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United States

Community wind spirits revived -- Big expectations of Obama package

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Development of community-owned wind projects, a niche market of the American wind power industry, is in the same holding pattern induced by the collapse of investment banking as its bigger corporate counterpart. The last half year saw completion of 125 MW of wind projects sponsored by members of the community in which they are built, but the movement is now stopped in its tracks as it waits for the US Treasury Department to write the rules defining new federal incentives for all wind development. The rules may prove especially useful to community wind.

President Barack Obama's January stimulus package includes a 30% investment tax credit that can also be taken as a direct cash grant. Lisa Daniels of Windustry, a Minnesota community-wind advocate body, hopes the new grant will open up the wind market for small investors to own part of a wind project.

"It's not a secret by any means that this whole industry went with one business model and it was the Wall Street business model," Daniels says. A federal tax credit, which only works financially for big firms with big tax burdens, has been the main driver of the American wind market. The grant option, however, will be especially useful for community wind, she says. "It puts community wind back into the game that they have long been shut out of." Final rules outlining the grant program are not expected until later this summer.

The community movement -- largely centred in Minnesota -- has until now depended on local owners finding tax-heavy financial partners able to make use of wind's ten-year production tax credit (PTC) to lift projects off the ground, before the local sponsors reclaim ownership for the last ten years of a typical 20-year project, a manoeuvre known as the PTC flip. Minnesota's tally of locally owned wind plant now stands at 459 MW, more than twice as much as any other state.

A significant part of the reason for community wind's success in the state is a piece of 2005 legislation which instituted Community-Based Energy Development (C-BED) as a non-binding goal to reach 800 MW of locally-owned wind projects by 2010. As a way to help these projects pay off equity and debt costs, C-BED requires utilities to offer a higher price for wind production in the early years of a 20-year power contract in exchange for a lower price in later years.

Xcel Energy, Minnesota's largest utility, committed to the C-BED structure to facilitate 500 MW of the goal. The company expected to reach 200 MW by the end of 2008, but progress has been slower than planned. Xcel reached 80 MW through last year and has another 40 MW under contract. A recent request for proposals turned up 45 responses totalling nearly 2300 MW of community-based wind projects ranging from 15 MW to 150 MW. Xcel hopes to pick the best and get the company back on track, although doing so by 2010 now seems unlikely.

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