Wind Power DevelopmentIn South Dakota

Environmental Law & Policy CenterProtecting the Midwest’s Environment and Natural Heritage

Good for Jobs, Good for the Economy and Good for the Environment

Wind Power DevelopmentGood for Jobs, Good for the Economy and Good for the Environment

Principal Authors:

Stephanie Chase, Policy AssociateCharles Kubert, Senior Environmental Business Specialist

Contributors:

Howard Learner, Executive DirectorJill Geiger, Director of CommunicationsAndy Olsen, Senior Policy AdovateKelsey Snell, Legal Assistant

Environmental Law & Policy Center

Protecting the Midwest’s Environment and Natural Heritage

www.elpc.org

Introduction

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W!"# $"$%&' !( )*$ U"!)$# S)+)$(’ ,+()$() &%-.!"& (-/%0$ -, $1$0)%!0!)' &$"$%+)!-". !e country’s installed base of wind energy has grown from 2,000 megawatts (MW) to 16,000 megawatts

over the past 8 years. In 2007 alone, 5,000 MW of wind energy was installed in the United States.

South Dakota is poised over the next few years to become a national leader in wind power generation. !e available wind resources are among the best in the country, and public o"cials have expressed strong interest in promoting wind energy as a way to boost the state’s economy, aid landowners and produce clean energy. Yet, to date, very little of this opportunity has been realized. As of January 2008, there are about 4,000 MW of wind power under development in South Dakota. However, only 188 MW of wind energy has actually been installed. By contrast, Minnesota and Iowa each already have more than 1,200 MW of installed wind capacity.

!e 4,000 MW of wind power under development in South Dakota potentially represent $8 billion of investment. Sound and smart public policies can help transform this potential into reality.

!is paper showcases the enormous wind power potential for South Dakota to be a renewable energy powerhouse. It then identi#es some important policy drivers that can help South Dakotans fully and e$ectively tap this tremendous resource.

Total Wind Capacity Installed and in Development (MW), 2008

Source: Black & Veatch Analysis of Global Energy Decisions Energy Velocity Database

South Dakota Wind: A New Energy Harvest

!e wind resources in the Northern Great Plains’ states are among the most reliable and productive in the country. South Dakota ranks 4th in the nation for its wind energy potential based on the combination of both high average wind speeds and suitable sites.

While the state has only 188 MW of wind power

installed, wind energy developers have been active in exploring the state and identifying potential projects. An additional 250 MW is currently under construction and about 4,000 MW of projects are at varying stages of development. Economic Bene!ts of

Wind Energy Development

!is wind power development can bring an enormous economic boost to South Dakota businesses, landowners and communities.

Job Creation For example, a single 250 MW project in South Dakota would create about 500 direct construction job-years and an additional 500 indirect and induced job-years. Indirect and induced job-years represent those in service and retail industries supporting the project and construction workers, everything from co$ee shops and motels to ready-mix companies.

Wind Power Development: Good Jobs, Good for the Economy and Good for the Environment

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Economic Impact of Hypothetical 250 MW Project in South Dakota

During Construction

Jobs Earnings ($ Millions)

Economic Output($ Millions)

Direct 508 18.7 57.1Total 1004 31.7 97.7Source: National Renewable Energy Laboratory JEDI Model,Note: Assumes No Local Manufacturing Content

Economic Impact of Hypothetical 250 MW Project in South DakotaDuring Each Year of Operation

Jobs Earnings ($ Millions)

Economic Output($ Millions)

Direct 67 2.6 5.4Total 122 4.1 10.1Source: National Renewable Energy Laboratory JEDI Model,Note: Assumes No Local Manufacturing Content

During its operating years, a 250 MW project will employ as many as 23 wind technicians maintaining the turbines, 44 jobs with suppliers and an additional 55 indirect and induced jobs.

Landowner Revenues Lease payments to landowners are an important bene#t of wind energy development. While the terms of these payments are con#dential, landowners can expect at least $4,000 per installed megawatt per year for granting permission to place turbines on their land. Some developers may even share in the revenues from the project. Landowners can earn these lease payments without signi#cantly impacting their existing farming and ranching operations. In e$ect, wind energy becomes a new and highly predictable “cash crop” for farmers and ranchers.

Tax Revenues For many rural counties and communities, wind farms can be the single largest capital investment and property taxpayer. South Dakota recently enacted HB1320, which creates a uniform taxing system for utility-scale wind projects. HB1320 assesses a $3,000 per MW #xed rate plus 2% of gross revenue tax on wind generation equipment. For each 100 MW of wind power, this would represent an annual tax payment of $300,000 + an estimated $300,000 tax on power sales revenue for a total of $600,000 per year. All of the #xed capacity tax and 20% of the variable production tax would go to the county in which the project is located with the remainder going to the state. Multiply that by dozens of similar projects across the state, and wind energy development can easily become a key source of support for rural schools, other community services, and property tax relief.

Industrial Development As the wind energy industry in the United States

matures, the domestic manufacturing of turbines, blades and their components is also growing. Wind power

components, such as towers and turbine blades, are very large and di"cult to transport over long distances. !at reality provides a strong incentive to manufacture and assemble wind power equipment components near the sites where they will be installed. In short, states acting early with policies supporting wind power, and where development is occuring, have a leg up in attracting related manufacturing jobs. For example, several major wind component manufacturers have opened plants in Iowa (Siemens, Clipper, Acciona), Minnesota (Suzlon) and North Dakota (LM Glas#ber). In South Dakota, Molded Fiber Glass, a major wind turbine blade manufacturer, is building a 300,000 square foot facility in Aberdeen that will employ up to 750 people when it opens later in 2008.

Other South Dakota wind energy business success stories include:

Energy Maintenance Systems which employs 180 wind technicians who refurbish and maintain wind turbines both in the #eld and at its base in Howard.

Knight & Carver which also has a growing plant in Howard that manufactures wind turbine blades. Bene!ts to Tribes

!e Rosebud Sioux have a small existing wind farm and are pursuing a larger development. Other tribes are also exploring the bene#ts that wind could bring to their lands and communities. Currently, the Western Area Power Administration is studying the feasibility of integrating tribal wind and hydropower along the Missouri River.

Wind Power Development: Good Jobs, Good for the Economy and Good for the Environment

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Environmental Bene!ts of Wind Energy

No global warming and other harmful pollution. !ere are no emissions of carbon dioxide or mercury, sulfur dioxide, nitrogen oxides or radioactive wastes.

No water use. Unlike coal plants, wind energy requires no water for steam generation or cooling. !is is important in water-scarce South Dakota.

Minimal wildlife impacts. With careful siting, modern wind turbines have minimal impacts on birds and other wildlife populations.

Consumer Bene!ts of Wind Energy

!e cost of wind power has declined dramatically over the past twenty years. At the same time, the cost of building new coal plants has continued to rise. Moreover, wind power has no fuel costs, and provides a long-term #xed-cost source of power. In addition, wind power is not subject to the uncertainty of future carbon taxes, which thereby makes it even more cost-competitive.

Public Policy Options to Spur Wind Power Development in South Dakota

Strong wind speeds are fundamental to wind energy development. But, equally important are forward-looking public policies that encourage both large projects and more smaller, locally-owned wind projects.

1. Renewable Energy Standard. Twenty-#ve states have now adopted state Renewable Energy Standards (RES), which require utilities to obtain a growing portion of their electricity supply from renewable energy sources. Illinos and Minnesota have the strongest in the country, requiring 25% of the electricity supplied by utilites to come from renewable energy by 2025.

An RES is a key driver for wind development because it creates a predictable demand and a timeline for developers to follow.

2. Transmission. Because the available wind energy in South Dakota is far greater than the state’s own electricity needs, the ability to move this power out of the state is essential. !ere is limited available capacity, however, on interstate transmission lines. !e South Dakota Energy Infrastructure Authority is a public-private partnership to help develop energy projects, provide #nancing for new and expanding facilities, and assist in the development of new transmission lines across the state. Moving forward, it should develop a more focused mission statement and work with other states to develop new approaches for more transmission.

!e recently-passed HB1320 also addresses transmission issues by providing partial rebates of wind generation property taxes to cover the cost of new transmission lines and substations in conjunction with a wind farm. Up to 90% of the tax can be rebated for the #rst #ve years provided that the rebate does not exceed 50% of the cost of constructing this development.

3. Community Wind Development. Most of the focus on wind energy is on large wind farms, involving hundreds of millions of dollars in capital investment, but there are also good opportunities for smaller scale projects, which create local wealth and more easily integrate with distribution lines. For example, land owners and small rural cooperatives have invested in small projects. School districts across South Dakota are expressing interest in so-

Wind Power Development: Good Jobs, Good for the Economy and Good for the Environment

4Source: Lawrence Berkeley Laboratories

called “behind the meter” projects and need more support. !e Bank of North Dakota can support loans to schools and landowners for these projects.

In southwestern Minnesota, more than 500 megawatts of wind power is locally-owned. Policies such as Minnesota’s Community Based Energy Development (CBED) Program have been important in stimulating these projects.

4. Interconnection Standards. Every state must determine how independent electricity generators can connect to electric distribution lines. Establishing statewide interconnection standards ensures consistency, predicatablity and that all parties know the interconnection “rules of the road.” !is better enables renewable energy generators to have a fair chance to bring their power to market.

!e South Dakota Public Utilities Commission is developing a set of standards for small generators of power. !is is a key policy issue, and should be monitored by public o"cials interested in creating a friendly environment for wind energy development.

5. Technical Training. !ere are new “green job” opportunities to expand and establish new training programs for wind technicians at community colleges and vocational-technical institutes. Lake Area Technical Institute in Watertown and Mitchell Technical Institute currently o$er energy-related programs. As the wind industry expands, it will create more demand for educated, skilled workers. With good technical training, South Dakotans can earn a good wage and work in communities across the state.

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Over the coming decades, wind energy will become an increasingly important source of clean, renewable electricity generation that will have an enormous impact on rural economies, jobs and the

environment throughout the Great Plains and Midwest. South Dakota is well-positioned for a rural economic renaissance through wind energy development, but must put in place the right policies to achieve these bene#ts.

Wind Power Development: Good Jobs, Good for the Economy and Good for the Environment

Map KeyGreen = Existing Projects Yellow = Projects Under ConstructionRed = Proposed Projects

Existing and Proposed Wind Projects in South Dakota

June 2008 Data

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