North Dakota Is Smart to Resist the Wind Energy Bubble

Ed Gruchalla is a former Democratic state lawmaker now serving as a flack for the wind energy after voters cast him out of office in the 2014 election cycle.

He has a letter to the Fargo Forum suggesting that North Dakota is missing out because wind energy projects are being developed in other states and not here.

“Last week, farmers in South Dakota were jumping up and down in excitement over the announcement by Xcel Energy that their new 300-megawatt wind energy farm would be built there instead of North Dakota,” Gruchalla writes. “Xcel Energy pointed out that the political environment in North Dakota is challenging for wind energy development. This was further underlined by the announcement earlier this week that Xcel seeks to separate their North Dakota holdings from their Minnesota operations.”

Gruchalla sees this as North Dakota missing out on jobs and economic prosperity.

A more reasonable person might suggest that North Dakota is missing out on a bubble fueled by massive and misguided government subsidy.

[mks_pullquote align=”right” width=”300″ size=”24″ bg_color=”#ffffff” txt_color=”#000000″]Not surprisingly, this buffet of taxpayer money has inspired a lot of investment wind energy. And why wouldn’t it, when you have Uncle Sam all but guaranteeing profits?[/mks_pullquote]

Taxpayers fork over a tax credit for every kilowatt hour of energy wind companies produce. That’s not a deduction from tax liabilities. That’s the government writing a check to an industry that has, thanks to fierce lobbying efforts and operatives like Gruchalla, enjoyed favorable political status for decades now. It’s so massive that at times wind companies can literally pay utilities to take their energy.

Not surprisingly, this buffet of taxpayer money has inspired a lot of investment wind energy. And why wouldn’t it, when you have Uncle Sam all but guaranteeing profits?

But is that investment happening because wind power makes sense in our energy market place? Or is it just a way to capture government largess?

If the former, then fine. But if the latter, then what we’re seeing is a bubble. The supply of massive amounts of something not because of market demand but because of politics.

Here’s the kicker: Under current policy, per the Department of Energy, the wind industry only has until December 31, 2019, to commence construction on projects to be eligible for these tax credits (which last ten years per project).

There is a gold rush in wind energy development right now.

But, again, is that because wind energy serves our electrical grid? Or is it just rank rent seeking by companies out to get their share of the subsidies?

Policymakers in North Dakota are right to resist the wind energy boom. Because what happens when the subsidies dry up?

Nothing good, I’m afraid.