Wind and ethanol

Ben Lieberman:

Repeating past mistakes has long been a part of Washington's energy policy, but Congress used to wait a while before making the same blunder again. Not anymore. New legislation requiring wind energy closely resembles the ethanol mandate that sparked a backlash just last year.

For many years, wind has benefited from generous tax credits and subsidies, but it still provides less than 2 percent of the nation's electricity. By comparison, coal supplies around 50 percent (and with considerably fewer federal incentives). Natural gas and nuclear, meanwhile, account for about 20 percent each.

No wonder wind supporters want a federal mandate atop all the handouts. The targets in various bills range from 15 percent to 25 percent electricity from wind and other renewable sources, to be ramped up from current levels over a decade or longer.

Let's see: a heavily subsidized energy source that needs a mandate to get it over the top. Sound familiar? It should. It's the same situation we were in with corn ethanol a few years ago. Through 2005, ethanol's high cost, among other problems, were such that even a 51 cent per gallon tax credit and other giveaways couldn't enable it to capture much more than 2 percent of the motor-fuel market.

However, the minuscule market share worked to ethanol's advantage in that its shortcomings weren't noticed by the public. This made it possible for the corn lobby and other proponents to get away with calling it a success and prevailing upon the feds to mandate that more of it be mixed into the gasoline supply.

By 2008, it was required that 9 billion gallons of ethanol be used, nearly triple the 2005 levels. But at these volumes, the problems were no longer so easily hidden.

Last year was one of record oil and gasoline prices. Yet ethanol still added to the overall burden on the driving public. In addition, the diversion of corn from food to fuel use raised the price not only of corn itself but of related items such as corn-fed meat and dairy. The Congressional Budget Office estimates that up to 15 percent of food price increases from April 2007 to April 2008 were because of the ethanol mandate.

That costly double whammy - higher costs to drive to the supermarket and higher prices once you're there - really soured consumers on the ethanol mandate. It also contributed to global food-price inflation and hardships in the developing world, eroding the already shaky moral high ground that ethanol had held. Surprisingly, many environmental activists piled on, arguing that the "green" benefits of ethanol were overstated and that this once-favored alternative actually contributes to global warming.

Congress has yet to correct its ethanol mistake. The mandated levels rise to 10.5 billion gallons this year and 12 billion in 2010, so the difficulties will only intensify.

Are lawmakers about to make the same mistake with wind energy? As with ethanol, wind is too expensive to expand without a lot of help. Right now, its added cost is an unnoticeable speck on people's electric bills. A hefty mandate would change that.

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If these energy suppliers were viable, they would not need subsidies. I think ethanol is wore than wind because it drives up the price of other commodities made with corn. Wind is more benign, but it is still more expensive because of the need to change the grid to get its energy to market and its intermittent quality. Without the carbon phobia on the left, it would be even more limited in its contribution.