In related developments, two western states have become positioned to take advantage of one of their most plentiful, free resources. This summer, officials in South Dakota and Colorado adopted significant policies to increase wind power development in their states.
Legislators in South Dakota, which is currently ranked fourth nationally in overall wind generation potential, signaled their intent to make a major investment in that potential when they adopted legislation that will provide tax incentives for wind energy facilities and related transmission in the form of an alternative tax and rebate.
Effective July 1, revenue is derived from the alternate tax, which has two parts, a “nameplate capacity” tax and a “gross receipts” tax. The nameplate tax is $3 multiplied by the nameplate capacity of the total wind farm in kilowatts. The gross receipts tax is 2 percent of the wind farm’s actual production of electricity multiplied by an established 2008 electricity rate of 4.75 cents per kilowatt-hour. The established electricity rate will have a 2.5 percent annual rate of inflation.
All of the nameplate tax and 20 percent of the gross receipts tax goes to the local governments. Those taxes are given to the local governments outside of established property tax caps. Each local government gets the same percentage of the tax as they would receive if the revenue was agricultural property tax. The remaining 80 percent of the gross receipts tax goes to a property tax reduction fund.
Developers receive a rebate on the taxes they pay. The maximum amount of the total rebate is 50 percent of the cost for the transmission lines and collector system for a wind farm or the cost for transmission lines to a new coal-fired power plant. The rebate lasts up to 10 years and cannot be more than 9 percent of the gross receipts tax for years one to five and 50 percent of their gross receipts tax for years six to 10.
The tax incentive is expected to help stimulate an already booming wind power industry in the state. Since June 2007, South Dakota has increased wind energy capacity by more than 300 percent, with two other wind energy projects currently under construction.
Colorado also is expanding its wind industry. The Colorado Governor’s Energy Office (GEO) announced that it has chosen four utility companies to partner with to offer a rebate for small wind turbine installations. The Small Wind Incentive Program partners are Highline Electric Association, Sangre De Cristo Electric Association Inc., Southeast Colorado Power Association and Town of Estes Park.
This program was designed to respond to a growing interest in harnessing wind power to provide local, renewable power. Homeowners and businesses who are customers of one of the four utilities and are interested in installing a small wind turbine are eligible for rebates for up to 10 kW of installed DC capacity per installation, including systems larger than 10 kW. Incentives will total $2 per watt, with $1 per watt DC from the partner and $1 per watt DC from GEO. Rebates will not exceed 50 percent of the total cost of the project or $10,000. Each utility will set the maximum rebate amount and pay the rebate to the customer. Wind systems must be grid-tied and net metered by the interconnecting utility. Stand-alone systems are not eligible.