Wind Power

By | Updated Dec 18, 2015 9:31 PM UTC

Subsidize a new technology and the price will drop as production grows — and eventually the subsidy won’t be needed. That’s been the rationale behind tax breaks for renewable energy for a generation. For wind power, that day may have come. Wind energy can be so cheap that producers in Texas, Germany and elsewhere sometimes pay grid operators to take it away. Since the wind is free and subsidies are delivered by the kilowatt, it can pay to generate electricity even when it’s not needed. That’s one reason why the U.S. tax credits for wind may soon end. But wind power’s rapid growth globally isn’t just a matter of dollars and cents. Governments that have made big commitments to carbon reductions to limit the damage of climate change, like China and Germany and the U.S., are less likely to reduce subsidies quickly.

The Situation

December 2015 was a good month for wind power. While the global agreement reached in Paris in December on fighting climate change didn’t include specific provisions on wind, it was considered certain to spur significant new investments in renewable energy. In the U.S., Congress reached a budget deal that extended tax credits for wind and solar power for five years. The wind credit had been allowed to expire at the end of 2014. Bloomberg New Energy Finance estimated that the extension will generate $35 billion in new wind power investment. In much of Europe, premiums for power produced by wind are steadily declining as installation costs drop. In 2014, global wind capacity reached 369.6 gigawatts — more electricity than Europe uses — including 51.5 gigawatts from new installations, roughly equivalent to Turkey’s electric output. Almost half of the new power came in China, which has blown past the U.S. with the world’s largest fleet of wind farms. But China has idled more than a 10th of its capacity because its grid can’t deliver it.

Source: Bloomberg Intelligence

The Background

Persians discovered as early as the sixth century that the wind could be used to move water to irrigate crops. In early windmills, the sails spun parallel to that the ground in a design that also proved useful for grinding grains under a slowly turning stone. By the 14th century, Europeans improved efficiency by shifting to a horizontal axis that allowed each cloth blade to absorb energy continuously. An American named Charles Brush in 1888 built the first full-scale electric wind turbine, in Cleveland. It was 60 feet tall and produced a maximum of 12 kilowatts. Today’s towers can exceed 400 feet and can produce as much as 8,000 kilowatts. NASA focused on wind turbine research after the 1973 oil embargo, and Congress passed the first tax credit in 1992; innovation by American and Dutch engineers led to lower costs. The success on land pushed manufacturers to build even bigger turbines for offshore use, where winds are stronger and steadier. In 2014, wind accounted for about 5 percent of power in the U.S. and about half that globally. But wind is growing faster than any other form of energy. In Denmark, on some days wind already delivers more electricity than the country needs.

The Argument

In the U.S., opponents of tax credits call them a giveaway that distorts the market. Proponents say government support is still worthwhile, as wind farms that take as little as six months to build — less than half the time of a coal or natural gas plant — are the fastest way to meet the renewable energy goals set by 43 states. To wind supporters, the ambitious goals set by the Paris agreement strengthened the case for subsidies — though the reason they stayed in place was as a swap for allowing the export of U.S. crude oil. Europe’s biggest constraint for wind’s growth is the lack of empty land, which has led to more interest in offshore wind farms. They can blunt fears that rows of turbines will spoil scenic vistas. Similar objections helped block the biggest U.S. offshore proposal, at Cape Cod, but the first U.S. offshore project is now under construction. Since offshore farms cost about twice as much as onshore projects, the switch could extend the need for subsidies. China’s recent stumble shows the complexity of matching different pieces of the energy puzzle — the strong winds of its northern provinces attracted more turbines than the region’s weak transmission infrastructure could handle.

The Reference Shelf



First published Feb. 19, 2015

To contact the writer of this QuickTake:
Chris Martin in New York at

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John O'Neil at