Library filed under Taxes & Subsidies from Kansas
Gov. Kathleen Sebelius spent a day this week in Houston, the city of big oil, to promote another energy source -- big wind. In her speech Monday to the annual convention of the American Wind Energy Association, Sebelius called on the federal government to renew its production tax credit for wind energy due to expire at year's end. She urged Congress: "Make it clear to investors that this incentive will last for several years." The governor's message echoes a concern of wind developers, who complain they can't make plans to build in places such as Kansas without a multi-year tax credit in place to boost their emerging industry. The U.S. Senate recently approved a single-year extension, but the bill remains pending in the House.
A decision by the Kansas Corporation Commission has led Westar Energy, Inc. to suspend plans to develop 200 MW of wind power by the end of 2010. ...The company said the order also indicated that in the future wind generation could be subject to "undefined operating standards" and "potential financial penalties" that have not been imposed on other forms of generation. ...In its order, the commission said it concluded the circumstances do not justify allocating to ratepayers the cost of an additional 1 percent return on investment in light of the uncertainties inherent in wind generation and the narrow margins as to whether purchased power agreements or ownership is more costly. The commission also said an incentive mechanism to maximize wind energy output is not necessary at this time. It plans to revisit the issue in two years.
State regulators are saying Westar Energy Inc.'s plans to invest in wind power are prudent but aren't allowing the utility to increase its profits. The Kansas Corporation Commission's decision created uncertainty about Westar's plans to invest in 295 megawatts of generating capacity from wind farms in three counties, enough to power 88,000 homes. ...Construction costs and the fact that wind doesn't blow consistently means that electricity from wind turbines more expensive per kilowatt hour in the short term than power from coal-fired plants. But commission spokeswoman Rosemary Foreman said Westar shareholders' risk was lessened because regulators will permit the utility to recover its investments in wind farms through its rates. "The commission just didn't think it justified, the ratepayers paying an additional cost," she said. "The risk to the company is minimized."
Let's face it: Most homeowners don't buy wind generators or solar energy systems simply for environmental reasons. They make the investments because they're banking on a payoff in the form of lower energy costs. Westar Energy is no different in wanting a bang for its green-energy bucks, which is why it's seeking a rate increase to support an $830 million wind energy project. But just how much of a payoff should Westar receive? And at what risk? ...To some extent, it's reasonable to place the cost of wind power on the shoulders of ratepayers. After all, wind could provide Kansans with an abundant, environmentally friendly energy source to offset the cost of fossil fuels. Westar and its stockholders should be given the chance to obtain a fair return on the company's investment. At the same time, though, the company bears a responsibility for keeping cost increases to a minimum for its customers.
Westar is seeking the rate approval to recover $282 million for ownership of turbines at two proposed wind farms and for costs in purchasing energy from a third farm. The 300 megawatts of electricity would come from the Central Plains Wind Farm in Wichita County; Meridian Way Wind Farm in Cloud County and Flat Ridge Wind Farm in Barber County. ...Westar expects energy demand to continue growing among customers and while new wind energy can put off purchase of new "baseload" or constant power sources, for now, the utility expects it will need to build a new power plant between 2016 and 2018. ...Moore told commissioners Westar would walk away from the wind projects if they weren't allowed to earn at least a small profit from them.
Kansas can forget about wind power if Westar Energy doesn't get the chance to earn extra profit from it, the company's chief executive testified Monday. Westar chief executive Bill Moore also said Westar would scrap its wind energy plans if the company isn't allowed to build its own wind plants, or if regulators approve sanctions that would be triggered if wind power performs below expectations. "If the direction we're headed is not what the commission wants us to do, we won't go forward," Moore said. Monday was day one of a court-like hearing on how Westar will recover costs of adding about 300 megawatts of wind power to its energy system, which serves 674,000 Kansas customers.
A state consumer agency is demanding to know whether Gov. Kathleen Sebelius and her lieutenant governor have tried to influence state regulators who are about to decide how much consumers will have to pay for wind power from Westar Energy. The concern stems from a once-confidential memo written by the former chief executive of Westar Energy indicating that Sebelius and Lt. Gov. Mark Parkinson influenced utilities to pursue large-scale wind power by promising they would be "fully compensated" for any added costs of building wind plants.
In fact, nothing is going to raise our electricity rates faster than the installation of wind power. It is the most inefficient and overpriced form of power currently being flogged to consumers by "green-posing" politicians and profit-hungry wind developers. The real cost of wind power is staggering when you add it all up. ...Higher costs might be socially acceptable if wind could actually replace coal-fired generation, but it can't. Wind power is unpredictable and will always require backup from a reliable, on-demand, source. ...Beyond the direct costs of wind power, we must also factor in the socioeconomic and ecological costs. Foremost among these is the loss of property values, which reliable estimates suggest is about 30 percent, on average, for those unfortunate enough to become wind farm neighbors. ...Due to deceptive government legislation, the high costs of wind power are being temporarily concealed from consumers in order to encourage its public acceptance. But don't be fooled;
A program aided by the U.S. Department of Energy seeks to place small wind turbines at several rural Kansas high schools in the next three years. Wind for Schools is a national outreach effort of the National Renewable Energy Laboratory in Colorado, where organizers hope to familiarize rural America with a cheap local source of power. The program will help selected schools construct a 1.8-megawatt wind generator on a 60-foot tower. In addition, they'll provide educational support for all school levels to create lessons based on the turbine.
On April 25, The Hays Daily News ran a fairly extensive news story on the proposed development of the industrial wind power generation plant west and southwest of Hays. That article stated that about 80 local families have expressed their opposition so far, but it did not say much about why there is this opposition. Let me try to explain very briefly some of the multiple sources of opposition. But please understand that this is an extremely brief explanation of each. More information is available at a public meeting being held tonight in the Fox Pavilion, starting at 7 p.m. and sponsored by the Ellis County Environmental Awareness Coalition. (Full disclosure: I am a member of this group.) I would say that the opposition can be divided into three groups, and these groups often overlap.
Facts now demonstrate that much of the information about wind energy distributed by the wind industry and its advocates simply isn't correct. The public, media and government officials have been misled. Accepting the misinformation and adopting policies based on it isn't in the best interest of electric customers, taxpayers, or the environment – even though “wind farms” are highly profitable for organizations that enjoy the huge tax breaks and subsidies. Income for landowners who lease land for turbines is often at the expense of their neighbors........Please keep in mind that electricity generated from wind has less real value than electricity generated from reliable (“dispatchable”) generating units that can be counted on to be produce electricity when it is needed to serve customers demand. (Electricity from wind is intermittent, volatile and unreliable and most likely to be available at times when it is not needed to meet high electricity demand.) If electricity generated in Kansas from wind energy were to bear anything near its true cost (and considering transmission costs discussed below) there is no realistic basis to believe that it would be competitive with electricity from reliable generating units located near population centers.
This paper: • Lists key reasons why political leaders and regulators are facing problems when attempting to deal with wind energy. • Provides more information on the effort in Kansas to evaluate wind energy. • Identifies facts about wind energy that are often not taken into account by political leaders and regulators. • Comments on the efforts in Kansas to promote greater use of wind energy. • Outlines lessons for all government officials that can be learned from the efforts in Kansas.
Wind farms in Kansas, Nebraska and California will play a role in Colorado Springs Utilities’ compliance with a voter-approved mandate on renewable energy. But homes and businesses in Colorado Springs won’t be getting electricity produced by harnessing wind in those places. Instead, renewable energy credits will be logged into Colorado Springs Utilities’ books.
Whenever energy prices rise, the government promises to subsidize oil alternatives," said Jerry Taylor, an energy expert with the Cato Institute, a Washington, D.C.-based think tank that opposes government intervention in economies. "It's flushing money down the toilet."
Wind farm operators do not pay property taxes under a state incentive aimed at fostering development of renewable energy. The money is meant as a gift, in lieu of the taxes KCP&L otherwise would have to pay.
The bill provides a 10 percent income tax credit, accelerated depreciation and property tax relief to energy companies expanding or locating new facilities in Kansas on projects up to $500 million. The credit moves to 5 percent if the project exceeds that cost.
This means, said Anderson, that they are seeking to impose a requirement that all companies purchase a certain amount of their energy from this renewable source. “The problem is that no one wants to buy the energy they are producing because of the high cost involved,” said Anderson. “However, they are pushing hard and I don't know at this time whether they will be successful or not.”
Commissioner Duane Patrick brought up the “elephant in the room” in regard to wind farms in Kansas and the payment in lieu of taxes issue.
Given its location, Gray County would have displaced mostly NGCC and some oil fired generation. Using the average 2003 NGCC heatrate for the sub-powerpool (7,478 Btu/kWh) and the average CO2 content of natural gas (116 #CO2/MMBtu), the project may have displaced only 158,000 tons of CO2 in 2003 (0.00207% of 2003 US estimated emissions according to the USDOE report entitled Emissions of Greenhouse Gases in the United States, 2003 (issued December 13, 2004). (Note in 2002, the output was less and it would have displaced only 140,000 tons).