wind industry. Indeed, those same entities are mute despite the fact that many of the biggest companies getting those subsidies are fossil-fuel entities.

Instead, the prevailing attitude among those various groups seems to be that any renewable-energy project must be good, because, well, it’s renewable. But as can be seen by looking at the subsidies collected by the companies on AWEA’s board of directors, the rush to build renewable energy hasn’t been as much about cutting carbon dioxide emissions as it has been about one of democracy’s oldest professions: rent seeking.

Robert Bryce is the author of Power Hungry: The Myths of “Green” Energy and the Real Fuels of the Future.