Cash grants under a federal programme included in last February's stimulus package provide wind project owners and developers of wind projects with an investment tax credit (ITC) offsetting 30% of installed capital cost. The grants are available to both commercial and community wind projects but are particularly valuable for the latter. Before the global meltdown, wind developers frequently partnered with deep-pocketed companies that wanted to take advantage of production tax credits (PTCs) to reduce big tax burdens by $0.021/kWh for energy produced during the first half of a wind project's life. The arrangement fuelled the voracious US commercial market for years, while leaving most would-be community developers in the lurch. But the ITC removes the need for such partnerships, because wind developers no longer need to find a partner with a large tax bill, opening new doors to community wind.
A recent report from the Lawrence Berkeley National Laboratory (LBNL) highlights enthusiasm for the programme. It says the grants provide benefits worth considerably more than the PTC to most community wind projects and encourage outside investors. The government promises cash payment within 60 days of connection to the electricity grid and developers are allowed to declare the money to lenders ahead of construction to secure loans, giving them a better shot at financing.
One drawback is that the application process cannot be altered midway if estimated costs spike. And the programme, which ends in 2012, contains a clause requiring construction to begin this year. "But there's very little not to like about it," says Mark Bolinger, the report's author, who expects the construction deadline to be removed anyway. Because stipulations for the new incentives were decided only midway through last year, officials say it is too early to quantify how many projects will benefit.
Green with envy
In the northern state of Minnesota, home to 469MW of community wind power - more than a third of the total citizen-owned capacity of 1.4GW for all 50 states combined - green entrepreneurs are looking north of the border with envy. Though the Canadian province of Ontario has only 1MW of community wind power, last year it passed green energy legislation favouring citizen-owned renewables as part of an initiative to eliminate reliance on coal by 2014. Key to the Canadian legislation, and the envy among US neighbours, is a feed-in tariff providing 20-year power purchase agreements (PPAs) worth C$0.145/kWh (US$0.136/kWh) for community-based projects - one Canadian penny more than the commercial rate. Armed with these payments and the promise of interconnection, Canadian community developers in a difficult economy become the apple of lenders' eyes. By mid-December, more than 8GW of new renewable energy projects, commercial and community, had applied for government mandated power purchase price contracts in Ontario.
"Ontario did a great job," says Lisa Daniels, founder and executive director of Windustry, a Minnesota-based non-profit organisation that advocates community wind. "They flipped their whole energy system on its head and it really goes to the heart of the problem."
Pockets of progress
Communities in the US do not want to be left behind. A group of publicly owned utilities in Washington state was recently able to harness the PTC to connect a 200MW wind project, securing 20 years of power at well below market prices while planning a 100MW second phase. In Colorado, state legislation allows utilities striving to meet renewables standards to count community wind megawatts at 1.5 times a projects' actual output. In Oregon, the controversial Business Energy Tax Credit has doled out millions of largely unchecked dollars to wind but is undergoing legislative revision to tighten up the process by which successful applicants are chosen.
Feed-in tariffs are providing incentives to local ownership in Maine and Vermont. Vermont has a 2.2MW project limit. State legislators will revisit their per-kilowatt-hour rate at two-year intervals to reflect changing power prices and there is hope the rate will be raised. Maine's tariff, aimed at community wind but still lacking specifics, has a 51% local project ownership structure. It limits developments at 10MW, considerable for a state totalling roughly 100MW last year. Sue Jones, president of Community Energy Partners, which helped get the law passed, is optimistic. "Now that it's in place, I think it's going to really jump-start community wind projects," she says. In December, the 4.5MW Fox Islands project on the island of Vinalhaven, Maine, went online. Widely considered the largest community development in the eastern US, the three GE turbines produce enough electricity to supply Vinalhaven's population, which swells from 1800 to 3000 when seasonal dwellers arrive, plus a smaller sister island.
Islanders' power bills were significantly reduced and copycat projects nearby are likely, says George Baker, CEO of Fox Islands Wind. "When people look out their windows, see these wind turbines and flip on the light switch, they feel the connection," adds Baker. "If you do a project and the community actually gets to control and benefit from things, people love turbines in their backyard."
In 2005, Minnesota passed the pioneering community-based energy development (C-bed) law requiring utilities to award contracts to generation plant operators with at least 51% in-state project ownership and setting a higher rate for the power during the first ten years. In 2007, Nebraska followed suit with a law requiring 33% home-grown ownership. There have been results. By end-2011, Minnesota-based utility Xcel expects to have 300 of its 500MW goal of C-bed community projects connected, while all 153MW in Nebraska are already considered C-bed.
But C-bed is not without problems. Nebraska Farmers Union President John Hansen, who spearheaded the Nebraska legislation, says the spirit of the law has changed. "The qualified owners are corporate executives who live in Nebraska, but they're corporate executives from Omaha, not rural folks," he says. "We also know that two-thirds of the profits from some projects are going to leave the state."
In Minnesota, transmission has reached capacity and even small projects are difficult to connect, says Mike Bull, senior resource analyst for Xcel. He points to a study concluding the problem is unlikely to be solved even by those projects located close to their electricity customers. "We have to build transmission," Bull says. Even tiny projects come with their own risks. "If you lose a single turbine out of a two-turbine wind farm, you've lost half of your revenues and you can't carry your debt," Bull says.
Other problems persist. Interconnection queues are difficult to navigate and transmission shortage is a dilemma. Economic stagnation has reduced electricity demand, making it easier for utilities to reach renewables targets without offering large numbers of PPAs to projects.
Meantime, the definition of community wind is itself unclear. Some say the term refers to projects 51% owned by state citizens. Others apply it simply to projects where local landowners get significantly more than a simple lease payment for hosting turbines. "If you can't really explain to a congressman what you're talking about, it's hard to convince him to actually pass policy that's good for your sector," says Hansen.
Indeed, Dan Juhl, a pioneer of community wind from Minnesota, believes a federally mandated purchase power price regime and national renewables standard are unlikely. "Utilities have too much political horsepower in this country," he says. Obstacles notwithstanding, community wind is hitting its stride. That bodes well for community wind projects seeking not only the acceptance of local regulators but the nation as a whole.