Following up on my post yesterday on unanswered questions about wind energywind energy, here is a second question I received from a banker about this issue:

Q: What percentage of the money spent on these projects is likely to be recycled back in the Texas economy?

A: Whatever the percentage is, it will be less of a benefit to Texas than if the money had been spent on the other investments that would have occurred if the money wasn’t diverted to wind. The fact that wind investments are occurring only because of subsidies shows that these investment are inferior to other investments, and economic losers for Texas. Sure, some West Texas property owners, school districts, and local governments will be better off, but most Texas taxpayers, consumers, and workers will not be.

Of course, not everyone agrees with this assessment. Many claim that wind does provide an economic benefit for Texas. However, the problem with economic analyses like this is that they ignore opportunity costs, i.e., those projects that would have been undertaken if the money hadn’t been diverted to wind farms because of subsidies. Of course, we can’t know how the money would have been used if it hadn’t been diverted to wind farm projects. We can’t see the jobs that would have been created. Nor the tax revenues that would have been raised. That makes it all the more easy to ignore economic reality in these assessments.

– Bill Peacock