South Dakota Legislature Kneecapping State's Wind Potential

March 4th, 2010 by Susan Kraemer

South Dakota’s potential for utility-scale wind projects could be seriously curtailed by three bills now in the House that reduce the attractiveness of investment in a permanent, safe and clean energy source that could bring billions in much needed revenue to the state.

Like cutting itself off at the knees to save on shoe leather, the Republican-held legislature is considering three pieces of very short sighted legislation that cut off the few tax breaks that wind investment had.

Senate Bill 123 would remove all incentives for large capital improvement projects.

Senate Bill 195 would eliminate any refunds on projects that cost more than $40 million.

House Bill 1060 heard yesterday would cut tax refunds for large commercial projects.

Like all new power stations, wind projects are “large capital improvement projects”, “cost more than $40 million” and are “large commercial projects”. The shortsighted laws curtail wind power.

“When you’re talking investments in wind, you’re talking about heavy, capital-intensive projects. A cheap project for us is $300 million.” says Steve Wegman executive director of the South Dakota Wind Energy Association.”We have a huge problem coming down the pike, and we need consistent public policy.”

“This business will just move across the borders, into Minnesota, into Iowa, into North Dakota. That’s not a threat, it’s just dollars and sense. It’s time to scrap these bills and let’s get everybody to the table and talk tax policy.”

Bait and Switch

The proposed ruling by the legislature would retroactively affect projects that had already been financed, approved and placed in line to be interconnected to the grid, under the the existing tax laws, so this legislation would be profoundly unethical.

If the legislature passes these laws, NextEra and partner Basin Electric Power Cooperative will likely relocate a planned $350 million 151.5 MW PrairieWinds SD1 farm with its 101 1.5 MW wind turbines, collector substation and 13 miles of new transmission line, that had been approved and planned for South Dakota assuming the existing tax breaks.

To date, only 313 MW of wind is installed in South Dakota, or about the size of an average coal power plant.

No Wind Incentives Remain

The state has only a Renewable Energy “Objective” of 10% by 2015 (includes Solar Thermal Electric, Photovoltaics, Landfill Gas, Wind, Biomass, Hydroelectric, Geothermal Electric, Municipal Solid Waste, Hydrogen, Electricity Produced from Waste Heat and Anaerobic Digestion).

Unlike a Renewable Energy Standard, there are no penalties for non-achievement of an “objective”, so the invisible hand of the market decides the energy mix for the state, and has decided to keep its ancient coal power plants, rather than invest in wind. (However, this does include electricity from waste heat, which might interest coal powered utilities (which produce the vast majority of South Dakota’s electricity) in cutting the carbon output of their coal plants by doubling their output (most operate at only 35% efficiency).

Despite being the 5th windiest state, South Dakota lags notably at 20th in wind installation. Its potential is estimated at 3,411,690 gigawatt hours by the NREL. The long term revenue to the state of wind power would far outweigh any introductory tax incentives.

The likely beneficiary of the shortsighted policy will be its own neighbor Iowa, that produces 15% of its power from wind (to meet its Renewable Energy Standard) while being only the 7th windiest state. Iowa is 2nd in wind production, right behind Texas, with 3,670 megawatts.

Image: Dave Clark

Source: Ecoseed

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Tags: overturning progressive legislation, South Dakota

About the Author

Susan Kraemer writes at CleanTechnica, CSP-Today, PV-Insider , SmartGridUpdate, and GreenProphet. She has also been published at Ecoseed, NRDC OnEarth, MatterNetwork, Celsius, EnergyNow, and Scientific American. As a former serial entrepreneur in product design, Susan brings an innovator's perspective on inventing a carbon-constrained civilization: If necessity is the mother of invention, solving climate change is the mother of all necessities! As a lover of history and sci-fi, she enjoys chronicling the strange future we are creating in these interesting times. Follow Susan on Twitter @dotcommodity.

Dave Morrow

I would imagine that these tax proposals are supported or even initiated by coal industry lobbyists. It reeks of back room dealing actually. That said, hopefully legislators will realize that wind projects increase the tax base in rural areas, provide good paying head-of-household type jobs, and insulate the state from changes in fossil fuel prices. A good tax base means better schools, and the jobs mean stable families, both are key to protecting small towns in the heartland.
Dave Morrow

I would imagine that these tax proposals are supported or even initiated by coal industry lobbyists. It reeks of back room dealing actually. That said, hopefully legislators will realize that wind projects increase the tax base in rural areas, provide good paying head-of-household type jobs, and insulate the state from changes in fossil fuel prices. A good tax base means better schools, and the jobs mean stable families, both are key to protecting small towns in the heartland.
Concerned

Republicans dragging their feet against progress – really? It’s too bad the ‘Anti Obama’ party is so heavily invested in defeating so many critical initiatives that are overdue in this country. God have mercy on His misguided children.
Concerned

Republicans dragging their feet against progress – really? It’s too bad the ‘Anti Obama’ party is so heavily invested in defeating so many critical initiatives that are overdue in this country. God have mercy on His misguided children.
http://www.sdwind.org Steve Wegman

South Dakota does not have income tax but a 4 percent sale and use tax and 2 percent contractor excise tax. The refund is for projects that cost over 10 million dollars, you pay on the first 10 million and your project may be eligible for a refund.

When doing a large capital project in South Dakota, you will need to capitalize the 6 percent tax, that means it may be cheaper do projects in Minnesota, Iowa or North Dakota. The current program really is an interest-free loan to the State of South Dakota on large capital projects that are going to be built somewhere.
http://www.sdwind.org Steve Wegman

South Dakota does not have income tax but a 4 percent sale and use tax and 2 percent contractor excise tax. The refund is for projects that cost over 10 million dollars, you pay on the first 10 million and your project may be eligible for a refund.

When doing a large capital project in South Dakota, you will need to capitalize the 6 percent tax, that means it may be cheaper do projects in Minnesota, Iowa or North Dakota. The current program really is an interest-free loan to the State of South Dakota on large capital projects that are going to be built somewhere.
http://cleantechnica.com/author/susan Susan Kraemer

Great points Paul. That lack of population is what makes it hard to develop all the empty windy states. I think its a good investment for the nation as a whole, and why I suggest to Steve that we use the Federal funding to make up the difference. (The Feds helped in developing the railroad and the oil pipelines and dirty energy infrastructure that make it a dirty energy state currently.)

We’ll all benefit with clean energy if we unleash the potential of our wind giant states. But, yeah, South Dakota has almost no tax base to develop it on their own.
http://cleantechnica.com/author/susan Susan Kraemer

Great points Paul. That lack of population is what makes it hard to develop all the empty windy states. I think its a good investment for the nation as a whole, and why I suggest to Steve that we use the Federal funding to make up the difference. (The Feds helped in developing the railroad and the oil pipelines and dirty energy infrastructure that make it a dirty energy state currently.)

We’ll all benefit with clean energy if we unleash the potential of our wind giant states. But, yeah, South Dakota has almost no tax base to develop it on their own.
Paul

BTW the population of South Dakota is 804,194 and 40% of that total are either under 18 or over 65 (i.e. not tax payers)
Paul

BTW the population of South Dakota is 804,194 and 40% of that total are either under 18 or over 65 (i.e. not tax payers)
Paul

I don’t mean to be a contrarian here but tax money doesn’t grow on trees.

Perhaps South Dakota with a relatively small rural population (read: small tax base) can’t actually AFFORD to “refund” a huge influx of “cheap” $300 million projects.

These are meant to be commercial ventures aren’t they, with commercial risk? Can’t expect tax payers to pick up the tab on everything!
Paul

I don’t mean to be a contrarian here but tax money doesn’t grow on trees.

Perhaps South Dakota with a relatively small rural population (read: small tax base) can’t actually AFFORD to “refund” a huge influx of “cheap” $300 million projects.

These are meant to be commercial ventures aren’t they, with commercial risk? Can’t expect tax payers to pick up the tab on everything!
http://cleantechnica.com/author/susan Susan Kraemer

Thank you Steve.

What do you think the chances are that this is just about money? If so, have you looked into replacing state tax credits (lack of) with Federal Recovery Act funding?

Here’s a very direct link for anyone wanting to comment: In the drop down topic box, scroll down to choose “Business tax”

http://www.sd.gov/feedback/topic.aspx?url=http://www.sd.gov/
http://cleantechnica.com/author/susan Susan Kraemer

Thank you Steve.

What do you think the chances are that this is just about money? If so, have you looked into replacing state tax credits (lack of) with Federal Recovery Act funding?

Here’s a very direct link for anyone wanting to comment: In the drop down topic box, scroll down to choose “Business tax”

http://www.sd.gov/feedback/topic.aspx?url=http://www.sd.gov/
http://www.sdwind.org Steve Wegman

This is a sad state of affairs. Why would you try to injure a industry that is trying to help your state.

If you want to help us please contact the State Legislature and its leaders at http://www.sd.gov

Thanks,

Steve Wegman
http://www.sdwind.org Steve Wegman

This is a sad state of affairs. Why would you try to injure a industry that is trying to help your state.

If you want to help us please contact the State Legislature and its leaders at http://www.sd.gov

Thanks,

Steve Wegman
Mridul Chadha

Last year we saw several countries announcing billions dollar stimulus packages specifically for the renewable energy sector. China, Japan and South Korea all announced packages close to $400-500 billion but there was no such announcement from the US. These countries recognized that economic slowdown as an opportunity to lay the foundation for energy security and economic prosperity through renewable energy infrastructure.

Foreign scholars coming to my university emphasize on the need for the US to revamp its power grid in order to tap full potential of renewable sources, but I believe that after the initial talks of spending billions on infrastructure projects, like building a smart grid no concentre investments of actions have been taken.

Lately, the politicians have been announcing policies which completely isolate the US from rest of the world in terms of promoting renewable energy. Be it cap and trade, regulating carbon emissions or supporting renewable energy projects. If this continues, US might lose its strategic, economic and technological edge very soon.
Mridul Chadha

Last year we saw several countries announcing billions dollar stimulus packages specifically for the renewable energy sector. China, Japan and South Korea all announced packages close to $400-500 billion but there was no such announcement from the US. These countries recognized that economic slowdown as an opportunity to lay the foundation for energy security and economic prosperity through renewable energy infrastructure.

Foreign scholars coming to my university emphasize on the need for the US to revamp its power grid in order to tap full potential of renewable sources, but I believe that after the initial talks of spending billions on infrastructure projects, like building a smart grid no concentre investments of actions have been taken.

Lately, the politicians have been announcing policies which completely isolate the US from rest of the world in terms of promoting renewable energy. Be it cap and trade, regulating carbon emissions or supporting renewable energy projects. If this continues, US might lose its strategic, economic and technological edge very soon.