Wind propels more than energy in S.D.

Written by Cody Winchester, Argus Leader • Posted: Monday, October 8, 2012

.wind turbines in S.D.

Turbines spin at a wind farm near Toronto, S.D. Wind projects add to personal incomes in windy states. / AP

Wind energy projects have provided a significant economic boost to counties in wind-rich states such as South Dakota, according to a new federal study.

Researchers at the USDA Economic Research Service, the National Renewable Energy Laboratory and Lawrence Berkeley National Laboratory examined economic data from 1,009 counties in 12 states with high wind-resource potential — Montana, Wyoming, South Dakota, North Dakota, Minnesota, Iowa, Nebraska, Colorado, Oklahoma, Texas, Kansas and New Mexico.

Controlling for other factors, their analysis found that each megawatt of installed wind power led to an additional $11,000 in personal income and 0.5 jobs per county during the time period studied.

Put another way, wind energy projects in these counties led to a median increase in personal income of 0.2 percent and a median increase in employment of 0.4 percent.

The economic benefits can come in the form of direct employment during construction and operation, lease payments to landowners, demand for local goods and services, tax payments and other spending.

The study, published in the November issue of Energy Economics, is unique because it evaluates the county-level economic benefits of actual wind projects rather than simply estimating those effects, as other research has done, said lead author Jason Brown, an economist with the USDA Economic Research Service

The results are not generalizable outside of the 12-state study region, he cautioned, and the methods used cannot determine the exact number of jobs and income generated by wind development in specific counties.

“We’re simply looking at where the development occurred and using econometric models to estimate the impacts. … This is a much more conservative way of reporting the numbers,” Brown said.

The report highlights the promise of wind power in South Dakota, which has 784 megawatts of installed wind capacity — about half of which came online after 2008 — and ranks fifth in the nation for wind energy potential, according to the American Wind Energy Association.

The 150-megawatt Crow Lake Wind Project in Jerauld, Aurora and Brule counties, for example, pays an estimated $1 million in taxes annually, said Ron Rebenitsch, executive director of the South Dakota Wind Energy Association. Rebenitsch worked on the project when he was with Basin Electric, which owns the project and purchases the power.

Tax credit cloud

But wind development has ground to a halt amid uncertainty over the federal Production Tax Credit, which expires at the end of this year unless renewed by Congress. The 2.2-cent-per-kilowatt-hour tax credit can be applied toward electricity produced from utility-scale wind turbines.

The industry tends to follow a boom-bust cycle following the tax credit. And with renewal far from certain, manufacturers throughout the supply chain have been scaling back. This hit close to home last month when Aberdeen-based Molded Fiber Glass, which makes wind turbine blades, laid off 90 people.

“You can’t invest millions and millions of dollars (in a wind project) with that uncertainty,” Rebenitsch said. “The silver lining: I’ve been encouraged by some smaller wind groups — community initiatives — folks looking to get a wind project developed in their area. It’s under the radar screen, and these folks will be ready to move when the market opens up. … That’s one of the few lights that I see in an otherwise dark forecast.”

Veterans leaving

Steve Wegman, whom Rebenitsch replaced at the wind group, said many industry professionals are leaving and taking their experience and institutional memory with them.

“There’s going to be a substantially different wind business in 2013, with or without the (tax credit),” said Wegman, now an analyst at the South Dakota Renewable Energy Association. “Once you start cannibalizing it — that’s the worst thing to do. And that’s what we’re doing.”

Beyond the federal credit, the industry is pushing for more state support, including South Dakota’s construction excise tax rebate, also known as the large project development fund. After the Legislature passed a bill championed by Gov. Dennis Daugaard to extend the program, Democrats successfully referred the law to a public vote in November.

Wind developers have captured one-third of the construction tax refund since 1996, and Rebenitsch said more of these favorable tax policies would help draw wind developers to South Dakota.

“We need to be looking at what kind of long-term tax polices we can initiate in South Dakota that will enable developers to feel comfortable coming to South Dakota,” he said.