Minnesotans For Sustainability©
Sustainable Society: A society that balances the environment, other life forms, and human interactions over an indefinite time period.
(Part 3 of 3)
Minnesota’s Energy Future:
Minnesota Senate: Commerce and Utilities Committee
Wind Power in Minnesota
February 26, 2003
Minnesota’s Energy Future: Evaluating Windpower©
Windturbines can be lethal to flying wildlife, insects, bats and birds. Although song birds are the primary victims, the primary concern is with the large predator birds such as hawks and eagles, and migratory birds where, not such a coincidence, the flyways are frequently those same wind alleys preferred for windcommerce development.
The larger the windmill, the greater is the potential conflict with bats, large prey, and migratory species. The radar bats use to detect items doesn't appear to detect the rapidly moving blades in time to avoid contact. One does not appreciate the speed of the blades until one stands below an operating turbine. From a distance, the turbine blades may appear to be moving at a leisurely pace, however, the actual speed deceives birds and bats (and human spectators) ―the blade tips are moving at Cuisinart cutting speeds. Consider that a turbine blade revolving at a typical 30 revolutions per minute for a relatively small 150' bladed windturbine is moving at 160 mph; a 200' blade: 215 mph; 250', 270 mph; and a 500' blade, 535 mph. In Minnesota –and most other states, windpower projects the turbine blades are slicing through the air at a rate of close to 250 miles per hour. [Example, 150' blade: 2 x 3.14 x 75 x 30 x (60 ÷ 5280) = 160 mph].
In addition, the movements of the turbine blades create a nearby vacuum pulling flying objects into the windstream. The potential harm is directly proportional to the dimension of the windturbine; the sweep of each large windturbine can approximate the size of four football fields. A 500' windturbine will have a sweep of 190,000 square feet, approximately four acres. It is not overstatement to say that large wind projects are literally an enormous dicer for migrating birds, songbirds, and insects. [500': 3.14 x 2502 = 190,000, ÷ 48,000 ≈ 4].
Not only can the blade speed be lethal to birds, bats, and insects but the potential jet plane speed of the turbine blade is a reason engineering shuts down the turbine at relatively modest windspeeds. High rotation speeds imperil the structural integrity of the blades; approaching or exceeding the speed of sound, easily attainable with larger windturbines, results in compromising the structural integrity of the windturbine and increasing the potential for hurling the immense blade as a one-way Boomerang-like projectile for long distances. The impact on a dwelling, airplane, or sight-seeing helicopter ¼ or ½ mile or more away could be heartbreaking –and perhaps subject to judicial action.
Determining the appropriate policy response is the issue. Appropriate siting and physical tower properties, and regulatory monitoring are approaches requiring review.
Reducing bat and bird conflict is an important consideration. Although the avian species is not as high on the evolutionary intelligence scale as some other species, resident birds occasionally are able to learn and adjust to some windmills and local conditions. Thus, in some instances local birds should be able to learn to avoid the blades and support cables (if used). Smooth surfaces and internal ladders also eliminate nesting and perching habitats that attract birds. One effective method is the construction of nearby and out-of-the-way bird habitats to help draw local birds from the immediate windturbine site. Bird – windmill research is ongoing, however it appears fatalities can be reduced by the construction of larger and slower revolving turbines with more blades. Painting the blades with UV gel type paints (“NUV”) also appears to help alert some bird species to the blades. In this way birds are able better recognize the blades and prepare to avoid them.21
Shutting down windturbines during periods of high bird activity and removing and prohibiting siting of windturbines in known areas of high bird activity are appropriate regulatory options. Maryland regulators explicitly incorporated this important protective measure into a first-of-its-kind rule. Regulators, evidently, did not have the natural environment fully in mind when drafting the rules, however. Acknowledging that the blades could kill large numbers of migratory birds, the regulations stated that the sum of the windturbines in a development totaling 25 windturbines, could only be shutdown a total of 18 hours a year. The regulation said that if the entire development killed more than 200 birds or bats in a 24-hour period, the windturbines could be shutdown for a maximum of 18 hours per year. Arithmetically, the rule allows windturbines to potentially kill 1,825,000 birds before being shutdown for a maximum of 18 hours (200 x 365 = 73,000 per turbine; 73,000 x 25 turbines = 1,825,000). After the maximum had been reached, no further shutdowns are possible ―no matter the consequences to flying wildlife.22
Although “birdlike” ―and it may appear humorous at first glance, flying insects can and do create serious energy losses. Insects such as dragonflies, bees, and butterflies and many other flying critters impact the blades. Impacting a blade is not necessary. Flying species only need to fly in the proximate area for the revolving blades’ tornado-like winds to do its damage. Because of their numbers the airfoil can be disturbed reducing blade rotation speed by as much as 25% in smaller applications. Similar to migrating birds using wind flyways, the huge whirling blades can be a severe problem for migrating insects, notably the Swallowtail and the endangered Monarch butterflies. Compounding the problem, the aircraft warning lights on the towers ―in addition to being a significant visual annoyance, may attract moths and some species of butterflies.
A final unanswered question: What are the effects of noise on wildlife of the 65db noise at distances of 400’ to 500'? Do predators or their prey have difficulty detecting prey or escaping predators due to the increase in noise and deflection of wind patterns? Errant wind patterns will break the scent link to and from potential prey and predators. Because of their dependence on sound and odor to detect prey or food sources, predator-prey relationships will be affected. The changing environmental patterns will likely disadvantage predators and result in an increase in prey species ―rodents in particular.
With good fortune the windcommerce industry eventually may be in the same economic ballpark as baseline energies. There are, moreover, critical issues other than cost that are more difficult to overcome —land demands, destruction of natural environments and pollution.
Pollution is in four forms:
1. As discussed previously, the pollution embedded in the baseline energies used to produce and maintain the wind development;
2. Noise pollution;
3. The widespread and inevitable visual pollution; and
4. The unprecedented land requirements for siting.
The expense and problems associated with siting windcommerce dwarf those for traditional generators, coal, oil, nuclear, or natural gas baseline generating plants. The unparalleled land requirements ―320 acres in the "demonstration", are clearly evident.
With the larger windturbines come substantial increases in noise and visual pollution. Yes, as one can imagine they are not quiet, producing a constant “swishing” fan sound that's been compared to standing by a busy Freeway. In the home a fan user escapes the noise by turning down the fan speed. In a windcommerce development there can be no relief from the unremitting noise until the wind subsides. The noise factor also helps to explain why wind developments are located some distance from residential areas. Although the noise is not as piercing as that from a racecar those near a wind development are fully aware of the incessant drone created by windmills. Even smaller windmills are noticeably noisy. The noise explains why back in the early 1980's there were communities passing restrictive noise regulations to prevent the development of high performance “egg-beater” style windmills in residential areas.
The “noise” is more than the sounds commonly heard. Windturbines also generate electrical interference with other electronic devices in the vicinity such as radios and TV’s. Electrical interference helps explain why they are located in low population density and non-city areas.
In a recent study of a modern 0.9 kW, three-blade, 7 foot diameter fan, 67db was the noise level at its rated speed of 12.5 meters per second (28 mph). This windmill is the type often used by ranchers, farmers, and rural individuals. The tested windmill was on a 30-foot support with the microphone placed at a distance of 35 feet. The noise to wind speed correlation appears to be closely related at every level until high windspeeds are achieved (when the design's safety features began to shut down the blades). Even at minimum windspeeds of 6 meters per second (13 mph) the noise was at 45db and in straight-line linear fashion reached 73db at 16 ms (36 mph). The 73db level is about the level the Metropolitan Airports Commission is targeting for jetplanes as they pass over homes in south Minneapolis. The drone of larger complexes is routinely in the 51db range.23
When windmills were widely scattered and less than the height of a barn, visual and noise pollution were less of a material matter. The following paragraphs discuss the visual pollution and land requirements, beginning with one possible solution.
relative size of a windturbine is demonstrated in the following picture showing
the front view of the state capitol with a typical Minnesota windturbine placed
adjacent to the main entrance steps.
Figure 1: Windturbine over Minnesota Capitol
One practical solution to noise and land siting would be to make windcommerce zones in or proximate to downtown metropolitan areas. Siting windpower installations in downtown areas would also connect electricity cost directly with users, eliminate visual and noise pollution, and reduce expenses associated with transmission. Wouldn't properly sized windmills be as or more effective if placed on high downtown buildings? These buildings are in effect pre-built towers with the added benefit of being directly connected to the user. In downtown areas, the redirection and vortex from the higher buildings could actually increase wind flows from adjacent and lower level buildings. Smaller and high performance “egg-beater” style windmills would likely fit existing structures without costly structural modifications and larger units would clearly be an advantage in new construction. If economics support stand-alone windturbines the economic benefit of adding windpower directly to structures of large users should be compelling. Because of the obvious consumer and environmental benefits the wonder is that there has been no legislation in this direction.
Nostalgic romantic reminders of a more open era, windmills built in the early
development of the Midwest are reminders of yesteryear but have little in common
with today's giant modern energy driven windcommerce sites. Windmills used in
the 1800's and early 1900's were small, low, used for grinding grain and pumping
ground water on isolated farmsteads. The following figure illustrates the
relative size of a modest windturbine compared to several common items.
Figure 2: Size Comparisons of Windturbines
Point Lighthouse, Nantucket; a 30' sailboat, and the Statue of Liberty.
Figure 2 illustrates a smaller turbine than seen in Figure 1 showing the Minnesota State Capitol. This illustration demonstrates a 164' bladed windturbine which is an ordinary if not small sized windturbine. Modern windturbines are proportionally larger, with the largest windturbines approximately three times the size of the Statue of Liberty. The windturbine illustrated in Figure 2 is similar in height to the landmark Foshay Tower in downtown Minneapolis. It is also significantly smaller than many of the windturbines throughout the country –including Minnesota. Today’s windturbines shadow the 447' Foshay Tower, the highest skyscraper in Minneapolis until the IDS tower was constructed in the 1970's. The largest windturbines today exceed the height even of the IDS tower.
“Windfarm” or “windpark” are strange terms for these skyscraper developments. Rather than an apt description the term appears to be an attempt to use language to manipulate perceptions. A tranquil cornfield a windturbine is not! Imagine a two or more mile square of exquisitely beautiful landscape now covered with 250’ and larger towers with blades reaching 500’ to 1,000’ and more heights!
A feat similar to hiding the Foshay Tower, windturbines cannot be hidden from view. By default, windcommerce complexes are sited in flatland farm or natural prairie areas or the peaks of selected hills. Because trees, hills, and human structures block or retard windspeed, windcommerce sites are located either where these features are not present or the hindrances removed. Advertised as a “green” clean development, will windpower have the unintentional consequence of removing vast quantities of trees, reduction of wildlife, and damage to natural habitats? The widespread environmental repercussions will be most evident in farming areas and areas proximate to local communities. Even on rural farms, the windmills stand in open areas well above treeline and farm structures.
The location of windcommerce becomes a genuine “not in my backyard” (NIMBY) proposition of unparalleled magnitude.
Visually cluttering the landscape for 30 miles in every direction today's wind projects sprawl over vast areas, areas requiring several square miles for each development with each separate unit producing relatively minor quantities of electricity. Because windpower requires extremely large and numerous areas to become a productive energy contributor, it implies that large areas now sublime in nature will be converted into eyesores and environmentally threatened. With modern larger higher units this is a substantial, growing, and likely technologically insurmountable problem. Modern windturbines have 250΄ – 500΄ diameter blades reaching heights of 1,000΄ —reaching clouds a quarter mile high!
The consumption of land and visual pollution requires elaboration. The land area required by a windcommerce project is composed of the actual land area under a windturbine and the distance between the windturbines. Each windturbine requires about the same “bedrock” area as a suburban residential house lot, probably 1/2 acre. However, each windturbine requires 30, 40, 50 or more acres because of their blade size and wind currents.
If wind complexes were to become the primary source of additional electricity in Minnesota the land requirements would be almost beyond comprehension.
Two projects will demonstrate the cost and land requirements of windcommerce. In Chicago, Illinois Wind Energy will construct a $50 million wind development near Princeton, Illinois to produce 30 to 50 MW on about 1,500 acres, about 50 acres per windturbine. Navitas Energy (of Minneapolis) will build a $55 million, 50 MW wind farm on 5,000 acres, about 100 acres per windturbine, near Mendota, Illinois.24 The Minnesota experience is that each 0.75 MW turbine requires not less than 30 acres and the 2 MW windturbine requires 40 to 50 acres of land. If windcommerce were the selected alternative energy choice for meeting Minnesota's growing electricity demands, therefore 1,620 windturbines would be needed in the current year, with increasing numbers of facilities constructed in each succeeding year. The full-scale wind development option will require 81,000 acres of land in the first year (126 square miles), 81,750 the next year (128 square miles), and 82,500 in the third year (129 square miles) and so on each succeeding year. [1,620 x 50 = 81,000]
In sharp contrast, a modern baseline generating plant could produce considerably more electricity at less cost and utilize a small fraction of the land area, only a single square mile.
Projects using smaller windturbines produce less electricity at lower costs but trade-off increased acreage for only slightly less visual pollution. The larger windturbines reach much higher heights creating higher levels of visual pollution but impact fewer total acres of land. Because of costs, technology, and very likely the enormous visual pollution, thus far, Minnesota has selected smaller units in the 1 MW range. Although still reaching great heights, the 1.0 MW or 1.5 MW turbines require approximately 30 and 40 acres respectively, but are somewhat lower than larger capacity units with less visual impacts. As indicated, to use lower MW windturbines requires larger land areas devoted to windcommerce. Assuming 30 acres per unit, the use of 1.0 MW windturbines will require the construction of 3,240 windturbines and 97,200 acres of land (152 square miles) rather than 81,000 acres, an increase of more than 16,000 acres in only the first year. It is probable that the capital, transmission, and operating requirements will also follow the land needs.
If 1.0 MW windturbines are the development choice it implies that before an individual born today retires, every section of land in western Minnesota will have several windturbines placed on it. Even with 2.0 MW windturbines the entire region will become a “forest” of windturbines. Emphasizing the impending population – land – windcommerce imbalance is that years before numbers in Minnesota populations projections are reached, every section of Minnesota land will contain several, at least 18 windturbines. Even a program of using windcommerce to provide one-third of the growth in electricity demands, the land requirements are difficult to grasp. Exacerbated by using small, but even using large windturbines, windcommerce development force an unwinable contest between farmland, natural areas and windpower —with wide-ranging sprawl, wildlife habitat and environmental considerations reduced to memories or scenes in history texts.
The question which should be asked is, “will state owned land currently held for environmental reasons be converted into energy producing areas?” The state of Minnesota is known throughout the nation for its natural beauty. It’s the theme promoted by the Minnesota Office of Tourism and any number of resorts! Tourists and other’s passing through Minnesota will be met with a forest of massive towers rather than the pristine beauty of the Minnesota countryside. The question of the affects on visitors traveling through Minnesota needs discussing. Visitors and traveling state residents will be greeted with miles of visual pollution in an otherwise serenely beautiful region. When the initial curiosity is satisfied the compelling negatives will take center-stage: the public will become aware of the negative energy implications that windturbines are icons signifying business intrigue and energy waste. “Green Minnesota” could be seen as “Brown Minnesota”.
The commercialization of windpower siting is a classic question pitting of those who may benefit against those who do not. Do individual farmers benefit? However, whether large or smaller turbines are constructed the financial and environmental burdens will be borne collectively by society and the environment. For example, the value of property affected by a windcommerce development but not directly involved in the farm annuity payments could be harmed. Surely, the reason for residing in a pristine environmental area would be questioned.
Area residents who are not farmers enjoy living in farm communities and near natural areas for the community values and life style it offers. Constructing windturbines detracts from that life style and therefore reduces the value of the residential area for those holding those values. Windcommerce will tend to encourage moving in of people with somewhat different social and environmental values. It would be ironic that one unintended effect of windcommerce would be the unmaking of the community values and life styles now at the forefront of living in rural communities. Reducing demand for property has the effect of reducing the selling price of existing dwellings. In other words, increases in value of farmer property come at expense of local resident non-farmers.
Because visual pollution affects those surrounding the wind development for many miles it is reasonable and appropriate to compensate all residents in the surrounding area, not only a few local farmers. In brief, selected farmers are being enriched while diminishing the living standard not only of other local residents but also of everyone in Minnesota.
One question that deserves an answer is, “do others have rights to determine the extent of visual pollution or are the majority of citizens uninterested in the outcome?” Because it is the local community and rural farms that are said to benefit, it is reasonable to propose wind developments in the local and nearby communities and permit the local residents to vote by ballot box on the development and its numerous related issues. Because of the long-term nature and potential divisiveness of the issue appropriate legislation should be considered ensuring that approval is in the form of consensus, a sizeable majority of local residents affirming support of local windcommerce developments. Equity requires connecting the direct receivers of the energy benefit to the economics and environmental consequences. This has been seldom the case —redirected costs and substantial subsidies have taken precedence over linking benefit with costs.
Because of the volume of government and industry marketing promotions, opposition has been slow to develop or receive media or policymaker attention. A more inclusive and economically and environmentally wise understanding is gaining acceptance. See the references for further information.
An Hyannis, Massachusetts organization succinctly states an opponents point of view.
more wind power stations are placed in environmentally or culturally sensitive
areas, people around the world are challenging developers who cloak themselves
in the green armor of environmentalism while pocketing huge profits and ruining
A picture is worth more than a 1,000 words. The photographs promoting windsites are cleverly prepared not to illustrate the environmental aspects of the development. It is reasonable to conclude that promoters are fully aware of the consequences to farm and natural areas: staggering dimensions of the turbines, massive land requirements, and unsightly road grid required. The following photographs illustrate many of the land and environmental issues mentioned in the text.
Access road. Lake Benton, Minnesota area. Note the width of access and border. Multiply by size of project.
Stormlake, Iowa development. Note extent of access roads and grid. Also note concrete base.
Tennessee. TVA windproject. Driveway road grid, hilltop location. Trees clearcut and landscape reconfigured.
Koudia, Morocco. Landscape consequences in natural area.
Pennsylvania construction. The size of the roads required parallels the size of the windturbine and development. Large dollar amounts are for road building. Compare visually as natural area.
Altamont, California. Built in the 1980's early 1990's. Large wind development ―picture taken several years after closing due to poor economics. Demolitions, or in this case accumulating site costs, are often not included in studies.
England. Collapsed tower.
Loss of blade. Smaller turbine –available in Minnesota.
A Hobson's Choice, subsidies make free choice a mask covering all choices but that pre-selected.
A subsidy is an expense borne by someone else. Windpower is prospering because it is heavily subsidized. Although no comprehensive government or industry economic study has yet to thoroughly describe the rate and taxpayer effects of policies and practices encouraging windcommerce, it is safe to report that the effect of subsidies is to promptly return to owners and investors the entire amount of their invested capital and more than half of the annual operating costs. Government is providing the windpower industry substantial taxpayer funding for utility company and private industry obligations and benefits. In great measure, the financial responsibilities of owners and risks of windcommerce are borne by other energy users and taxpayers.
The industry is quick to point out that consumer cost per kWh has been declining since 1987. Generally true, however, the broad spectrum of subsidies is seldom, if ever mentioned.
At the present time, 36 states, including Minnesota and the federal government subsidize windcommerce development as “renewable” energy systems. Current promotions of windcommerce are a reminder of early government and industry promotions for nuclear power, “will cheaply be able to dig shipping channels and roads through mountains” was one favorite statement. Similar to the effusive statements regarding nuclear power, windcommerce advocates overstate the assumed benefits and underplay or neglect the true costs.26
Evaluation of the economics of windpower is often difficult because cost data is rarely ―if ever, included in reviews or project plans intended for public information. Thus, publicly available reports do not provide an adequate economic evaluation of windpower nor can analysis be performed from the limited data. For example, neither the state nor industry sponsors for the Lake Benton – Buffalo Ridge complex provided complete economic or pricing information central to a discussion of its merits.
order to be economically successful either the same quantity of kWh generated
from smaller windturbines or decreases in required minimum effective wind speeds
must occur. Progress has been slow or absent in this regard.
An irony of windpower is that because a backup power system is needed, the same baseline generators, probably coal, will be constructed in addition to the wind development. Modern coal and coal-gasification plants have experienced substantial increases in generating efficiencies and as a consequence operate at lower costs, use considerably less coal to produce the same kWh and with well controlled environmental impact.
Windcommerce subsidies range from indirect and subtle to obvious. Subsidies are at the federal and state levels and often work through the income, property, and sales tax systems and ratepayer tariffs.
Glenn Schleede, President, Energy Market & Policy Analysis, in an economic analysis of windpower in West Virginia compiled a detailed schedule documenting the many federal and state subsidies. The study documented that a 2003 project in Grant County, West Virginia with $300 million in capital and related investment would return more than $325 million over ten years. Of the total invested, 69% is returned within five years. In addition is the $236 million in revenues from the 3¢ per kWh revenue mandated by legislation. The West Virginia windcommerce development parallels those in the Buffalo Ridge area and proposed developments of current Minnesota legislation.27
The language of federal or state bills describe windpower, ethanol, biodiesel, and other forms of alternative energies as being renewable energies and sustainable. It is one matter to use language to describe events, it is quite another to use science and economics to justify the language. In order for alternative energy to be “renewable” its net energy output must at least equal today's baseline energies. Language aside, an energy source that cannot use the net energy it produces to reproduce itself –build and operate, is neither renewable nor sustainable. The heavy subsidies suggest the magnitude of the non-renewable aspects of windcommerce. This applies equally to ethanol and biodiesel production and the manufacture of hydrogen as sources of fuel. Subsidies reflect the energy problematic nature of these alternative energies. In brief, windpower development exacerbates the energy dilemmas it is said to remedy.
The federal government provides a tax credit for wind power developments. Investor-owned utilities and municipal utilities use the “Production Tax Credit” (PTC) and electric cooperatives use the “Renewable Energy Production Incentive”. This credit effectively subsidizes approximately 1.8¢ per kWh. Clearly, this tax credit is a tremendous subsidy, reducing a consumer's windpower bill more than 20%.
The current PTC legislation was due for renewal at December 31, 2001. Being the leading company involved in the development of the Buffalo Ridge, Enron Wind Company is actively promoting the continuation of the tax credit. Urging industry members and interested parties to contact Congress in a suggested letter for activists the company said the “PTC assists wind power by leveling the playing field when it comes to government assistance for energy generation.” Although the statement is partially accurate the suggested magnitude of assistance to other energy industries is overstated. Admitting to the deficient economics of windcommerce, the company said that the industry requires the PTC to compete with baseline generators while researching technologies to make the future industry competitive.28
Federal and state subsidies are involved in taxation of income. Accelerated depreciation allowances effectively permit utilities to “up-front” tax benefits. Capital investments in windcommerce are permitted to use five-year “double-declining balance” accelerated depreciation. The West Virginia study demonstrates that a utility will have 52% of its investment returned within 18 to 24 months with the remaining balance returned in the following 36 to 48 months. In brief, within five-years, a utility will have all of its windcommerce investment returned; the balance of the operating life is without investment risk while including a steady windfall of income.
Because regulatory books are often on a different basis —a double set of books, the benefits of rapid depreciation may not flow through to ratepayers, the difference in accounting and costs flowing through to owners and investors. The investment returns are calculated using one set of books while the rate and taxpayers see a second set.
The Minneapolis based Star Tribune newspaper contained a lengthy article regarding a quirky aspect of the property tax – accelerated depreciation rules. The accelerated depreciation allowance lowers the assessments for property tax purposes, thus local communities holding the promise of tax windfall money are sorely disappointed. Lincoln County with its Lake Benton complex placed a 60-day moratorium on new construction when taxes could not pay the increase in local community costs due to the projects. The proposed solution was to reduce the emphasis on the property tax and replace it with a production tax. A common windcommerce refrain, the intention is to balance local community and user costs by shifting those costs to distant ratepayers. A production tax would be more reliable —and easily adjusted upward, but would be borne generally by non-owners and non-local users.29
Operating and construction subsidies are promoted by the U.S. Department of Energy (DOE)/Electric Power Research Institute (EPRI) Turbine Verification Program. The DOE/EPRI provides funding to facilitate the development and construction by utility companies. Under this arrangement the utility will own and operate the windturbines —a form of investor ownership at public expense. It is clear that an important aspect of the program is to eliminate investment risk. Market risk assessment is directly linked to associated costs and uncertainty of investment return for a windcommerce project. Risky ventures such as windpower imply significant investor discounts reducing potential investment and increasing cost of capital and cost of windpower. In using a government and taxpayer funded program, risk is being assumed by taxpayers rather than owners and investors. Due to government protection the industry’s capital costs are significantly reduced and consumer prices minimized. In brief, government policies are encouraging electricity consumption by arbitrarily establishing below market electricity rates. Nevertheless, the investor will earn a return on funds provided by the public.
If the local utility is a cooperative form of utility that builds the windcomplex, subsidies are notably egregious. The users are the owners. Therefore, with the exception of costs shifted to distant users, all offsetting subsidies flow directly through the cooperative to the users making their cost of electricity a relative bargain with the liabilities paid by non co-op users’ ―other rate and taxpayers.
overview the federal government position see the legislation introduced on
December 5, 2001 by Representative Barton (R-TX), Chairman of the House Energy
and Air Quality Subcommittee. The legislation is titled the
“Clean Energy provisions of
Title IX – Energy, regarding renewables energy incentives.”30
According to a Wisconsin windpower dealer, “Minnesota is the best state in the country for public benefits!”31
The catalogue of state subsidies is a thick one. Similar to the federal inducements, these incentives take many forms including exemptions from personal, corporate, sales, and property taxes, rebates, grants, and below market interest rate loans. Minnesota for example, exempts windcommerce from property taxes and the 6.5% state sales tax.
On February 12, 2001, led by its Chair, Rep. Ken Wolf, the Minnesota House Regulated Industries Committee introduced HF–492 and HF–710 intended to promote renewable energies. HF–492 establishes a state-wide energy plan, exempts existing plants that convert to “cleaner fuels” and “no fuel use”, from the property tax, and capped emissions levels. The capping of emissions appears more as public relations than environmental program —the “renewable energies” have low direct emissions but significantly greater indirect levels of air pollution than conventional baseline energy. The bill also requires utilities to share conservation goals with consumers. One interpretation of this legislation is that the “sharing” actually involves spreading the high development and operating costs of “renewable” developments across non-owners and non-users. The companion legislation HF–710, sponsored by the Minnesota Chamber of Commerce, offers consumers a “choice” of selecting the source of energy. The “choice” notion includes streamlining regulatory requirements regarding energy transmission. This is conceptually a prudent change, however it implies that all production, transmission (with line losses), and distribution costs are fully included in ratepayer tariffs. Although the Chamber's bill has merit, the probability that all costs are included —as this paper discusses, is improbable.
HF–492 contains one additional subsidy: $500,000 per year for “modern energy technologies” funded from the Renewable Development Fund at Xcel Energy. The discussion of this “fund” under the nuclear power section should be considered at this point as well. In Minnesota, subsidies began in earnest in 1994 when the legislature paired the increased storage of nuclear wastes canisters at the Prairie Island Nuclear Plant with the construction 425 MW of windpower by NSP (Xcel Energy) wind energy, subsequently increased it in January 1999 by 400 MW, and yet another 400 MW by 2012. All related costs are passed on to rate and state taxpayers. The purpose of this “new” source of money is to site energy developments, “energy parks”, “closer to the need”. The implication is that smaller, i.e., “renewable” and natural gas generating facilities are encouraged and that the public and regulatory roles in siting new facilities are diminished.
Under HF–3519 and SF–2675 (CH–312) the state obligates its agencies to use “cleaner fuel” if it’s available at “similar costs” to typical fuels. The requirement includes the purchase of biodiesel, ethanol, hydrogen, and natural gas fuelled vehicles. The nebulous “similar costs” statement and that the state itself is the policing agent implies a wide price latitude will prevail. Mandating entire fleets of vehicles to use particular fuels is a generous boost to an otherwise untenable energy source. In introducing HF–2574 Rep. Dan McElroy, stated that biodiesel “is a fuel of great promise”. As the discussion of biodiesel demonstrated, the “promise” of biodiesel requires substantial state assistance to be realized. The legislation expands the definition of renewables under certain tax and consumer rebate programs to include biodiesel and qualifies biodiesel generation facilities to be eligible for the 1.5¢ per kWh tax credit subsidy. The bottom line is that taxpayers and consumers will pay higher taxes and rate charges, while increasing unreliability of electricity and reducing the quantity of available energy overtime.
Minnesota's House legislation HF–1323 (Rep. Loren G. Jennings) and HF–659 (Rep. Ken Wolf) are the principal energy bills. Rep. Wolf's bill is called the “Minnesota Energy Security and Reliability Act” and contains the financial and policy portions of Minnesota energy legislation. It establishes the “Minnesota Energy Reliability Trust Fund” to provide incentives for the construction of generating plants using “renewable” energy. Setting a novel precedent, the bill provides for establishing “Energy Parks”. Not only are construction subsidies a significant item, but the siting of plants now structured in the public domain, is becoming a more streamlined affair. The legislation adds a consumer surcharge of $0.00017 to every kWh sold and $0.003 per Mcf of natural gas sold. The fund limit is $50 million and uses construction tax credits to flow the subsidy through to the utility ―a generous investor/owner windfall. One imagines that as the fund limit is approached, there will be increasing political pressures applied to fund an additional undertaking: free investment capital with income guarantees is not easy to obtain. One wonders if the accelerated depreciation provisions are also applied to construction financed from this Trust Fund? The legislation also includes provisions for construction using tax-increment financing and exemptions from personal property taxes. The substance of this legislation is to quietly shift the costs of windcommerce or other alternative energies from the owner, investor or utility, and local consumer “benefiting” from the development to non-owners and non-local consumers, even out-of-state.
Evidently, the industry is working through the Governors Convention’s members to draft similar legislation throughout the country. Resembling the Minnesota legislation, the 1993 – 1995 Texas legislative session passed a bill providing $2 billion for renewable energy over the next ten years, most of it for windpower development.
Similar to legislation proposed in Minnesota, as an outcome of their “Energy Smart” program the New York governor on June 11, 2001 issued an Executive Order requiring the state to purchase 10% of their electricity from renewable sources by 2005 and 20% by 2010. This amounts to an effective tax credit of almost 2.5¢ per kWh (and includes an automatic inflation adjustment). When added to the federal credit, windpower is on a half-price sale! To facilitate the transition, New York paid $5 million of a $34 million 30 MW windpower project. In combination with the generous depreciation allowance, this is a philanthropic gesture to the owner and investor. Minnesota has similar legislation.32
A widely used subsidy is to use “net energy” pricing where electricity in excess of current use or storage is “sold back” to the local area utility company. On the surface it appears a reasonable and common sense approach. Using “net energy” pricing to reduce windpower users' electric bills by the amount generated may appear as an excellent practice. However, unless the price paid by the utility is not less than the current cost of generation, it will be an uneconomical purchase. The excess cost increase is passed onto other ratepayers —a potentially immense subsidy and misallocation of consumer cost.
Moreover, unless correctly applied, it inappropriately shifts a significant proportion of the fixed and capital costs of electricity to other customers. There are substantial fixed costs of serving each customer, the administration, generators, and transmission and distribution lines which are independent of the variable costs, fuel for example. It is the variable costs that are reflected in net energy pricing.
high and fixed expenses are appropriately the obligation of each customer served
regardless of the quantity of electricity consumed. If these costs are not
borne by a customer because of windpower credits or subsidies, the remaining
customer base is unduly charged the cost of serving another customer.
Although of modest impact at this time, further windpower development increases the potential for shifting greater windpower costs to decreasing numbers of baseline utility users. With planned windcommerce increases and associated subsidies, the current fixed capital, operating, maintenance, building, personnel, and administrative costs will undergo a process having fewer consumers carry their expense burden. The reduction (or revisions in calculated costs) in specific ratepayer classes implies that substantial rate increases will be shifted from owners and windpower users to the economically immobile and non-windcommerce users. There can be no doubt that large industrial users —as they already have accomplished using small natural gas generators, will opt out of the increasingly expensive baseline system and seek to generate their own electricity. In other words, because of windcommerce the least affected consumer will increasingly be required to fund the baseline system ―the system windcommerce is dependent.
It should be clear that in misallocating energy costs government policies are inadvertently promoting social and economic class distinctions. These policies are a mythical golem that will turn on its creators —and the innocent public. It should also be apparent that the process is circular. Under current practices, increases in windcommerce increase the consumer costs of baseline energies and make comparisons more favorable. Were the costs properly allocated the tenuous economics of windcommerce would become self-evident with each additional installation.
Windcommerce requires changing local property tax and zoning regulations from farm to business status. If this is not done incorrect property tax assessments or exemptions must be considered another substantial subsidy. Further examination reveals that the property tax exemption is a substantially greater subsidy than readily apparent.
The $2,000 to $5,000 annual installment to the landowner per windturbine, often a farmer, is said to benefit local rural economies. A large area such as Buffalo Ridge may receive $1 to $3 million or more per year in revenues. More apparent good news, the source of the investment is not necessarily from Minnesota but from the firm that constructed the wind complex located in Chicago or New York or overseas for many Minnesota installations. Still more apparent good economic news, this implies that there are no offsetting Minnesota impacts. On the other hand, if a local or state “production tax” applied to kWh sales were implemented, the tax would offset possible benefits of the annual wind annuity payment.
Income flows derived from the land determines land values. The annual $1 to $3 million in windcommerce payments to farmers and landowners are contractual annuities guaranteed for 20 years. These annual payments have substantial value today. The annuity makes the land the windmill sits extremely valuable, at least 25 times its agricultural value. The high value explains why it is exempted from additional taxation. At a minimum the land value is the present value of the annual income stream. Assuming a 10% investment return, a $2,000 annual payment implies a current value of about $17,000, a $3,000 annuity, $26,000, $4,000, $34,000, and a $5,000 annual payment is worth about $43,000 today. Making the payments appear even more generous is that the actual land utilized by a windturbine is less than an acre, ¼ or ½ acre is common with one-acre for larger units or other facilities.
A resourceful entrepreneur would purchase the rights to the annuity and in return give the owner, farmer or landowner a satisfying upfront cash payment. The entrepreneur would pay the farmer an appropriately discounted sum based on current interest rates and expectations of future payments. The probability is that an entire investment niche could develop —with intelligent farmers reaping the financial benefits and shifting all associated risks to the buyer of the rights. Wind Commerce Investment Trusts (WCIT's or “winchet's”) for large complex financial transactions or Wind Power Investment Trusts (WPIT's or “winpits”) for smaller undertakings could be sold and bought by institutions, mutual funds, individuals, and speculators on stock and commodity exchanges. The instruments would behave in financial markets much like a bond. An alternative would be for a fixed unit cost with the annuity varying based on sales. The market-wise approach would be for investors to compete at “auction” for the WCIT's or WPIT's.
Relative to cropland income the windcommerce annuity payment may seem large; however, the economics of windcommerce dictate modest compensation levels if the economic viability of windpower is to be successful.
Zoning agricultural land with a substantial non-agriculture business of energy value is a considerable subsidy to the farmer or owner. The number of windturbines on the farmer’s property multiplies the subsidy. Assuming a 350-acre farm, a ¼ section grid, 40 acres at each point, indicates possible 15 windturbine installations with 30 acres remaining for the homestead. Assuming an annual payment of $2,500 with a current value of about $21,000 each (at 10% return), the 15 windmills will produce $562,500 in income over 20 years and that sum discounted to present value instantly adds $315,000 to the value of the farm today. The $315,000 increase in farm value is currently shielded from income and exempt from property taxes.
A similar amount can be determined for every individual windturbine installation in every state. The sum of the increase in land values now overlooked by legislation is an energy subsidy of unparalleled proportions. In addition, unlike any other small business entrepreneur, the subsidy does not apply to but a few individuals made fortunate by legislation. To reduce the local community tax load on non-commercial or subsidized developments and to compensate for the revenue loss to local communities also implies that other local commercial enterprises will see their tax burdens increase if existing services are to be maintained or to provide for the growth in government services.
The subsidy is more than in property taxes. Because the land business of windcommerce is now classified as farmland the installation will receive favorable inheritance tax treatments accorded farmers and when the farmland is sold its value basis stepped-up to the data of death and then treated as a capital asset receiving most favorable low capital gains taxation. The general public with similar circumstances is compelled to pay at least twice and possibly over three times more in taxes as these fortunate farmers and other windpower owners.
For the rural community government legislation makes it a genuine Hobson's Choice, there is really no alternative. Farmers, local property owners, and the public (or state environmental lands) have no genuine choice in the matter. A proposed wind complex development compels farmers to compete against neighbor farmers or farmers in nearby towns and other landowners for the windfall cash payment and annuity dollars. If one farmer disagrees with an installation, a neighbor may not. Landowners may otherwise choose not to participate because of what they perceive as inadequate compensation levels or for ecological or other reasons. The farmer or landowner may feel that by applying rental payments to the single half-acre on which the windturbine physically stands is insufficient when each windturbine directly involves more than 40 acres of farmland and the farmstead can literally lie in its shadow —and visually pollutes for miles.
Whatever the reason for disapproval, the income flows to the other farmer or landowner while the negatives directly impact adjacent farmers and are widely dispersed throughout the larger community. Because individual compensation speaks a powerful language and the negatives apply to a large diffuse common area, realistically there can be no escape.
Although rental and lease payments are intended to overcome local resistance it is the state's “eminent domain” or land confiscation legislation that provides the last and final added impetus to the development of windcommerce. If the state feels the area has windcommerce potential, farmers, other citizens, and whole communities who wish to opt out of any windpower or transmission program can be compelled to participate.
Minnesota Law is explicit:
M.S. 222.36 RIGHT OF EMINENT DOMAIN IN CERTAIN CASES.
public service corporation shall have the right to obtain by condemnation, under
the right of eminent domain, any land, or any right over, through, or across the
same, or any easement therein, necessary for the convenient prosecution of its
enterprise; and … may in the same manner acquire the right to construct its
lines over, along, and upon the right-of-way … .
M.S. 300.04 STATE AND LOCAL CONTROL OF EMINENT DOMAIN.
The state may supervise and regulate the business … and … may fix the compensation which it may charge for its services. … The corporation may acquire by right of eminent domain the private property necessary or convenient for the transaction of the public business for which it was formed.
The annuity payments to local farmers and landowners may be considered an attempt to remedy or balance the local economic consequences of negative out-of-local and out-of-state money flows. The several levels of subsidies suggests the extent of the negative economics of windcommerce to a state and region. It is through the application of subsidies that one sees statements describing the economics of windcommerce that they return their energy investment within one to three years of operation and subsequently are an seemingly endless windfall of energy riches. And, like the wished for perpetual motion notion, does it all in an environmental benign and friendly manner.
It is clear why legislatures and Congress with important farm influences promote windcommerce. The use of significant payments, tax credits, and other subsidies are an enormous form of welfare to the agriculture industry and to individual farms in particular. The bottom line of windcommerce subsidies is that state legislatures and Congress have essentially eliminated owner and investor risks associated with alternative energy processes and developments while severely harming the environment and adding ratcheting increases in resource consumption and consumer prices. In so far as owners and manufactures are out of state (or nation), the dollars flow to those areas as well. In addition, government policies are virtually guaranteeing these groups a rate of return on taxpayer and ratepayer generated funds and shifted much of the increased costs to unsuspecting and distant ratepayers.
The beautiful island state of Hawaii with its volcanic hills and limited energy has only minor windpower developments because of its economics and environmental consequences.
The development of windcommerce is expensive and produces an unreliable and energy intensive system. If coal-generating plants were built with modern technology and pollution controls, pollution would not be an issue and the price of electricity delivered to the buyer would be substantially less than of windpower. The paradox of windpower is that it requires a duplicate parallel energy system, traditional baseline energies to be developed and maintained.
is not a renewable energy source, increases resource depletion, and does not
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See at <
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