C. Boyden Gray served as White House counsel to President George H.W. Bush and was one of the principal architects of the 1991 Clean Air Act Amendments. He teaches a seminar on energy security at the New York University School of Law and leads the Washington-based law and consulting firm Boyden Gray and Associates. His firm has clients in the nuclear and natural gas industries.
The recent debate over the wind-production tax credit ignores the big picture of how electricity is produced in this country. Our national energy policy should be focused on finding reasonable, science-based solutions to making all electricity production cleaner, more secure and more economical. Fights over costly stove-piped initiatives such as the wind tax credit distract from this larger goal.
The major distraction comes from the widespread assumption that kilowatt-hours — the basic units of electricity — are interchangeable, fungible across space and time. In reality, because energy cannot be stored and because the United States lacks a nationwide, networked transmission grid, the location and timing of production are crucial. Electricity, like politics, is local. The hard truth is that wind does not blow on demand. No amount of political will or congressional hot air will alter this scientific reality.
In the United States, electricity is transmitted on regional grids that work like auction houses. Different energy sources bid to get “on the grid,” and the wholesale cost of electricity is the price from the lowest bidder, be it nuclear, natural gas, coal or wind. At times of peak demand, when all available energy is needed, the market-clearing price is highest. At off-peak times, the price is lower. This means that a kilowatt-hour that can be produced on demand is worth far more than a kilowatt-hour produced intermittently or off-peak.
Unfortunately, the wind subsidy ignores this market complexity. It functions as a fixed payment to wind producers for each kilowatt-hour they put on the grid, regardless of reliability or demand. In the middle of the day, when the sun is shining and wind is scarce, millions of people crank up their A/C and expect the lights to stay on. But since wind generally blows at night, when people use electricity the least, it cannot form a dependable part of this “baseload” supply. Here’s an example: On July 6, electricity demand in the Chicago area peaked at 22,000 megawatts. Yet out of 2,700 megawatts of wind generation installed, only four megawatts actually contributed to the energy load that day — roughly the energy used by 4,000 blow dryers.
A myopic focus on promoting wind is just “feel-good” energy policy. Seeing wind turbines in Texas may make us proud of our environmentalism, but as long as the Texas grid is disconnected from the rest of the country, those turbines will not help us reach our overall clean-energy goals.
And subsidizing wind may make it even harder to achieve these goals because it distorts the market against high-tech solutions that could reliably carry the majority of peak energy demand. Nuclear power, for instance, produces no harmful pollution or greenhouse gases, but it has high start-up and shut-down costs and cannot power on and off economically every time a breeze passes by. I cannot see the environmental rationale for subsidizing wind at the expense of far more reliable, and equally clean, high-tech alternatives.
A market-distorting subsidy is not a rational way to help wind get on the grid. But there is another solution. We should forgo the haphazard approach of isolated subsidies and instead focus on modernizing our transmission infrastructure to create a nationwide, networked grid. If wind energy could be transmitted from Texas and used to meet peak demand in California, it would not be wasted, and no subsidy would be needed to make it profitable.
Modernizing the grid would allow our nationwide energy production to be cleaner, more sustainable and more secure. It would also help the economy, as increased competition among energy sources would lead to lower costs to consumers, higher profits for wind producers and savings of billions of dollars in government payouts.
Of course, building a networked national grid is no easy task. Success will demand a bipartisan effort, in conjunction with the private sector and state governments, to solve one of the most complex energy problems of our century. But this is the task that political leaders who are concerned about the environment, energy security and economic growth should be focusing on.
The goals of energy independence, reduced electricity costs and environmental stewardship are all attainable. We simply cannot allow special interests and costly distractions such as a wind-production tax credit to make us lose sight of these objectives.