South Dakota Legislature Kneecapping State's Wind Potential

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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.”

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“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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