State Level Impact of Federal Wind Energy Subsidies

The federal production tax credit (PTC) for renewable electricity is one of the federal government’s primary policy tools for subsidizing and promoting renewable energy development. The PTC gives electricity producers a tax credit for each kilowatt-hour of electricity generated from qualifying renewable energy sources (currently 2.3 cents per kilowatt-hour) for the next ten years of operation, regardless of real-time market signals such as negative prices that indicate that electricity is unwanted.

This paper examines the distributional impacts of the PTC. For the purposes of the paper, we assume that all wind production built over the last 10 years in the United States elected to take the PTC. We call this the proxy PTC to differentiate this metric from the actual PTC. The proxy PTC is a one-year snapshot based on state-level wind generation data for 2012. It does not look at the full value of the PTC over a 10 year period. We find that the distributional impacts of the PTC are striking. The top ten proxy PTC-taking states in 2012 received over 72 percent of the total PTC subsidy transfers for 2012.

The map below shows the transfer of the proxy PTC among the states:

Key Findings:

  • 30 states and the District of Columbia paid more to the federal government in 2012 to support wind subsidies than wind producers in those states received.
  • Of those 30 net losing states, 11 states and the District of Columbia had no wind production and received zero subsidies but still paid their share of the tax burden related to federal wind subsidies.
  • On the regional level, the Northeast and Southeast were the biggest net payers, subsidizing other areas with net losses of $591.8 million and $559.3 million, respectively.
  • California’s share of the proxy PTC tax burden is $330.8 million, while wind producers in the state received $134.9 million in proxy PTC subsidies, indicating a net payment of just under $196 million in 2012.
  • Texas was the largest net taker of subsidies—wind producers took in $642.5 million in proxy PTC subsidies in 2012, while taxpayers in Texas contributed $248 million toward the related tax burden for a net transfer of $394.5 million.


To read the full study, click here.


Print Friendly, PDF & Email

Leave a Reply

Your email address will not be published. Required fields are marked *