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Wind Energy Headed for a Crash

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03 December 2012

“We’re going from boom to bust,” said South Dakota Wind Energy Executive Director Rob Rebenitsch, speaking at the South Dakota Wind Energy Association’s 2012 Membership Meeting on Thursday at Mitchell Technical Institute. About 150 people, including industry representatives, government officials and students, attended the event.

A major topic of discussion was the wind industry’s federal production tax credit, which provides incentives to developers and is set to expire at the end of the year.

The uncertain future of the tax credit has developers scrambling to finish ongoing projects before the end of the year and delaying future projects, Rebenitsch said.

“We’re projecting a crash in the market,” he said.

The tax credit pays developers 2.2 cents per kilowatt-hour, which, according to Rebenitsch, can account for nearly one-third of the funding for an average project.

Economic factors, such as the stalled growth in electrical demand and the unusually low cost of natural gas, have also affected the wind industry. Nationwide demand for electricity historically increased 2 to 3 percent per year, but actually declined during the recession, Rebenitsch said. It has now started to recover.

According to statistics presented by Rebenitsch, South Dakota’s existing wind capacity is 784 megawatts, which represents $1.5 billion in investments.

South Dakota has excellent wind resources, Rebenitsch said, but the state government could do more to provide incentives to developers to make the state more competitive.

South Dakota Energy Policy Director Hunter Roberts, a state government employee, told those in attendance the $1.5 billion in investments made into wind energy has been great for the state.

“We’ve had a good past,” he said. “Things have grown.”

Looking ahead, Roberts said the renewal of the federal tax credit will be “critical” to the wind industry’s development in South Dakota.

“It’s been successful in getting the industry where it is today,” he said. “From everything I hear, we need it going into the future.”

The state’s contractor excise tax refund program, which provides a 45 percent tax refund to new or expanding businesses for projects over $10 million and a 55 percent tax refund to projects over $40 million, is, like the federal tax credit, set to expire at the end of the year.

A potential replacement to the program, a Large Project Development Fund, was defeated by voters in the Nov. 6 election.

“We think there needs to some sort of development-type incentives there,” Roberts said. “How we get there is a big question for everybody.”

Roberts unofficially announced Gov. Dennis Daugaard will be vice chairman of the national Governor’s Wind Energy Coalition starting in 2013 and chairman of the coalition starting in 2014.

In the short term, Roberts doesn’t expect much in the way of new wind development in South Dakota.

“I think we have a bright future,” he said. “But it’s going to be that five- to 10-year time frame.”

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