Bringing Wind Home: Incentives for Community Wind Justin Barnes North Carolina Solar Center Database of State Incentives for Renewables and Efficiency (DSIRE) Community Wind Across America Mid-Atlantic Regional Conference February 9, 2011

Things to Cover… DSIRE and wind energy incentives The federal incentive landscape State incentives options and examples

DSIRE and Wind… The DSIRE Search Tool is your best friend:

The Federal Incentive Landscape Tax Incentives - Business Energy Investment Tax Credit (ITC) - Renewable Electricity Production Tax Credit (PTC) - Modified Accelerated Cost Recovery System + Bonus Depreciation - New Market Tax Credits Other Programs - Rural Energy for America (REAP): Grants + Loan Guarantees - Department of Treasury 1603 Grant in Lieu of Tax Credit - Clean Renewable Energy Bonds (CREBS) - Renewable Electricity Production Incentive (REPI)

Renewable Electricity PTC Placed in service by 12/31/2012 Inflation adjusted 1.5 cents/kWh (1993 dollars). Currently set at 2.2 cents/kWh Available for first 10 years of facility operation Electricity must be “produced by the taxpayer” and sold to an “unrelated person” Subject to anti-double dipping haircuts (up to 50%) ITC or 1603 Grant election available Incentive terms and limitations generally make the PTC less valuable than the ITC or the 1603 Grant for community wind

MACRS + Bonus Depreciation MACRS - Allows wind property to be depreciated over five years (rather than useful life) using a 200% declining balance method - No expiration date - Basis is reduced by 50% of tax credit or 1603 grant claimed - Non-taxable incentives also reduce basis Bonus Depreciation - 100% first year depreciation for facilities placed in service from September 8, 2010 through % first year through Bonus depreciation reduces the depreciable basis for claiming normal MACRS depreciation by an equivalent amount

New Market Tax Credits Availability stems from a Qualified Equity Investment in a Community Development Entity A CDE can invest in qualifying low-income businesses for projects that may include community wind projects. 39% investment tax credit is claimed over seven years - 5% for first three years, 6% for next four years Promising, but only recently used for clean energy applications and may entail high transaction costs.

State Incentives and Examples Major RPS (i.e., REC sales) Tax Incentives Direct Incentives: Production, Grants, Loans Supplemental Property Tax Incentives Sales Tax Incentives Customer-Side Shared Ownership??

RPS Policies Renewable portfolio standard Renewable portfolio goal / January 2011 † Includes non-renewable alternative resources WA: 15% x 2020* CA: 33% x 2020 NV : 25% x 2025* AZ: 15% x 2025 NM: 20% x 2020 (IOUs) 10% x 2020 (co-ops) HI: 40% x 2030 TX: 5,880 MW x 2015 UT: 20% by 2025* CO: 30% by 2020 (IOUs) 10% by 2020 (co-ops & large munis)* MT: 15% x 2015 ND: 10% x 2015 SD: 10% x 2015 IA: 105 MW MN: 25% x 2025 (Xcel: 30% x 2020) MO: 15% x 2021 WI : Varies by utility; 10% x 2015 statewide MI: 10% + 1,100 MW x 2015* OH : 25% x 2025 † ME: 30% x 2000 New RE: 10% x 2017 NH: 23.8% x 2025 MA: 22.1% x 2020 New RE: 15% x 2020 (+1% annually thereafter) RI: 16% x 2020 CT: 23% x 2020 NY: 29% x 2015 NJ: 22.5% x 2021 PA: ~ 18% x 2021 † MD: 20% x 2022 DE: 25% x 2026* DC: 20% x 2020 NC : 12.5% x 2021 (IOUs) 10% x 2018 (co-ops & munis) VT: (1) RE meets any increase in retail sales x 2012; (2) 20% RE & CHP x 2017 KS: 20% x 2020 OR : 25% x 2025 (large utilities )* 5% - 10% x 2025 (smaller utilities) IL: 25% x states + DC and PR have an RPS (7 states have goals) 29 states + DC and PR have an RPS (7 states have goals) OK: 15% x 2015 PR: 20% x 2035 WV: 25% x 2025* † VA: 15% x 2025* DC

RPS and Community Wind The value of a renewable energy certificate (REC) depends on a variety of factors but is based generally on supply and demand – Factors: RE target, eligibility, alternative compliance payments, facilitating policy measures – PA Tier I (08-09): $3.65/MWh ;NY Main Tier: ~$20/MWh EXAMPLES: Maine - New RE 10% by 2017, long-term bundled contract option, community multiplier (1.5X), NE-ISO delivery New York - ~8% incremental increase by 2015, central procurement, 10-year contracts (REC only), no community bonus, NYISO delivery

State Tax Incentives for Community Wind NC: 35% up to $2.5M GA: 35% up to $500,000 MD: $0.0085/kWh for 5 yrs., up to $2.5M KY: Negotiated, up to 50% of capital exp. MA: 100% corporate excise tax deduction and exemption State tax incentives may suffer from the usefulness limitations similar to federal tax incentives. Remedies may include: Allow credits against a variety of different taxes. Allow transfer or sale of credits Make the tax credit refundable A note on depreciation: Most states “generally” conform to the MACRS system through coupling with the federal tax system, but many disallow a portion or all of federal bonus depreciation.

Direct Incentives Production incentives - Vermont SPEED: Energy + RECs; $0.118/kWh (closed) - NJ Grid-Connected Renewables: Incentive only, not energy or RECs; proposal- based but likely $ $0.029/kWh; option for limited up-front payment for development costs. Grants & Loans - Massachusetts Community Wind Initiative: Spectrum of grants and loans for feasibility, pre-development, and construction - Rhode Island Renewable Energy Fund: Combination of grants, recoverable grants, and financing. - Pennsylvania (multiple programs); Wind and Geothermal Incentives (grants & loans); Alternative and Clean Energy Program (grants and loans); possibly Sustainable Energy Funds; PEDA - Vermont Clean Energy Development Fund: Loans, does not support feasibility studies. Former CEDF grant program now closed.

Customer-Side Shared Ownership Might be referred to as “community renewables” or “aggregated net metering” Comes in different flavors. The most expansive policies may allow community-owned assets coupled with benefits similar to traditional net metering A different model than a typical wholesale sale EXAMPLES: Rhode Island – Government/non-profit only, up to 10 electric accounts; 3.5 MW limit Massachusetts – At least 10 residential customers; other customers, including commercial eligible once minimum is met; up to 2 MW generally (10 MW for public) Delaware – Regulations forthcoming; few apparent limits; customers on same distribution feeder receive retail NEG credit, others energy supply rate NEG credit.

Sales Tax Incentives for Wind MI: Alternative energy personal property Property Tax Incentives for Wind ME: Community wind only (10 MW or less) VT: 250 kW or less KY: $1M investment minimum OH: Payment in lieu of taxes for 250 kW or larger PA: Alternative assessment NY: Local option RI: Local optionVT: Local option

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