From Root River Energy's Fall 2009 Newsletter...
he Minnesota wind industry is one of the most progressive in the country. Currently the state ranks fourth in U.S. for the most wind energy installations, topping out with just over 1,800 megawatts. These 1,800 megawatts will produce enough electricity to power 450,000 homes. The state also has one of the most stringent Renewable Portfolio Standards (RPS), requiring utilities to purchase 25% of their electricity from renewable energy sources by 2025. Xcel Energy has executed a more rigorous standard beyond that, requiring that 30% of its energy come from renewables.
In fact, since 2005 Minnesota has dramatically increased its wind capacity, growing about 31 percent every year. The RPS will require the state to increase its wind power capacity by an additional 4,000 megawatts which is enough to power nearly 1 million homes. The economic and job-creating stimulus the RPS has is enormous. In fact, over the next 17 years, 2,200 construction phase jobs will be instated along with more than 900 sustained jobs during the operations period of the wind farms. 1,422 of these are estimated to be in the turbine supply chain, and 190 new jobs are expected to be created in the construction sector and in project development related services.
The construction phase will pump nearly $9 million dollars into Minnesota’s economy throughout this 17 year period. Operations costs would propel another $1.5 billion annually into Minnesota towns. A great portion of the jobs created would be in the manufacturing sector, especially hit hard by the economic slowdown. Minnesota ranks 13th in the number of workers already in wind-related industries and 14th in the number of actual companies engaged in related manufacturing processes.
Community wind projects also have an advantage over traditional, corporate-owned developments in regards to job creation and economic stimulus. The National Renewable Energy Laboratory’s Eric Lantz reported that community wind, when compared to hypothetical average corporate-owned projects, has construction-period employment impacts that are 1.1 to 1.3 times higher and operations-period impacts that are 1.1 to 2.8 times higher than corporate-owned wind. Lantz went on to further conclude that community-based wind farms overall have greater economic impacts over corporate-owned developments because landowners retain an ownership stake in the project’s profits. However, wind farms need to be financed in order to achieve these construction and operations period benefits. Prior to the recession, most wind projects were financed via the Production Tax Credit (PTC). Typically the financiers utilizing this credit are institutional investors who have high passive income and tax liability to offset the PTC.
The current session has reduced this pool of investors capable of using the PTC, along with available debt financing. But government stimulus has helped revive the wind industry in 2009.
The American Recovery and Reinvestment Act signed in February 2009, contained several provisions to aid the development of wind energy over the next several years.
•3 year extension of the Production Tax Credit beyond 2009
•an option to elect a 30 percent Investment Tax Credit in place of the PTC. The credit can then be converted into a grant for project beginning construction or starting operation in 2009 or 2010.
•a new 6 billion Department of Energy (DOE) renewable energy loan guarantee program To utilize these options, companies are required to begin construction of their wind farms prior to 2011. As of September 2009, the DOE has already distributed over 1 billion dollars in grants to renewable projects across the country.
This is one step in the right direction, however, to continue Minnesota’s robust wind energy growth, more stable long-term public policies are needed in regards to project financing. Also, a variety of tax incentives could be utilized to attract more in-state manufacturing activity, including generation subsidies and below-market loans that promote projects that use turbine components manufactured in Minnesota. All of these items are being considered. Once policy stability is achieved, the state has the ability to continuously see the extended economic value wind energy can provide for generations to come.