Siemens has announced that it will lay off about 600 workers in Iowa and Kansas, representing 37% of its U.S. wind turbine manufacturing jobs. Although Siemens itself wasn’t eligible for the wind Production Tax Credit (PTC), naturally the pending expiration spells a collapse in demand for their product. Supporters of wind power are outraged, but the episode actually underscores the danger in the government’s assaults on the coal industry.
Here is the WSJ article’s description of the wind industry’s response to news of Siemens’ layoffs:
Navigant Consulting, of Chicago, has estimated the end of the credit could ultimately cost the industry 37,000 jobs throughout the supply chain, out of about 75,000 total jobs currently.
“It’s a great loss to America, in what has been one of our leading sources of new manufacturing jobs. But Congress can make it stop,” said Denise Bode, CEO of the American Wind Energy Association, in a statement.
On the one hand, it is good that Denise Bode understands how federal policies can affect jobs in the energy sector. If removing the tax credit for wind will reduce employment in the wind sector, imagine what a new carbon tax would do to employment in coal and oil industries.
This is really the irony of the complaints about the expiring PTC. Congress isn’t placing on unfair burden on wind with this move, but rather is “leveling the playing field” by taxing electric producers who use wind power at the same rate as coal-fired plants. The American Wind Energy Alliance puts out “fact sheets” that unwittingly admit how artificial and non-market-based the current capacity in the wind sector is; without the advantage given by the PTC, wind power is unprofitable except in certain niches.
Federal regulations alone—even setting aside the danger of a carbon tax—threaten far more jobs in the coal sector than what is at stake with wind. For example, the EPA has issued new rules on mercury from coal-fired power plants (the Mercury and Air Toxic Standards), which many call Utility MACT because the rule requires “Maximum Achievable Control Technology” from 2012 through 2015.
The National Economic Research Associates found compliance costs of Utility MACT to be $21 billion per year and lost jobs to amount to 183,000 per year. Studies project that these higher business costs will lead in turn to higher retail electricity prices of between 10 and 20 percent in most of the country and over 20 percent in the coal-dependent states in the Midwest.
According to a report from the United Mine Workers of America, job losses associated with the closure of EPA-targeted coal units (due to Utility MACT and tighter greenhouse gas standards) could amount to more than 50,000 direct jobs in the coal, utility and rail industries, and an indirect job loss figure exceeding 250,000.
Despite these sobering dangers, proponents of renewable energy sources typically point to increased compliance costs as good for the economy, because (they allege) there will be job creation in order to jump through the new government hoops.
The truth is that coal- and natural gas-fired power plants currently dominate the electrical generation sector because they have several advantages over wind power. If the government taxes all sectors equally, wind’s share of the market will fall—as its own supporters admit with their complaints over the expiration of the PTC. If the goal is to create as many sustainable, productive jobs as possible, while providing inexpensive and reliable energy to consumers, the proper policy should be to have a tax code as low as possible applicable to all sectors, without picking winners and losers. Moreover, specific regulations that sabotage particular energy sources are clearly a roadblock to job creation and affordable energy.