smaller municipal systems and rural electric districts will find it more
difficult than the larger utilities to satisfy the current least-cost criterion
that the Power Review Board must apply (The Legislature modified the least
cost provisions during the session in 2003). This is so because the size
of wind projects appropriate to their needs would generally be smaller,
leading to higher wind energy costs.
systems would benefit from joint projects (photo: Kimball, NE)
These smaller utility entities could move forward by pursuing joint projects,
thereby aggregating electrical load and pooling assets such as attractive
plant sites, power plant operating experience and financing capability.
The rural electric districts are not likely to pursue a wind project independently,
because these entities have no history of power plant ownership and operation.
Instead they are much more likely to participate in joint projects. Tribal
entities may also benefit from joint pursuit of wind projects with a wholesale
electricity provider or one of the smaller utility entities.
number of smaller municipalities would prefer to start small with wind
in order to minimize their risk exposure even though higher wind
energy costs would result.
Options for Consideration: Several policy options for Nebraska are
presented that would accelerate the introduction and use of wind power
in the state. All but one of these options are likely to be revenue neutral
with respect to the state's budget. The first option is to generalize
the least cost statute that governs the Power Review Board's decision
process. This would allow consideration of currently non-monetized benefits
of clean renewables like wind power; including, for example:
While these benefits are difficult to quantify, even a very small allowance for them would often be sufficient to tip the scales in favor of wind. With respect to budget impacts, this measure would have no impact on state or local revenues. Initially, it might result in a small but nearly imperceptible increase in local electricity rates; but in the longer run the net economic impacts are likely to be positive as the expected benefits materialize. (The Legislature exempted wind projects of 10 megawatts or less from least cost compliance provisions).
air and water resulting from emissions reductions,
health risks and costs,
diversity and energy security, and
benefits from developing and utilizing an indigenous resource as opposed
to exporting dollars to import fuels.
The second option is to allocate transmission costs for new wind plants over the entire transmission network in the state. This would reduce the effective capital cost of wind plants when comparing with conventional alternatives perhaps by about 5 percent and is similar to a provision already operating in Texas. This measure would have no impact on state or local revenues, and would have a negligible impact on electricity rates throughout the state.
A third option is to enact a sales tax exemption for renewable generation.
This also would reduce the effective capital cost of a wind plant by about
5 percent and ease the least-cost burden. Electricity rates would not be
affected, but there would be a resulting loss in state revenue. If 600 megawatts
of wind generation were built over a ten-year period which is about
10 percent of the state's generation then the revenue loss would
average approximately $3 million per year.
A fourth option is to institute a state production incentive for wind
power. At a level of 1¢ a kilowatthour over a 30-year plant life, this
would compensate for the inapplicability of the federal Production Tax Credit
in Nebraska. If 600 megawatts of wind were then installed in the state,
this would require revenue at peak of about $18 million per year. However,
several options exist for reducing and even eliminating this impact on state
revenues. First, any payments received from the federal Renewable Energy
Production Incentive, or as a result of tradable federal tax credits that
might materialize in the future, could be applied to offset the proposed
Nebraska incentive. These measures are highly uncertain, however. A more
attractive and reliable option would be for the state to offer green tags
to those wishing to purchase the environmental attributes of wind energy.
Markets for these tags are being established today, and green tags are being
sold at prices in the range of 1 to 2¢ a kilowatthour of generated electricity.
Hence it is likely that Nebraska can finance a production incentive entirely
through the sale of green tags, thus avoiding any negative impact on state
important to remember that some wind projects are likely to make economic
sense in Nebraska today without any incentives. Therefore, those wishing
to pursue projects on their own without participating in, or waiting for,
any incentive program should be allowed the flexibility to operate outside
of the framework of any incentive program that might be enacted.
other incentive program that has been highly successful in other states
is the Renewables Portfolio Standard, which stipulates that a specific portion
of retail electricity supply must come directly or indirectly from renewable
sources in conformance with a specified time schedule. It is likely that
a Renewable Portfolio Standard could work well for Nebraska, but there is
clearly a strong distaste for mandated programs in the state. Consequently
the chances of legislative success are lower for this incentive option than
for the others discussed.
text of Accelerating Wind-Power Development in Nebraska: Status, Recommendations
and Perspective can be found at reports/accel_wind.htm