National energy policy is a hot topic in this round of presidential politicizing. In a perfectly free market, no energy source would be subsidized through the force of government taxation, but in modern day America – and Kentucky – we are as far from a perfectly free market as the Cincinnati Reds’ are from winning this year’s World Series.
Both alternative, “green” sources of energy and traditional fossil fuels like coal are greatly subsidized in this country. But a key subsidy for wind power, its production tax credit, is once again up for renewal at the end of this year, and letting it expire would not only impact wind, but Appalachia’s energy sector as well.
To give our readers a taste of the costs to Kentucky of subsidizing unproven alternative energies, let’s break down the numbers. According to the Robert Bryce, senior fellow at the Manhattan Institute:
- The cost of extending the production tax credit for wind is about $12 billion over the next nine years, supporting 37,000 jobs.
- Dividing $12 billion by 37,000 jobs over those nine years produces a federal subsidy of about $36,000 per year for each worker.
Now let’s compare this to the subsidies for fossil fuels, like Appalachian coal:
- The cost of subsidizing fossil fuels is $2.5 billion per year in tax preferences, supporting 1.4 million jobs directly.
- Dividing $2.5 billion by the 1.4 million jobs produces a federal subsidy of about $1,800 per year for each worker.
Kentucky coal provides 93% of our electricity needs. Wind provides the nation with less than 4% of its energy needs. Though wind does far less for the economy than fossil fuels like Kentucky coal, each worker in the wind industry receives 2000% more in federal subsidies than an industry like coal.
Kentucky coal has enough natural market competition from natural gas to also have to deal with competition from the unnatural forces of government’s preferential treatment, like the unbalanced support given to alternative energy sources.