An Energy Incentive Is Drifting in the Wind
A wind turbine can power up to 600 homes, but 600 homeowners can't get together to own a wind turbine. Why? Because federal law makes local ownership virtually impossible.
Here's how. The federal wind tax credit of 2 cents per kilowatt-hour can be taken only against taxes on passive income. Passive income does not include wages or salary; it only counts income from investments or real estate. Most Americans do not have any passive income. Those who do have very little. Thus wind turbines are financed by a handful of firms that attract investments from a few hundred or a few thousand wealthy individuals who can use the tax incentives.
The federal wind-energy incentives -- up for renewal this year -- discriminate against local ownership and favor absentee ownership. They also severely restrict the number of investors who can finance wind-energy generators.
Changing the incentives would pave the way for rural Americans to own wind turbines and for the economic benefits of wind energy to truly accrue to the host community's advantage. It would reward self-reliance. And it would level the playing field for average citizens.
A few stalwart entrepreneurs, mostly in Minnesota, have tried to use the current tax code to create locally owned wind projects. But the process is frightfully cumbersome. A wind farm is developed as a partnership between local landowners and an equity investment firm. The firm retains full ownership of the project, the tax incentives and most of the revenue flows for at least the first 10 years. The local partners become true owners only after 10, 14 or even 20 years. The local owners stand to make out well, assuming the turbines continue spinning after that long -- there's little data on the longevity of modern wind turbines. But the process is costly, with several middlemen taking a cut and all of the federal incentives flowing out of the local community.
One solution has been offered at the federal level by U.S. Rep. Tim Walz, D-Minn. His bill would allow up to $40,000 of the tax credits to be taken against any income taxes, not just taxes on passive income. This would allow as many as 1.5 million households to become investors in Minnesota and tens of millions more nationwide.
Think how much faster America can achieve energy security if it can add millions more investors to the renewable-energy market. Think how much better investment can be if these locally owned projects are returning significant dividends to their rural communities.
Energy independence shouldn't be limited to avoiding oil or gas from the Middle East. It should also mean individuals and communities becoming energy producers. Community-based energy projects create a preference for clean energy, since the owners live next to the power plant. Locally owned energy projects double the return on our investments in wind energy and, more importantly, mean paying ourselves for our own power.
John Farrell is a research associate with the Institute for Local Self-Reliance in Minneapolis.
© 2008 Star Tribune
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19 Comments so far
Show AllWhy do we persist in calling non-petroleum-based fuels "biofuels?" Anything that burns and emits carbon was once alive and is thus a biofuel, including oil!
I always wondered why people in flat open areas of the country did not set up wind farms for themselves and to sell off the excess power. This article and following comments by andersdl explain some of the artificial financial obstacles and red tape that have been placed in the way. These rules were obviously made so that only those who are already rich from investments could profit from (or block development of) the wind power technology.
Legislation should make it easy, promote and expedite the development of wind power by communities and individuals with modest means. It looks like casino owning tribes might already be in a position to set up wind farms, an improvement for community life over the organized gambling scene.
How big a problem is the bird killing? Birds used to kill themselves on picture windows until people started putting decals etc. to warn the birds. We can probably find ways to shield the blades or make them easier for bird visual systems to perceive.
By the way - I really appreciate CD as a place to learn about and discuss issues with like minded people with all kinds of experiences and angles. I believe CD is like Benjamin Franklin's little societies in which ideas were germinated and hammered out as preparation for raising them in public. I feel so much more prepared.
Urban and suburban wind it just not worth it. It is better to have large wind turbines in the best places. If individuals want to invest in partnerships they can get the same tax breaks. It makes more sense to put solar panels on your house and a PHEV in your garage.
This article appeared in the Guardian on Friday May 02 2008 on p43 of the Comment & debate section. It was last updated at 00:05 on May 02 2008.
This week the shape of the global energy crisis came into its sharpest focus yet. The world needs renewable energy fast, but as BP and Shell announced record profits, they also demonstrated that they are in essence retreating from renewables, perhaps with the exception of biofuels. They intend to focus their record billions on expanding production of what remains of traditional oil and gas, plus tar sands and liquid fuels from coal - ruinous in their effect on the climate.
The oil giants are recarbonising, wilfully choosing to forget both global warming imperatives and the need for renewables in national security terms. Shell pulled out of the biggest offshore UK windfarm yesterday and BP is losing interest in solar and investing in the tar sands - having once refused to do so on ethical grounds because of the greenhouse gas emitted in processing.
The European oil giants are behaving in this way in part because ExxonMobil became the most profitable of the big players while turning its back on the climate issue and pouring scorn on renewables investment. BP and Shell can no longer resist the calls of investors who demand short-term Exxon-type performance, whatever the final cost.
Others think differently. In New York, members of the Rockefeller clan - descendants of Exxon's founder - called yesterday for radical reform of the company because they can no longer stomach its irresponsible attitude towards the climate. They want a board that will invest in renewables. Meanwhile, in London, a big asset management house took out newspaper ads spoofing a death announcement for fossil fuels and one for the birth of renewables, in which its alternative energy fund will invest.
This fund, and others like it, are investing in renewables because they enjoy some of the fastest growing markets in the world. This growth is driven in large measure by feed-in tariffs - to encourage the use of renewables. Thirty-three Labour MPs rebelled this week against the government's energy bill because it ignores the feed-in mechanism. The UK government persists with its discredited renewables obligation, a measure that has seen the renewables mix in UK primary energy sit for several years now at just 2%.
Meanwhile, North Sea oil and gas are depleting rapidly. BP and Shell know there are no more rich oilfields to be discovered there. They are being forced to invest much further afield in the search for the huge fields they so badly need.
As domestic oil and gas production collapses, the UK will be forced to look increasingly to imports. Britain imports only 5% of its energy now, but that is likely to rise to 50% in five years, much of it gas. The government appears to think this is fine, pointing to the growth of domestic infrastructure for liquefied natural gas and pipelines from Norway and the Netherlands. But this week we learned that the UK is the last priority for Norwegian exports. As the Grangemouth strikers wonder what to do next, we smell in that drama just how fragile the whole energy edifice is.
Those who hoped Opec would come to the rescue also received a blow this week. The cartel said it wouldn't lift production, even if oil rises to $200 a barrel. Meanwhile, fuelled by $120 oil, the economies of the producers are booming, sucking up ever more of the oil and gas we will need. As for nuclear, it cannot produce a single unit of electricity for at least 10 years - far too late to help with a gas shortfall and largely irrelevant to oil, anyway.
We need renewables today like we needed tanks and planes in 1929. Those who ignore this may soon face accusations of betrayal from a population staring energy famine in the face.
· Jeremy Leggett is chairman of Solarcentury and author of Half Gone
jeremy.leggett@solarcentury.com
This discussion made me laugh!
We've got a few geniuses chiding wind power for its environmental impact - it kills a few birds and allows for natural succession on disturbed land where it's constructed... How utterly terrible!
I'm wondering what ecologically perfect form of electricity these folks are using to post such inane comments on the coal-and-nuclear powered internet. Jesus H Christ, have you people ever seen an open pit mine or a mountaintop removal site? Ever seen the oil or gas fields in otherwise pristine wild areas? Heard of Climate Change?
Every idiot knows that efficiency and conservation are the best forms of energy, but if you want to use electricity, you have to generate it somehow. I personally prefer complete decentralization and local-scale power if any, but even then we have to talk about the impacts of our choices. If your gripe with wind power is based on how many birds it kills, then turn off your computer (and everything else) and remove your windows, tear down every utility pole (no phones, no radio) and skyscraper (in fact every building with windows), stop all motorized transport (including rail and air). Every one of those things kills way more birds than wind power.
If it's about ecological destruction, the whole internet isn't large enough to list all of the activities and technologies that are more destructive than wind power. This includes simple things like driving (roadbuilding fractures habitat, pollution kills living things and changes the climate), working (buildings are responsible for over 40% of all energy consumption in industrialized countries), eating (unless you're literally a hunter-gatherer or a self-sufficient permaculturist), drinking (think water treatment plants, fluoride production, electricity, and metal pipes), and certainly flapping your digital gums on the internet (24-7 reliable electricity for running servers and their cooling systems, thousands of miles of fiber-optics and copper cables, and the roads of asphalt to get maintenance people and the system operators to and from their unfulfilling jobs).
Enough with the smarmy intellectual laziness, folks. Hypocrisy is cute, but only to a certain extent...
1. The number of birds killed by flying into wind turbines is small compared to the extinction level numbers produced by fossil-fueled global warming and even that number can be mitigated by smart placement and design.
2. The best energy future we can work for is one that is decentralized, redundent and fueled by whatever is abundent locally and sustainably. Giant energy companies have dragged us toward our current crisis. Ideas like this article describes are one step in the right direction.
Give every citizen at least equal rights as compared to corporations, not fewer rights.
The firm retains full ownership of the project, the tax incentives and most of the revenue flows for at least the first 10 years. The local partners become true owners only after 10, 14 or even 20 years
That's the same old capitalist approach that has failed the people over and over again. Try a different approach - try leaving the capitalist OUT of it. Do not borrow any money. Do the engineering, manufacturing and maintenance work locally. Put the technical designs in the public domain. Keep the material ownership local, preferably public.
If the capitalists are the problem, then you omit the capitalists from involvement in the solution.
Wind farms are ecological abominations. That part of the land they sit on that isn't scraped raw to build the roads and the individual turbine sites and to lay the wiring is a dead zone. Weeds move in and all native vegetation and animal life moves out. See Whitewater Pass in southern California. What was once a thriving desert-edge, natural community of plants, insects, animals and birds has been reduced to a remnant stand of scraggly, dusty creosote bushes where the only sound, the only movement comes from the turbines turning in the wind.
The incentive to SAVE petroleum has always been there.
Heating oil isn't free, nor gasoline for your car, nor
very cheap over last decades. Remember the 1970's oil
industry scam????
We have had legislators bought by the oil industry to
keep car mileage from rising and Detroit protecting the oil industry. Capitalism and corporatism are suicidal and sinking America.
Nationalize our oil industry ---
Put Electric Cars on our highways ---
We can subsidize both ends of this: manufacture and purchase.
Toyota Prius Hybrids are flying off the lots and Detroit
doesn't have an electric car????? What????
See: "Who Killed The Electric Car?"
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ok, i don't quite understand the wind belt. anybody care to explain how the magnets get moved?
see http://www.nytimes.com/2008/04/30/opinion/30friedman.html
now is the time to contact your congressperson and senators.
The Wind Belt looks like a great idea! Thanks Maplefudge.
There are lots of other great, bird friendly ideas for wind power and for solar, geothermal and tidal power that would be in use today were we not governed by Big Oil, Big Nuke, Big Coal and other monopolies and war profiteers.
wind is great! Think about how much it would benefit everybody if each housing development association put up a couple of wind-power generators (www.pacwind.com)??? Get the tax incentives working for energy alternatives (rather than against it) and we can move mountains.
((by the way....there are plenty of wind power alternatives that don't kill birds...not that I care about them all that much either)
Hey Kelmer
STFU, I can't believe how incredibly backward you are. Remember what the exxon valdez did to birds?
I saw this clever idea on youtube. It could be scaled up to revolutionize windpower and looks like it would be less dangerous for birds as well. check out the WIND BELT!
http://www.youtube.com/watch?v=dZ0v-CK63-4
Anybody who has ever successfully managed anything knows that providing incentives is the easiest and lowest cost method of obtaining desired results.
I have worked in the electric utility industry for many years and have recently observed a lot of lip service being paid to expanding alternative energy sources, while regulations, taxes, rate structures, etc. are being modified to create ever larger disincentives to invest in alternative energy and also to create disincentives to conserving energy. Meanwhile we see ever more incentives created for nuclear power and ethanol production.
There are a few exceptions to this trend, but not many.
The tax policy cited by the author is one example of a major disincentive to invest in alternative energy. Another example is the current widespread re-structuring of rates by electric and gas ulilities where the base monthly customer charges are being increased 25, 50 or 100%, while the usage charge (cost poer kilowatt hour for power, or cost of therms for natural gas) is NOT being increased or in some cases is being reduced.
In addition to discouraging investment in alternative energy sources, this type of rate restructuring discourages conservation and is extremely regressive. A poor customer living in an trailer or an 800 or 1200 square foot house is now subsidizing the wealthy customer living in a 6000 square foot house.
Your power and/or gas supplier is probably restructuring right now and you don't even know about it because many of them give little or no notice of public hearings and many of the public hearings are not conducted by a regulatory agency, the utility just tells you what they are going to do and why your concerns are invalid.
Wind farms are dangerous to birds.
Until they can reduce the bird slaughter to 0 it is not a green technology, but a red one.
And saying cats kill more birds is a false argument since domesticated animals arent exactly "green" either.