House Energy, Environment and Technology looks at the impacts of tax incentives for wind projects

The impact of Idaho tax incentives for renewable energy projects was the focus of presentations to the House Environment, Energy and Technology Committee this week.

A study from the Boise State University Center for Business and Economic Research was commissioned by a consortium of alternative energy producers. Another presentation from John Church of Idaho Economics followed, focusing on Exergy Development Group, developer of wind projects in Idaho.

The first study utilized data collected from projects of various sizes and from different locations combined and averaged into representative projects representing a 160 MW wind project and a low impact hydro project of 2.5 MW. The study included costs of permitting, construction and operations, as well as how much of the expenditures were local, and projected revenues over the life span of the project. Also considered were the types of jobs created when energy projects come into the state, the corresponding increases in income and expenditures. The study focused particularly on the impacts in rural areas.

Not surprisingly, much of the costs of renewable projects come from the construction phase. The representative wind company generated 380 jobs annually, with $36.7 million in labor income during the construction period. In the operations phase, the total fell to 94 jobs annually for the life of the project and $3.6 million in annual labor income.

The low head hydro project, in contrast, generated 92 jobs during the construction period with a labor income of $3.3 million. The operations phase represented one employee annually, with $50,000 in annual labor income.

The study concluded that Idaho’s tax exemptions and rebates for renewable energy projects have been successful in bringing more such projects to Idaho and have a net positive impact. But a prevailing question throughout the presentations dealt with the impact to the consumer when utility rates go up as a result of buying energy from these projects. Neither study took this factor into account. Committee members also questioned new job figures, some of which may represent workers brought in from other states to function in specialized fields, although they also represent a share of the consumer spending realized by communities in which such projects were sited.

Representative Anderson questioned the value of the incentives, is a 6% sales tax rebate truly what motivates such projects to locate here? Analysts noted that Idaho’s population centers and transmission capabilities typically factor into such decisions.

Idaho’s alternative energy projects have grown from 75 to 400 MW since 2006, and there does not appear to be a decline in new projects. Given what he describes as this “explosion of wind energy in the state,” Representative Simpson asked when we stop incentivizing such projects. Experts assert that developers are aware that this rebate is scheduled to sunset in 2012, and are continuing to locate in Idaho, based upon the assumption that the rebate will be extended.

But what of existing public utilities’ need to pick up the slack when the wind doesn’t blow, Chairman Raybould asked, perhaps rhetorically, pointing out traditional utility's ineligibility for tax incentives when they back up wind projects.

Dr. John Church's presentation focused on economic and fiscal impacts to the state from the perspective of Exergy Development's construction and operation of 300 MW of wind energy in Idaho.

Over a 2 year period, this project would create an additional 650 jobs throughout the state, including specialized workers from outside Idaho. Post construction, the jobs from wind projects shrink dramatically, representing another 125 in ongoing jobs in rural Idaho over a lifetime of 25 years.

This study also evaluated the net effect on state income for each $1 increase in personal income. Income to the state can be realized in sales tax, some in vehicle license fees, registration taxes and product taxes. The additional jobs represented by Exergy projects total $120 million in additional tax revenues from all sources.

Exergy also pays property owners a royalty for placement on their lands. A farmer with ten windmills would realize $60k per year.

Representative Simpson reiterated the prevailing concern about the impact of these projects on utility rates.

“I’m looking at the increased cost for the rate payers,” he said of the rebate. “They hurt everyone, and the end result is we’re paying more for utilities. There should be no net negative over the lifetime of the project to the rate payer . . . most of these projects aren’t base load projects, but intermittent projects, and they’re very costly. “

“I’m not advocating for this as the end-all for energy supply,” Dr. Church said, responding to Representative Simpson's comment and others about the intermittent nature of wind energy and the costs to the consumer.

“It (wind energy) may have some characteristics that are somewhat variable, as others are variable,” he said. “It is one piece of an ideal portfolio, the combination of wind and hydro. There are some synergies that could work very well together. These two are not incompatible in any stretch of the imagination.”

But for Representative Anderson, the question came back to whether or not tax incentives for such projects should continue, although this committee is focused on the energy supply in Idaho and it will be the job of the Revenue and Taxation Committee to deal with the issue of extending tax incentives.

“I’m not convinced with any of these studies that the rebate is the deciding factor,” Representative Anderson said. “I’m not there with whether or not to extend this rebate.”