Policies, Past, Existing, and Discussions

Energy Self Reliant States

If renewable energy generation can be dispersed widely, then it should be locally owned whenever possible. With local ownership, the neighbors of energy generation are also the economic beneficiaries, creating a constituency for rapidly expanding renewable power and transforming energy consumers into energy producers.

The Energy Self Reliant States website expands on this foundation and is written by report co-author John Farrell, a senior researcher on the New Rules Project at the Institute for Local Self-Reliance. The potential for states and communities to pursue decentralized renewable energy inspired the highly acclaimed report Energy Self-Reliant States, published in late 2009.

Power Through Policy: Best Practices for Cost-Effective Distributed Wind Survey

The project, "Power Through Policy: Best Practices for Cost-Effective Distributed Wind," will identify policies most helpful in making consumer-owned wind turbines more affordable, measuring the impact of various policy combinations on the cost of energy, and highlighting attractive state and utility markets for small wind turbines that offer the quickest return on investment. The project will use a financial model to determine which policy options have the most impact on improving the bottom line of small-scale wind turbines. We will prepare case studies of effective combinations of local, state and federal policy measures such as incentives, portfolio standards, net metering rules, renewable energy credits (Green Tags), carbon credits, and zoning to provide tangible examples of different scenarios based on the existing policy landscape.

Your input will greatly aid the project in addressing a key market challenge and helping to ensure public dollars supporting small wind technology are spent wisely. With improved policies in place, wind turbines sited near the point of use can quickly ramp up to meet local demand, allowing distributed wind to play an important role in our energy future.

You may provide responses to one of the 3 following versions of the survey:

Current owners of small wind turbines (up to 100 kW)
Advocates, incentive managers and policy makers
Manufacturers, distributors and dealers

Does "Buy America" Apply to Tax Incentives for Wind Farms?

When President Obama signed the American Recovery and Reinvestment Act in 2009, the legislation contained a Buy America provision. This section 1605 of the ARRA requires that all of the iron and steel and “manufactured goods” used in ARRA-funded projects for construction, alteration, maintenance or repair of “a public building or public work” be “produced in the United States.”

As the ARRA programs have been implemented, many renewable energy developers have wondered how the Buy America provision will affect their projects, since a majority of renewable energy manufacturing happens overseas. The U.S. Treasury has clarified that for those interested in the section 1603 cash grant in lieu of tax credits, the Buy America provisions do not apply. (See item 32 in this U.S. Department of Treasury's FAQ document.)

However, there are other incentives to which this requirement does apply—so it is important to consult with a qualified financial and tax advisor for any ARRA funded project. In order to help recipients of funding through the U.S. Dept. of Energy has provided guidance documents and assistance on this topic. Those resources can be found at The Buy American Provision web page of the Office of Energy Efficiency and Renewable Energy (EERE).

Additionally, guidance and instructions for applying for the section 1603 cash grant are available at the U.S. Department of Treasury. For additional legal analysis of the Buy America provision of ARRA and its impact on renewable energy development, visit the following web resources:

K & L Gates LLP
Hunton & Williams LLP

Property Tax Financing Authorization

More states authorizing local governments to provide loans for small-scale renewable energy projects

In collaboration with Amanda Zidek-Vanega (DSIRE)

A growing number of states have adopted a policy that encourages development of renewable energy and energy efficiency projects: Property Tax Financing Authorization. The concept began in Colorado and California and has now gained momentum in a number of other states. These policies begin with the state legislature granting local units of government the authority to create a program that provides loans to property owners for the installation of energy efficiency upgrades and distributed renewable generation projects. It is then up to the local government to decide if and how they want to implement such a program. The key element of these programs is that repayment of the loan is through a special assessment fee on the property tax. Participation by local government is voluntary and only a handful of communities, described below, have implemented such programs.

The authorizing statutes promote on-site distributed renewable energy generation in addition to energy efficiency improvements. The authorizing statute may not specify the eligible renewable energy project size and instead leave that determination to the local government. Distributed generation projects are generally smaller-scale projects that consist of one to two wind turbines or solar panels that are geographically dispersed and located near the site of electricity demand. This type of project differs from large-scale solar arrays and corporate wind farms which are often located in remote, sparsely populated areas and can require transmission lines over significant distances to deliver the electricity.

The upfront costs of distributed generation can be, and often are, a significant barrier to homeowners and small businesses. Although many states offer tax credits, rebates, incentives and grants, these incentives only cover a portion of the costs of purchasing and installing a wind or solar system for on-site use. At some point an individual will need to come up with cash to move the project forward.

Property Tax Financing programs provide a direct way for individuals to cover some, if not all, of the costs of energy efficiency upgrades and distributed generation systems. This type of financing mechanism offers several major benefits. First, access to credit can help cover much of the upfront costs, and during tough economic times this program offers an alternative to people who cannot tap into home equity lines or gain low-interest personal loans. Second, the obligation to repay the loan stays with the property. Therefore, payments become the responsibility of whoever owns that property and is benefiting from the on-site electricity generation.

This type of program encourages participation by providing a way for individuals to access financing for the development of small-scale distributed renewable energy generation projects in their community. This in turn promotes local economic development by allowing energy dollars to remain in the community. It also provides opportunities for job creation in manufacturing, installation, and maintenance of the renewable energy systems. Local distributed generation projects can also decrease reliance on an overburdened and congested transmission grid and may reduce the need for expensive new high-voltage transmission lines. Distributed renewable energy generation teaches individuals and communities about the impact of human activity on our natural resources by self-generating a portion of their own electricity. To learn more about the benefits of local-ownership, visit:
www.windustry.org/communitywind

State

Authorizing Statute

Available for wind energy?

Local Government Programs Implemented as of July 09?

California

CA Streets and Highways Code § 5898.10 et. seq.

TBD at local level

Berkeley;
Palm Desert;
Sonoma County

Colorado

CRS § 1-24-38.7

Yes

Boulder County

Louisiana

Act 348 R.S. 33:130.790

Yes

None

Maryland

Md Code: Property Tax § 9-1501-743-24

TBD at local level

None

New Mexico

S.B. 647

Yes

None

Ohio

HB 1

No

None

Oklahoma

S.B. 668

TBD at local level

None

Texas

Texas Statutes § 12-A-376

TBD at local level

None

Vermont

H.B. 446

Yes

None

Virginia

Va. Code § 15.2-958.3

TBD at local level

None

Wisconsin

Wis. Stat. § Act 11

TBD at local level

None

 

As of July 2009, 11 states have passed legislation authorizing local units of government to provide loans to their residents for renewable energy and/or energy efficiency improvements: California, Colorado, Louisiana, Maryland, New Mexico, Ohio, Oklahoma, Texas, Vermont, Virginia, and Wisconsin. As seen in the chart above the details of each program, including eligible technology, project size, loan amount, repayment terms, are often determined at the local level. So far, only two of these states have local governments that have implemented such loan programs: Colorado and California.

Colorado

In Boulder County residents can obtain a loan for a variety of energy efficiency improvements and renewable energy technologies. The loans are available in amounts ranging from $3,000-$50,000 and repaid over 15 years through a special assessment on the property tax. Applications for the first round of funding were due on April 10, 2009. According to the ClimateSmart Loan Program staff, 394 projects were funded. Two-thirds of the projects were directly related to energy efficiency, and one-third were directly related to solar installations. There were no applications for wind energy projects in this first round because of publicity and timing—the majority of the applications came from property owners in the city of Boulder, an urban area that is not suitable for wind energy installations. Although the ClimateSmart Loan Program focused heavily on energy efficiency improvement in this first round of funding, it hopes to reach out to rural areas in their county to encourage more applicants interested in wind energy.

See the Database of State Incentives for Renewables and Efficiency for more information on the Boulder County ClimateSmart Loan Program.

California

Three communities in California have implemented clean energy financing programs: Palm Desert, Berkeley, and Sonoma County. Specifics of their programs vary; in Berkeley financing is only available for photovoltaics, while in Palm Desert and Sonoma County certain energy efficiency technologies and solar water heating are eligible as well. The diversity of these programs highlights the importance of allowing individual local governments to create and implement their own program. This flexibility allows local governments to tailor their programs to promote certain renewable or efficiency technologies over others based on resource availability and conditions or preferences of the community.

See the Database of State Incentives for Renewables and Efficiency for more information on:

For more information and updates on these types of financing programs across the country, see the recent report published by the Institute for Local Self Reliance "Municipal Energy Financing: Lessons Learned".

Frequently Asked Questions

1. How is this different from other loans for home improvements?

 The major differences are that repayment happens through a special assessment on the homeowner's property tax and that the loan would transfer (along with the distributed generation benefits) to the new homeowner if the property were sold before the loan matures. These loans are intended to be low-interest loans, but that does not guarantee that they are the lowest available. Interested applicants are advised to shop around as they would normally do when seeking a loan (the local bank might have lower rates). Keep in mind that unlike the Property Tax Financing programs which are repaid through taxes on the particular property, you will remain personally responsible to pay off a lower interest bank loan even if you sell the property.

Additionally, a study by the Lawrence Berkeley National Laboratory and the Clean Energy States Alliance has found the interest paid on Property Tax Financing loans will likely be tax deductible for federal tax purposes. As more states adopt this policy, the IRS may specifically address this issue. However, until they do be sure to consult with a tax professional to discuss your particular situation.

2. What about using rebates and grants to help pay for these improvements?

In the states that offer rebates and grants, the available funding is usually limited—leaving some interested parties without support. When grants and rebates are available, they cover only a portion of cost of the distributed generation system and significant up-front costs can remain. Property Tax Financing programs can help cover these remaining costs and fill-in gaps that grant and rebate programs may not cover, such as for certain technologies or renewable energy applications. However, keep in mind that the local government will implement their own Property Tax Financing program and the rules may vary from location to location.

3. How does the local government get the money for these loans?

It depends; in certain states local governments are authorized to issue bonds to cover the costs of the programs. In other states local governments are authorized to enter into a partnership with a local financial institution to implement the program, where the financial institution would issue the loan but repayment would still happen via an assessment on the property tax.

4. Can a business owner access this type of financing for renewable energy sited at the business?

Local and state governments determine eligible participants. For example, the Boulder program is only open to residential customers; while the programs in California are open to commercial and residential (and in Palm Desert agricultural property owners as well). The state laws in New Mexico and Wisconsin limit the programs to providing financing to residential property owners. In the other states, commercial and residential property owners would be eligible if the local government program implemented includes them—that determination would be up to the local government.

5. When will there be a clean energy financing program near me?

If you live in one of the states where this policy has been adopted, you may be able to expect certain local governments to start adopting and rolling out programs over the next year. It takes time for the local governments to get approval (in some states, they need voter approval or they have to pass an ordinance) and develop the program specifics. Some local governments do not even know about this yet, so there can be a time lag before some local communities realize they can implement such programs. There may also be other concerns the local government is likely to address first, such as a troubled housing market or significant job losses. And, even though a state may have a policy authorizing this type of program, local governments are not obligated to participate. If you are interested and you live in a state that has authorized local governments to implement these programs, encourage your local officials to explore the possibilities.

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Introduction to Feed-in Tariffs

The phrase “feed-in tariff” has recently entered the daily dialogue of not only renewable energy advocates, but policy makers as well. A feed-in tariffs is a policy mechanism that provides a renewable energy facility with a guarantee of interconnection to the electrical grid and a set price paid for that renewable energy. Feed-in tariffs are proven to be the most successful policy for the rapid development of significant amounts of renewable energy world-wide, and have experienced increasing attention in North America over the last year. Feed-in tariffs work because they are more equitable than other policies. They enable everyone - including homeowners, farmers, cooperatives, and businesses large and small - to profit from renewable energy.

 

Once a feed-in tariff is implemented, utilities are required to purchase the electricity produced from a qualified renewable energy facility at a set price, or tariff, per kilowatt-hour generated. The cost of purchasing this energy is paid for by the utility and energy consumer, just like any other electricity generation source, and not with government incentives paid for by taxpayers who may not be using the energy. To ensure the tariff rate is successful, it should be set at a level that allows recovery of the cost of the facility plus a return on the investment. This is similar to how regulations of utility rates happen in many parts of the country and is a familiar concept for the industry. A feed-in tariff is separate from net-metering because the electricity generated is not used on-site. All of the output from the facility is purchased by the utility and the facility owner continues to pull electricity from the grid as before.

 

This type of policy has had notable success in Europe, particularly in Germany where as of 2008, over 75 percent of the electricity generated from renewable sources was purchased according to the tariffs under the Renewable Energy Sources Act (EEG), Germany’s feed-in tariff. The additional costs associated with this program for 2008 accounted for an additional 1.05cent/kWh. An average German household had an increase of 3.10 euro in their monthly electricity bill as a result of the feed-in tariff. The German Ministry for the Environment, Natural Conservation and Nuclear Safety issues an annual report on the status of renewable energy in Germany that analyzes these figures. You can read the 2008 preliminary report here.

 

 

In North America this type of policy has been slow to gain support despite efforts on both the federal and state levels. However, the past year has witnessed major strides in implementing feed-in tariff policies. According to the Alliance for Renewable Energy, there are 20 states that have considered feed-in tariff style policies. Below are some highlights from a few of these efforts: California’s Start; The Gainesville Story; Vermont Joins In; The Canadian Perspective. 

 

California’s Start

In early 2008 the California Public Utilities Commission announced the availability of two expansions of a tariff designed to support and encourage the development of up to 480MW of renewable energy from small generating facilities throughout the state. This program is targeted specifically to the publicly owned water and wastewater treatment facilities.

The key elements of the tariff are:

-        

A fixed price, non-negotiable contract for 10, 15, or 20 years

-        

A project size cap of 1.5MW

-        

According to the order establishing this tariff, an eligible facility is one that is defined in PUC code § 399.12 which requires the facility to meet the definition of § 25741 of that code. The definition includes wind facilities that are located within the state of California and generally requires the first point of interconnection to be within the state.

-        

Any customer may sell to Edison or PG&E

-        

Only water and waste water customers may sell to the other four utilities: San Diego Gas and Electric Company, PacifiCorp, Sierra Pacific Power Company, Bear Valley Electric Service Division of Golden State Water Company, and Mountain Utilities

-        

The tariff rate is determined by the following formula:

o      

Price paid in $/kWh = (kWh of energy distributed onto the grid at a certain time) * (the baseload market price reference fixed at time of actual commercial operation) * (the time of delivery adjustment)

o      

More information on these factors can be found in the order establishing the tariff from the CA PUC 

Electricity purchased by the utility under this tariff may be used to satisfy the state renewable energy standards.

 

An Overview of Existing Wind Energy Ordinances

The National Renewable Energy Laboratory has issued a report that provides an overview of existing wind energy ordinances across the country. The increase in wind energy development also creates a new responsibility on the part of local governments to ensure that ordinances will be established to aid development of safe facilities that are embraced by the community.

The purpose of the report is to educate and engage state and local governments, as well as policy makers about existing large wind energy ordinances.

Click here to download the PDF version of the file (1.2MB)

USDA Farm Bill

2008 USDA Farm Bill

On May 22, 2008, Congress overrode the President's veto of the Food, Conservation, and Energy Act of 2008 (the "Farm Bill"). The Farm Bill is an investment in our nation's food and farm economy. It will ensure food security and promote healthier foods and local food networks, strengthen international food aid and reform commodity and farm programs, protect our natural resources and promote homegrown renewable energy.

The Farm Bill has historically addressed not only farm regulations, but also food security and protection of environmental resources. As our country seeks to reduce its dependence on foreign oil, our ranchers and farmers will continue to be vital players in the development and growth of renewable energy resources. Biofuels, wind energy, solar power and ethanol production are all addressed in the new Farm Bill 2008.

There are a total of 14 titles in the Farm Bill ranging from commodity programs to research to energy to insurance to nutrition. Renewable energy, specifically wind generated energy, is mainly addressed by 4 titles: Conservation, Rural Development, Research, and Energy.

Similar to the previous Value-Added Produce Grants and 9006 Programs, the 2008 Farm Bill will offer both grants and guaranteed loans for eligible projects under the Renewable Energy for America Program, or REAP. The USDA Rural Development website has information on applying and guidance documents for applications.

As a result of the delay in passing the 2008 Farm Bill, Congress has extended many of the programs from the 2002 Farm Bill including the Section 9006 Renewable Energy and Energy Efficiency Improvement Program. On March 6, 2008 the USDA annouced the availability of funding for these programs under Section 9006. The deadline for applications is June 16, 2008. The 9006 Forms for applications can be found here.


For the most up-to-date application information, contact your state Rural Energy Coordinator. Check back here for updates as they are announced and stay tuned to the USDA site for more information. Also, please see the attached "Farm Bill FAQ" pdf file.

Useful Resources for 2002 Farm Bill

Value-Added Producer Grant Program

Section 9006 Energy Title Grant Program:

"An American Success Story" (ELPC)

USDA Websites:

Farm Bill Section 9006

Value-Added Producer Grants

Previous Section 9006 Award Winners

2008 Award Winners and USDA 2008 Press Release

2007 Award Winners and USDA 2007 Press Release

2006 Award Winners and USDA 2006 Press Release

2005 Award Winners and USDA 2005 Press Release

2004 Award Winners and USDA 2004 Press Release

2003 Award Winners and USDA 2003 Press Release

 

More Information and Links

For more information about energy provisions in the Farm Bill:

--Environmental and Energy Study Institute- Energy and Agriculture Program
--Database of Renewable Energy Incentives- Renewable Energy Systems and Energy Efficiency Improvements Program summary
--North Dakota SEED- Farm Bill Energy Title resources
--Iowa Rural Development - Farm Bill

Minnesota Energy Legislation in 2007

2007 was a landmark year for energy policy in Minnesota. The legislature passed the strongest renewable energy standard in the nation with overwhelming support from both sides of the aisle. This law makes Minnesota a leader in clean energy policy and creates a great opportunity for our state to reap the rewards of the booming renewable energy industry. With the passage of The Next Generation Energy Act of 2007, the legislature made sure much of the economic benefits of the increased renewable energy would stay in our rural communities.

The bill also contains real solutions to global warming that will create tangible cost savings for Minnesotan families and businesses.

The Renewable Energy Standard

The strongest renewable energy standard (RES) in the nation became law this session when Gov. Tim Pawlenty signed a requirement that the state’s electric utilities obtain 25% of their energy from renewable resources by 2020. Minnesota’s utilities currently get about 6% of their energy from renewable sources. Under this new law, Minnesota will add between 5,000 and 6,000 MW of new renewable energy, a large part of which is expected to come from new wind turbines in our rural communities.

The renewable energy standard is a market-based mechanism that requires utilities to gradually increase the portion of their energy that is produced from renewable sources like wind, solar, biomass, and geothermal energy. The RES uses tradable renewable energy credits to achieve reductions in a flexible, low-cost manner that creates competition among renewable energy generators and provides them with an incentive to continually drive costs down. Minnesota’s Renewable Energy Standard will help keep electricity costs low, spur economic development, increase energy independence and security, and lead to cleaner air.

The Next Generation Energy Act of 2007

The Next Generation Energy Act, signed into law this May, provides for concrete actions that will set Minnesota on a path to achieve 80% reductions in greenhouse gas emissions by 2050. Key components of the law include:

Three times the current amount of investment in energy efficiency measures that will produce a 25% energy savings by 2025.

  • A goal to aggressively reduce our global warming pollution to reach an 80% reduction below 2005 levels by 2050.
  • The creation of an economy-wide climate change action plan by February 1, 2008. Arizona’s climate action plan will result in an estimated overall net economic cost savings of more than $5.5 billion from 2007 to 2020.
  • Required reductions in CO2 from the power sector. After August 1, 2009 there will be a moratorium on new power plants unless they can offset their CO2 emissions

The Next Generation Energy Act also includes critical provisions that will help rural communities plan, build, and own renewable energy facilities themselves, thereby keeping energy dollars in local communities. The Act:

  • Allows counties to take over permitting authority to site wind energy facilities up to 25MW in size, an increase over the previous 5MW, and impose higher standards than state laws.
  • Allows local governments to own wind energy projects with more than two turbines without partnering with other entities.
  • Requires utilities to study the amount of renewable energy that can be connected to existing local transmission lines and substations with minimal upgrades, thereby using existing utility infrastructure more efficiently and delaying the need for new large transmission lines.
  • Requires that developers finish projects within 7 years or renegotiate land development agreements with landowners to extend these agreements.
  • Requires the Department of Commerce to consider the Community-Based Energy Development (C-BED) economic benefits that flow to all local interests, not just the project developer, when approving C-BED projects.
  • Allows C-BED developers to negotiate market-based rates unhindered by out-of-date price caps.
  • Requires utilities to consider contracting with C-BED projects to comply with the Renewable Energy Standard.
  • Allows utilities to partner with C-BED projects.
  • Requires a variety of studies on emerging community energy issues.

“These changes in law will help cities, counties, school districts, and other local agencies develop, own, and benefit from wind farms. Local ownership of wind projects helps ensure that a broader spectrum of Minnesotans benefit financially from renewable energy, and it also helps make rural communities more energy independent.”

-David Benson, Nobles County Commissioner


More Information
For more information about the benefits of community wind, click here.

For the full text of the Renewable Energy Standard bill click here.

For the full text of The Next Generation Energy Act, click here.

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