Small Wind, Big Business

The 2007 Farm Bill suggests tax credits as one way to offset the cost — as great as the environmental benefits — of small wind projects.
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The 2007 Farm Bill suggests tax credits as one way to offset the cost — as great as the environmental benefits — of small wind projects.

Tucked away in the 2007 Farm Bill, now inching its way through the legislative process toward a presidential signature, is a section that could transform this country’s small wind energy industry.

That, at least, is the belief and the hope of Ron Stimmel, small wind advocate with the American Wind Energy Association in Washington, D.C.

Buried beneath billions of dollars supporting future farm incomes, commodity prices, agricultural trade, rural development and other farming-related issues is a provision for renewable energy.

And slipped somewhere into that section is a proposal to provide federal investment tax credits that would go some way toward offsetting the cost of small wind projects.

“Small wind” is defined as a system generating up to 100 kilowatts. According to Stimmel, most are below 10 kilowatts, enough for the average home, while other small projects may power farms, factories, businesses, schools or public buildings.

The Farm Bill provision, which Stimmel says has already been changed during deliberations, may change again and could well perish in a presidential veto, calls for a 30 percent credit capped at $4,000.

Since Stimmel puts the average cost of a turbine and tower installation at about $55,000, that seems a modest offset. However, the AWEA believes such an incentive would kick annual growth up to 40 percent.

Stimmel is also taking a longer-term view. “This is critical for the future of small wind,” he said, adding that just having the credit listed in the tax code would be a hugely important first step.

Such optimism is not without precedent. Wind’s first gust in the United States followed a federal tax credit that lasted from 1980 to 1985, although investment in windmills fell off noticeably after the credits expired and was further hampered by low fossil fuel prices in the 1990s.

Stimmel makes his case for growth despite last year’s AWEA small wind turbine global market study showing the industry has been growing at an annual rate of between 14 percent and 25 percent for almost two decades.

One motivation is that solar power already enjoys a 30 percent federal subsidy. “We’re looking for parity with PV (photovoltaics),” he said. “Small wind is cheaper than solar, but the (capital) costs are way too high. We need higher volume to achieve economies of scale.”

According to the AWEA study, around 6,800 small wind systems were installed in 2006; Stimmel estimates total U.S. capacity is now about 61 megawatts, roughly the equivalent of 25 of the largest wind farm turbines.

“Small systems are especially popular in states with good winds, high electricity prices and incentive programs,” said Trudy Forsyth, a senior project leader at the National Renewable Energy Laboratory’s National Wind Technology Center, a Department of Energy research facility near Boulder, Colo.

In some regions, subsidies and rebates can cover up to half the installed cost of wind systems. Leading markets include California, New York, Vermont, Massachusetts, Pennsylvania, Ohio, Texas, Maine and Arizona, mostly states with wind-friendly policies and regulations.

For most users, the choice of small wind is colored by financial necessity: They live off the grid, and hooking into the main electricity network would be prohibitively expensive.

Their solution is a wind turbine, possibly combined with solar panels, backed up by storage batteries and sometimes supported by the sturdy hand of a diesel or propane generator.

Forsyth calls wind an inconsistent power source, subject to daily and seasonal variations, so off-grid users generally have to rely on batteries capable of storing several days’ worth of power.

Increasingly, people already on the grid are also opting for small wind; some are drawn by the environmental benefits while others just want to loosen the grip of rising and increasingly volatile power prices.

Video: President George H.W. Bush installs wind turbine at Kennebunkport, Maine

The greatest joy for many small wind users is “net metering,” which enables them to divert excess generation straight into the grid. That means when their turbine is generating more power than they are using, the electric meter spins backward.

Net metering, state policy across more than half the U.S., enables users to draw from the grid as needed and pay only the net difference each month to their utility.

“Some months, we’re in credit,” said Rebecca Otto, who has a wind generator at her rural Minnesota home in Marine on St. Croix, a little more than half an hour from St. Paul. “Some months, we pay as little as $1.56, as much as $40.”

The AWEA would like to see a uniform, federal net metering policy, something it believes would make small wind systems more economically attractive while smoothing the permitting process.

Otto, Minnesota’s state auditor, and her screenwriter husband Shawn Otto, best known for the movie House of Sand and Fog, live on a 30-acre farm with their 12-year-old son and are perhaps Minnesota’s highest-profile environmental couple.

They built and have given tours of their eco-friendly home where a 15-kilowatt turbine atop an 80-foot tower generates about 80 percent of their electricity; the former demonstration unit, which cost only about $10,000, paid for itself in 10 years.

Generally, however, the lumpy economics of small wind inevitably stretches the payback period. The AWEA says this can range from six to 30 years depending on the quality of the wind, siting of equipment, permitting costs and the price of other energy.

For this reason, would-be small wind users are urged to do their homework, especially regarding wind speeds and patterns, buying and locating the turbine and understanding their local zoning, planning and permitting rules.

Even with that caveat, the AWEA cautions that small wind is not for everyone: “As a rule of thumb, at least one acre of open land and an adequate wind resource are necessary to achieve an attractive financial return on an installation.”

The height of towers can prove a major obstacle, even in rural locations, as the Ottos found out when it took about six months to get planning approval on their farm.

Video: Economics of wind energy in west Texas (from CBS Sunday Morning)

Zoning requirements and associated costs are ongoing concerns for the AWEA and for Mike Bergey, president of Bergey Windpower in Norman, Okla., which has been manufacturing small wind turbines for 30 years.

Though business “nearly doubled” last year, according to Bergey, many planning rules and height restrictions are unfriendly to small wind. “It’s worse on the coasts,” he said. “The Midwest is not so bad. They’re used to seeing windmills.”

According to Bergey, it can cost $8,000 in fees to erect a tower higher than 35 feet, even on a 150-acre property. “That’s very onerous,” he said.

Noise and the impact on property values are two common concerns among residents when a wind turbine is proposed for their neighborhood.

However, the AWEA Web site says evidence to date suggests property prices tend to increase rather than decrease while sound is largely masked by background noise. “It is audible, if you are out of doors and listening for it, but no noisier than your average refrigerator.”

Besides lobbying for financial incentives and more flexible planning, the AWEA is hoping to encourage small wind use through a certification system ensuring turbine performance, reliability and safety.