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Tax Credit Renewal Offers a Temporary Reprieve for Wind Energy

The wind power industry just dodged a bullet. As part of the fiscal cliff deal, Congress has renewed the wind power tax credit, whose expiration could have caused the industry to shrink by 95 percent. Prior to the deal, uncertainty over the industry’s future lead many wind power companies to slow down or halt their projects to prepare for the worst. Now that the credit has been renewed, the companies are preparing to ramp up production again. Some companies have seen their share prices rise by as much as 7 percent.

In general, however, the future for wind power still looks bleak. Despite the tax credit renewal, industry investment and unit construction is still expected to fall off from last year’s rates. Investors don’t believe in the industry and the FT predicts that the sector will continue to shrink. Some are spooked by the uncertain fate of the wind power tax credit after the renewal expires next year, but the bigger problem for the industry is that the gas boom has made energy so cheap that the more expensive sources are no longer cost effective. This is especially true of wind power, which is barely economical even in the best of times.

This is bad news for the sector of the economy devoted to wind production, as well as for greens who have bet on the viability of wind power. The rest of us, however, can enjoy the cheap energy undercutting the wind market. With the energy revolution exploding and the transition to an information economy underway, the future looks bright for America.

It would be a mistake to write off alternative energy technologies — but it would also be a mistake to ignore the reality that they are by and large not yet ready for prime time.  Much more research and testing is needed so that alternative energy can become genuinely competitive. If the government money wasted on subsidies and the foundations funds spent on fueling the doomed green treaty lobbying machine had been spent on research into new methods of generating, storing and transporting energy, the world would be a lot better off.

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