A Case Study in Rent-Seeking: The Big Wind Lobby and the PTC

Nov 12, 2013 by AFP

By Christine Harbin Hanson

As I discussed recently in The Hill, the wind industry has failed to produce much in terms of long-term job creation and energy affordability, and Congress should let the wind production tax credit (PTC) expire at the end of the year as scheduled. The American Wind Energy Alliance (AWEA) quickly responded, name-calling Americans for Prosperity a “special interest group” with “agenda-fueled rhetoric.” Quite clearly, this is the pot calling the kettle black.

As the group asking Congress for special advantages, AWEA fits the very definition of a special interest. It’s a trade association representing businesses involved in the wind industry—wind power project developers, equipment suppliers, service providers, parts manufacturers, utilities, researchers, etc.—and it faces a strong incentive to keep the playing field tilted in its favor. Even though wind power technology has existed for 126 years and has benefited from the PTC for more than two decades, the wind energy industry claims that it needs even more government help. This past month, during a House Oversight and Government Reform subcommittee hearing on the production tax credit (PTC), AWEA asked Congress to extend the tax credit for six years. Meanwhile, AFP is calling for eliminating targeted subsidies for all energy sources, across-the-board.

AWEA’s actions are a case study in what economists call “rent-seeking” behavior—petitioning the government for special treatment. Instead of seeking profits by investing resources into developing an energy technology that consumers actually want to buy (called, “economic profit”), the wind industry is seeking profits by securing special treatment from their friends in federal government (called, “political profit”). AWEA is paying lobbyists to roam the halls of Capitol Hill, knocking on members’ office doors and extolling the supposed benefits of extending this handout for the wind industry.

Rent-seeking is bad for economic growth because it pulls resources away from productive activities (e.g. improving wind power technology) and toward non-productive activities (e.g. penning responses to me in the newspaper). The wind energy industry would be closer to economic viability if it invested more resources into developing its technologies instead of paying lobbyists in Washington. Rent-seeking is harmful for American consumers because it means that they face higher taxes and bigger energy bills; it’s also bad for non-favored industries because they face difficulty competing in the marketplace.

As the wind PTC expiration draws near, the industry’s lobbyists kick into high gear. For “agenda-fueled rhetoric,” consider AWEA’s repeated responses to AFP’s efforts in opposing extending wind handouts, as it lobbies feverishly to extend the subsidy:

AFP will continue to fight for a free market energy policy, and we’ll do it with our 100+ coalition partners. Now is the time to stop propping up special interests like those in the wind industry. Instead, we should let energy technologies compete for American consumers’ dollars on the open marketplace.