When Governor Dennis Daugaard, Senator Russell Olson, and other Republican devotees of government interference in the free market talk their economic development proposals, they say we have to compete with other states with incentives.
As my friend and sustainability advocate Pete Carrels explains, Senate Bill 195 offers South Dakota a chance to compete with other states and catch up with wind power development:
The U.S. wind energy industry had its strongest year ever in 2012, installing a record 13,124 megawatts (MW) of electricity-generating capacity, leveraging $25 billion in private investment and achieving more than 60,000 MW of cumulative wind capacity. This is 28-percent growth in wind energy from 2011.
In this atmosphere of impressive national growth, South Dakota’s wind energy generation has been disappointingly stagnant. South Dakota is underachieving for various reasons. Inadequate transmission access and opportunities hampers developers. So does competition in other, nearby states that are closer to lucrative metropolitan markets. Another impediment, according to the SD Wind Energy Association, is the state’s tax structure and the lack of financial incentives. To correct that problem SB 195 has been introduced. If enacted, SB 195 would allow wind project developers to collect a full refund on contractor’s excise taxes, and 25 percent of the state’s sales tax. Ron Rebenitsch, executive director of the South Dakota Wind Energy Association, indicates that about 40 percent of the forgone revenue would be made up on the back end of project development with a production tax once a wind farm is operational.
Rebenitsch explains how South Dakota is currently disadvantaged: Assuming a cost of $2 million per megawatt, a 100-megawatt wind farm in South Dakota would cost $200 million and incur taxes of $12 million. That’s an additional $12 million a developer wouldn’t have to pay in Iowa, North Dakota or Minnesota. Why, Rebenitsch asks, would a wind developer choose to build here?
Despite ranking fifth nationally in wind potential, South Dakota ranks only 16th among all states in actual wind generation capacity, with neighboring Iowa, Minnesota, and North Dakota dramatically outperforming South Dakota. Surprisingly, states such as New York, Pennsylvania, and Indiana now produce greater amounts of wind power than South Dakota. Development in SD in recent years has been almost non-existent. In 2011 the state added only 75 MW of wind capacity. Last year the total capacity added was zero. Six states added more wind energy capacity just last year than South Dakota’s overall total.
How far behind has South Dakota fallen? Consider the following revealing data.
States leading in wind-generation total capacity through 2012 in megawatts/MW
- Texas 10,929 MW
- California 4,570 MW
- Iowa 4,536 MW
- Oregon 3,153 MW
- Illinois 3,055 MW
- Minnesota 2,717 MW
- Washington 2,699 MW
- Oklahoma 2,400 MW
- Kansas 1,877 MW
- Colorado 1,805 MW
- North Dakota 1,469 MW
- New York 1,418 MW
- Wyoming 1,410 MW
- Indiana 1,343 MW
- Pennsylvania 1,029 MW
- South Dakota 784 MW
States adding the most wind capacity in 2012 (total capacity added)
- Texas (1,826 MW)
- California (1,656 MW)
- Kansas (1,440 MW)
- Oklahoma (1,127 MW)
- Illinois (823 MW)
- Iowa (814 MW)
- Oregon (640 MW)
- Michigan (611 MW)
- Pennsylvania (550 MW)
- Colorado (496 MW)
[Pete Carrels, e-mail, 2013.02.10]
South Dakota sits on a gold mine of wind power, yet we make it millions of dollars more expensive for developers to come cash in and bolster the nation's power supply. Other states thus get those dollars.
If we believe in corporate welfare (and oh, yes, our Governor and Legislature do), we should use incentives to build on our greatest strengths and potential. Senate Bill 195 would build on our great wind power potential. A big roster of sponsors from both parties see wisdom in that plan; let's see if the full Legislature will agree.