Wind power incentives: What works?
A recent report from the agency that monitors New York’s electric grid says the state can quintuple the amount of wind power pulsing through the system by 2018. But wind developers say the chances of hitting that mark are slim. Should the government offer more incentives to meet its renewable energy goals?
If you want to build a wind farm in New York state, a good place to start is with Robert Burgdorf.
“Developing a wind project is not for the faint of heart to begin with,” says Burgdorf. “But New York is particularly difficult.”
Burgdorf is lawyer at Nixon Peabody, a law firm that has worked on several-dozen large scale wind projects, mostly in the Northeast.
Burgdorf’s biggest challenge is navigating the dozen or so federal, state and local agencies that his clients have to go through to get their turbines spinning.
But after regulatory hurdles, the marketplace comes in a close second.
Federal and state incentives for alternative energy do exist. New York has a goal of getting 30 percent of its electricity from renewable sources by 2015. The state is currently at 22 percent, but only 1 percent is from wind. (Hydropower accounts for 19 percent of New York’s renewable energy portfolio.)
Last spring, the New York State Energy Research and Development Authority (NYSERDA) handed out $200 million in state funding, some of which went to large-scale wind farms.
But wind companies eyeing development in New York say the pot’s not sweet enough. Developers want assurances that they can make money once the wind farms are built.
Otherwise, lawyer Burgdorf says, the state’s lofty renewable energy goals may remain out of reach.
“What the developer is looking for is price certainty,” Burgdorf says. “And in Canada, for instance, they have this feed-in tariff where the developer knows they will get X dollars per megawatt hour for a certain period of time. From that they can model the finances, they can know whether the project is going to be successful and they know they can get financing.”
The set price the province pays wind developers is more than two times the wholesale rate for electricity, and the wind farms get a 20 year contract with the government.
Jim MacDougall, manager of the feed-in tariff program at the Ontario Power Authority, says the program is meeting the province’s policy objectives.
“We’re getting the economic stimulus and the job creation that the government tried to put in place as a result of introducing a feed-in tariff in the province,” says MacDougall.
Experts say feed-in tariffs are good at stirring up interest and getting projects moving. In Ontario, wind developers flooded the power authority with applications, in the end offering three times more wind wattage than what the province could handle.
But feed-in tariffs don’t come without cost. Sandip Sen is the head of Citigroup’s Global Alternative Energy Group.
“You’ll either pay for it in the form of higher taxes because the government will need to at some point pay back its debt,” says Sen. “Or you’ll pay for it in the form of higher power prices.”
Sen says the Northeast is one of the toughest markets for wind power. For now, he says, developers on this side of the border do need the help.
Two of the biggest challenges in New York are geography and permitting, according to Sen. But economic factors are also working against wind development.
According to Sen, the down economy means that the price of power is low, making wind projects relatively more expensive.
“The revenue line item for a wind project or renewable energy project at this point is facing headwinds,” says Sen.
According to Sen, it’s federal policies that are driving alternative energy development these days. A key grant program that pays up to 30 percent of the cost of a wind project is set to expire at the end of the year.
The future of that program is uncertain.
Want to comment on this post? Visit our Facebook page.