Congress has closed the books on a another dramatic year in American politics with no real accomplishments. Among many lingering questions is the future of wind power subsidies. Introduced in the early 1990’s, government subsidies for wind power have played a major role in the expansion of the young industry. The current subsides are going to expire at the end of 2012 with no guarantee they will be renewed. This has left the industry in an uncertain state.
Along with the government subsidies that provide wind electricity producers 2.2cents per kWh many states have passed renewable energy mandates which required that a certain amount of electricity come from renewable sources. All of this has allowed the wind industry and wind technologies to thrived in recent years. Wind is now at the point where it is approaching so-called "cost parity" with more traditional methods of generating electricity, like coal and natural gas.
However, the growing national debt could sideline or completely end government support for the entire renewable energy industry. Many wonder if wind technology has advanced sufficiently to remain cost competitive with other electricity generation methods. In a free market without government subsidies or mandates, the one thing that trumps all is cost.
While environmental issues are important, there is much more to consider for survival in an open marketplace. A major challenge for the wind industry is continued low production costs even if government subsidies and mandates decrease or go away completely. In the wind industry’s favor is the fact that fossil fueled power has consistently risen with time in cost . If renewables continue to go down in price the two will ultimately intersect.
However, developments in the natural gas industry in recent years add a little more of a challenge to renewable electricity in competing on cost. Since 2008, new natural gas drilling technology advancements have triggered a dramatic decline in electricity rates in Texas. Texas, along with a number of other states, gets a significant portion of its power from natural gas plants. This makes it even more difficult for wind to compete on a cost basis for at least the next several years.