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Community Wind

Community Wind

Community Wind Act: introduced into Senate in October, 2011; in place of the Section 45 wind production credit, make community wind projects with a generating capacity of less than 20 megawatts
(MW) eligible for the existing Section 48 solar, small wind, and geothermal 30% business investment credit.
 
The proposed extension of the investment credit would allow community wind projects to utilize the same federal business tax incentive that solar, geothermal, and small wind properties now receive.
 
The proposed extension of the investment credit would enable small-scale (under 20 megawatts) community wind projects to be developed by local residents.
 
It would allow farmers, ranchers, and community businesses to obtain financing for, secure local
ownership interest in, operate for local power customers, and, most importantly, maximize the local advantages of community

What is the exact definition of community wind?
 
For policy purposes, the American Wind Energy Association defines community wind projects as those that are less than 20 megawatts (MW) in nameplate capacity.  Conceptually, in order to be classified as community wind, the project must involve local residents in the ownership and development decision making process or provide local benefits related to power costs, local grid benefits, and resolving remote power issues.  Projects between 20 and 100 MW are considered community wind projects if local owners own at least one third of the project.
 
What are the benefits of community wind projects?
 
Community wind projects have a number of benefits, including:

economic benefits that flow to the community, which are generally greater than those from a wind farm’s typical land- lease payments, construction and operations jobs, and increased local tax base;

  • a significant amount of community control over management of the project, possibly including voting rights, especially regarding matters of greatest importance to the community;
  •  opportunities for members of the community to have a direct financial stake in the project, with an appropriate share of both the risks and rewards of such investments;
  •  the use of a variety of ownership and financing structures which have features designed to accommodate the goals of the community with respect to financial and management participation; and
  •  a genuine sense of community involvement.

How many community wind projects have been developed?
In 2011, community wind projects account for approximately 7 percent of all new wind capacity in
the United States, and that number is growing.  Community wind projects are located in many of the states that have other existing wind energy installations, from Washington to Maine.
 
What types of policies are needed to promote community wind?
Community wind projects face unique challenges when compared to conventional wind projects, ranging from access to financing, to the inability to take full advantage of federal tax benefits.
Despite these barriers, community wind projects have devised innovative financing structures to
move forward with projects across the country.  However, like the larger wind industry, community wind  still  faces  great  uncertainty  with  the  looming  expiration  of  the  federal  production  and investment tax credits for wind, at the end of 2012.
 
AWEA supports the following policies to help to create more locally owned wind generation:
 

  • Favorable treatment for community wind projects in the tax code
Because of the unique challenges facing community wind projects in arranging capital, incentives through the federal tax code are needed. For example, AWEA supports using the
30% investment tax credit in lieu of Energy Tax Credits.  Allowing this tax credit to end in
2012 would thwart this growth and send investment in Community Wind back to the small pool of institutional investors capable of using the production tax credit and its passive loss rules.  If the ability of a wind project to elect the Section 48 Investment Tax Credit is extended community wind projects will continue to provide 7% or more of all new wind power projects.

 

  • Expansion of U.S. Department of Agriculture (USDA) and Department of Energy (DOE) programs, including an expansion of eligible applicants
USDA and DOE funding programs should be expanded to increase the amount of technical support and capital available, including a greater focus on early-stage development funds for such work as feasibility studies, wind resource assessments, and wildlife and other environmental studies. Eligibility for these programs should include private business, municipalities, and not–for-profit entities (such as schools, towns, counties, etc.) in rural areas.

 

  • Funding of a community wind road map
Community wind is a growing market in the United States. While 7 percent of 2011 new installed wind capacity in the United States, many believe that community wind could represent 20% of total wind capacity in the U.S. under a strong national renewable electricity standard. A roadmap to delineate the way for this success of community wind could be an important document, as it would define the market characteristics necessary for growth, as well as the benefits of and challenges to a robust community wind market.   
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