Tax Incentives For Wind Power

I was trying to figure out why a company like Jasper Energy LLC, which owns very little, would want to build a utility scale wind power project that is not in itself economically feasible. The answer that I came up with is that the tax benefits that are given to utility scale wind power projects and the ability to more or less sell these tax benefits in the form of a partnership in the wind power facility are the reason. According to a Jasper Energy LLC/Chautauqua Wind Power LLC representative at a public meeting on July 23, 2004, partnerships will be sold to "companies that can better utilize the tax benefits."

They are playing with OUR money!

Federal Accelerated Depreciation

Under federal tax laws, most of us who are in business are allowed to depreciate any investmenst that we make for the business over ten years. The way that I understand it, if you are a wind power developer, you get to depreciate your investment twice in five years. In the case of the Westfield/Ripley project, at a 35% marginal tax rate, the $69,000,000 invested would turn into about $49,000,000 in tax benefits over 5 years. If state tax law follows federal tax law, the tax incentive on depreciation is even bigger. This incentive is also bigger if the marginal tax rate for a company is higher.

Federal Production Tax Credit

In the past, the federal government of the United States has had a production tax credit to offset the extra cost of making electricity from wind power. This credit, 1.8 cents per kilowatt hour, recently expired and it will be up for a vote soon. It is expected that this tax credit will be voted back.

New York State Property Tax Exemption

Under New York State law, utility scale wind power facilities are exempt from property taxes. When developers come to a town, they make a point of mentioning this then offering Payment In Lieu Of Taxes or PILOT payments. These payments usually don't come close to the taxes on the assessed value of these installations. What the developers don't mention to the town is that towns can waive this exemption and put these installations on the tax rolls. For example, in Westfield, the PILOT payment offered is $100,000 per year. The project is worth $69,000,000 and at the tax rates in our town, if the installation were taxed, the amount would be about $1,750,000 per year or a difference of over 1.6 million dollars. This is only town tax - if school tax was added to this, the difference would be much greater.

New York State Energy Research & Development Authority Grants

The New York State Energy Research & Development Authority (NYSERDA) offers grants to utility scale wind power developers. This is the state's method of inviting wind power developers into the state. These grants are not based on the relative merits of a project but only on the fact that a qualified company is installing the facility.

All of these tax credits are based on the faulty assumption that utility scale commercial wind power is effective. Other pages on this web site explain some of the problems and drawbacks to large scale generation of electricity using wind power. It is worth considering that the wind power industry has a very strong lobby - Enron was part of this lobby.