Today’s cool charts come courtsey of GE. Now, its from GE so they have a vested interest, but today they released a powerpoint with some interesting datapoints regarding wind project impact on tax revenues and investment. GE claims subsized wind projects have a positive net return for the U.S. treasury over their lifetime. The argument is when you add up the various federal taxes associated with the economic activity of building a wind project and then operating that project over time, the Net Present Value (NPV) of that project with regard to taxes generated for the federal treasury is positive even after paying out a hefty federal tax subsidy up front.
There are no details on the NPV calculation so its hard to see exactly what assumptions go into this claim, i.e., what is the terminal value of the windfarm in year 10 (I assume its a 10 year DCF) given that the lifespan of a windfarm is well in excess of that. If true its the definition of a project that is revenue neutral from a tax standpoint. Apparently, it doesn’t include local or state tax revenues in the projections either (or subsidies for that matter).
The second interesting chart is that was in the presentation was this one:
Which shows the volatility associated with wind investment since 2000 – mostly due to political uncertainty associated with project tax breaks. As I have pointed out before, this is one of the more difficult issues that greentech faces with regard to investment capital – and why leveling the field with regard to subsidies and externalities should be priority. It also underscores one big problem with huge projects – rather than point solutions such as distributed micro installations. The impact of non-market factors (such as the whims of politicians) on the development of alternative energy capacity has a magnified effect when the capacity is rolled into an handful of mega-projects with massive capital needs and those tax breaks become a high stakes item opposed to being spread out accross millions of small installations that may have different sensitivities to tax subsidies in order to be sucessful.