Loss of Interest in Energy Efficiency Leads to Higher Energy Rates and Job Loss

Congress is cutting green energy initiatives, as it’s become clear that the tax preference given to renewable energy sources is fading, and the country is feeling the pinch.

To understand this issue, it’s necessary to backtrack a bit. About two years ago, a trend of interest towards energy-efficiency began. This was demonstrated by Maryland becoming the first state in America to require new homes to adhere to the 2012 International Energy Conservation Code. This effectively boosted the construction of energy-efficient homes, which is why many states soon followed that lead. Now, now home builders are investing their resources into these energy-efficient homes that consume around 30% less energy than what a typical home did about 10 years ago.

However, such interest in energy-efficiency has seemingly waned, as the production tax credit given to wind energy expired at the end of 2013. It awarded wind developers 2.3 cents for every kilowatt-hour they produced, which kept electricity rates low and encourages further development of proven renewable energy projects. The American Wind Energy Association reports that the credit has helped the wind industry lower the cost of wind power by more than 90% since 1980, provided power to the equivalent of more than 15 million American homes, and has fostered economic development in every state.

In January 2013, Congress passed an extension for the credit as part of their fiscal-cliff legislation. The last minute deal allowed wind developers to qualify for 10 years of subsidies, even though the credit expires for new projects.

The case against the subsidy is that it’s simply too costly to the U.S. Treasury, and that it creates economic inefficiencies, which force capital into assets that aren’t as productive and might not be able to stand on their own otherwise.

Proponents of the subsidy argue that it’s doing it job, which has led to development of 60,000 megawatts of wind energy. This growth has caused production costs to fall by a whopping 80% over the last 20 years.

The credit is only one example of the way this loss of interest in energy efficiency affects the country.

“We have lost at least 5,000 manufacturing jobs,” said Liz Salerno, vice president of data and analysis for the American Wind Energy Association about the loss of the credit. “Companies have made technical investments to retool their workers and these boom and bust cycles are not acceptable.”

While the credit could come back in a tax compromise, lawmakers could also put it to bed permanently. No matter which way it goes, the economic consequences of this new lack of interest in energy efficiency will be serious.


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