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United States

New tax law clears the way -- Two West Virginia projects

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A change to West Virginia's tax law last year cleared the way for two wind projects in a state largely known for coal generation. The change achieves a near level fiscal playing field for wind in the power plant development market.

The first to benefit is Atlantic Renewable Energy Corp's 65 MW Backbone Mountain project. Atlantic signed a power purchase agreement with Exelon Power Team, a division of Exelon Generation, in late December, a year after winning approval for the project from state regulators. Backbone Mountain Windpower LLC, owned by Atlantic Renewable, will develop the project, which had stalled when an environmental group objected to its location. A downsizing of the project from 75 MW to 65 MW -- so turbines will not be visible from Blackwater Falls State Park and Blackwater Canyon -- won the day.

Meanwhile, the tax change has also sparked new life into a plan by US Windforce LLC. It has applied to the West Virginia Public Service Commission for approval of its 250 MW Mount Storm wind project, to be built by the company's wholly owned Mount Storm Windforce LLC subsidiary. The project will be on Dobbin and Cherry ridges near the Backbone Mountain development.

Neither project was likely to move forward before the West Virginia tax law changes, says US Windforce's Tom Matthews. "We, along with our competitors, realised there would be no future whatsoever for wind power in West Virginia without revisions in the tax code," Matthews says. "The tax code for power projects had not foreseen wind development."

Tax wind

He says the state's business and occupation tax, along with the personal property and real property taxes for generating projects, resulted in taxes that could be six to eight times higher for each kWh produced by wind than by a coal generator. Before the legislature changed the tax code in 2001, wind projects would have been taxed based on nameplate capacity, not on an adjusted capacity factor. Now, he says, the tax is still a little higher on wind projects, but it is close to "a level playing field."

The plan is to build Mount Storm in two phases, starting with 150 MW to 175 MW using 1.5 MW turbines, though a supplier has yet to be picked. Matthews is still negotiating a power sales agreement, but he says the project will interconnect with Allegheny Power transmission, which in turn will interconnect with the Pennsylvania-New Jersey-Maryland (PJM) West Regional Transmission Organisation. He says construction is most likely to begin in 2003. All of the turbines will be in an area already heavily industrialised by strip or deep mines and timber harvesting.

"The area is well suited for wind turbines in terms of aesthetics," he says. "Many of the natural resources in the ground have been removed and now that leaves room for another natural resource -- wind generation."

The Exelon Power Team will also put electricity from the Backbone Mountain wind farm onto the PJM grid. Community Energy Inc, an East Coast green marketing company, will sell the power to retail customers in states like Pennsylvania which have an active retail market for renewable energy.

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