Tax Incentives for Installing Wind Turbines, Essay Example

Recent times have witnessed a sharp increase in demand for energy and electricity for industrial and domestic use. At the same time, oil output, the major source of energy in the industry sector has declined in the world’s leading oil producers. While human factors such as political instabilities, international conflicts and poor economic policies contribute to oil shortage at the international market, it could not be over-emphasized that oil is a non-renewable resource and as such, it is not a sustainable source of energy in the face of an ever increasing demand for energy. The effects of this situation were felt worldwide as from early 2008 when high energy costs triggered a global economic crisis. Not surprisingly, one of the major concerns in the 21^st century is sustenance and profitable utilization of non-renewable natural resources. On the same note, concerns for environmental conservation have led to a gradual shift to what has come to be popularly known as green energy, which is considered to be clean and environment friendly. Indeed, the dangers posed by global warming due to carbon emissions into the atmosphere, of which oil products are the chief source, makes the need for pollution-free energy sources as significant as the risk of exhaustion of oil reserves.  Thus, wind energy provides one of the cheapest, sustainable and clean sources of energy alongside hydro power and solar energy. In reference to case studies in Southwestern Minnesota, this research paper explores the significance of wind energy in the 21^st century, the challenges facing its production, government efforts to address the challenges as well as possible solutions the roadblocks that hinder profitable exploitation of wind as a source of energy.

In Southwestern Minnesota, high costs of fuel have sparked off an increasing desire for renewable energy sources (Roberts 191). Within the region, wind power projects are usually developed as communal properties on locally owned land. The generated power is concerns in relation to the one source of power. Wind power projects in the community are owned by the local citizens. Since it is not taxed, it is sold cheaply to non-profit organizations like schools, municipalities and the local community. In this way, wind energy is not only a cheap source of power for the locals, but also a means of promoting economic growth within the locality.

Nonetheless, local projects for the generation of wind power depend to a large extent on government policies in relation to incentives and tax exemptions. Unfortunately, what the government provides to this direction is not enough to boost wind power production adequately. It is estimated that between 2002 and 2008, federal contribution in subsidies towards fossil fuels was almost three times what was given as incentives to renewable energy projects. While the former got a junky 72 billion dollars, the latter was spared only 29 billion dollars. This notwithstanding, however, governmental input still remains crucial in the development and sustenance of these projects. Southwestern MN, particularly, benefits from tax credit incentives that target projects involved in the utilization of renewable energy resources. To this end, the tax incentive affords a 2 percent credit on income tax owed to the federal government for every kilowatt produced in the initial decade of any wind energy project. But since this offer demands that investors have significant tax liability to qualify for incentives, it becomes available only to large scale investors. Consequently, individuals who would like to utilize wind energy in the expansive ridges of MN are left out, thus discouraging small scale ventures. The ground effect of this situation is that wind energy as a renewable and clean source of energy is not utilized to the maximum.

Perhaps to address this inequality is the tax relief on an investment made. Tax Credit (ITC) grant option, which finances small scale projects usually owned by farmers. In fact, ITC is the largest contribution to several wind energy projects that began in 2009. It gives investors a 30 percent credit on facility installation costs. It is projected to be a tremendous boost to wind energy ventures in the coming years.

MN has a number of wind projects commonly referred to as MinWind, for instance the I-IX wind projects in Luverne which are privately owned. From the time they were established in 2002, they have created many job opportunities for the locals besides generating over 7 million dollars (Spiegel 2010). They have thirty three investors for each site, all of whom are MN residents. Buffalo Ridge in SW MN, which some ten years ago was a vast farmland, today is dotted with over 470 wind energy generators, serving around one hundred thousand households. Jim Nichols, Lincoln County commissioner who has been promoting wind energy production in the Buffalo Ridge for the last ten years says that “Minnesota is neck and neck with Iowa as the third-largest wind-producing state behind California and Texas” (Hoff 2010). There is another underway 85 megawatt wind project at Murray County.

The benefits of wind energy both to the local community and the government’s efforts to reduce consequences brought about by global warming and environmental degradation are many. Unlike fossil fuels, wind energy does not contribute to nuclear waste. It does not pollute the atmosphere to cause acidic rain and pollute rivers, and neither does it destroy natural vegetation. Dave Elson, a farmer in SW MN says that “”We’ve been trying to set up our lifestyle to be as environmentally responsible as we can.” He reckons that the surplus energy they sell back to power companies reduce the rate of carbon emissions present in the burning of fossil fuels by about twenty thousand pounds annually. Coupled with its economic contribution to the locals, it has come to be known as’ the farmer’s third crop’ (Davies 2010).

Nonetheless, wind energy production in SW MN has not been without challenges. The biggest one is posed by nature itself, in terms of wind direction and positioning of turbines. At the same time, it is an intermittent source of power, coming and going with the frequent shifts of air currents. As a result, investors and consumers reliant on wind energy are suddenly left without power source when the wind stops to blow at optimal speed. Consequently, there is need for prior preparation to fill the gap left by the stalling of wind energy generators in calm periods.

Secondly, the electricity generated by wind has to be transported from the site of production to where it is needed for use. In cases of long distances, it requires additional costs in the installation of transmission wire lines, which even costlier in the ridged landscape of South Western Minnesota. At the same time, line carrying capacity may be already contracted, making it difficult for wind energy generators to transmit power. Thirdly, wind turbines have been associated with bird mortality when birds perch and nest on wind towers. However, Buffalo Ridge has addresses the problem with the use of solid in place of latticed towers to discourage birds from nesting on the towers. And lastly is the challenge of noise pollution, which unfortunately cannot be addressed without compromising energy yielding capacity (Meersman 2010). The humming vibrations caused by rotating turbines have been associated with sleep disturbances and hearing problems to people living around the towers.

To address most of the challenges hindering maximum utilization of wind energy in Minnesota, there is need for active governmental participation in jumpstarting wind projects. The government should initiate a loaning scheme that advances interest free credit to individual small scale investors. At the same time, federal funding to states should consider increasing budgetary provisions for states with vibrant projects for renewable energy production. To attract new investors into renewable energy projects, the government should reduce its subsidies for fossil fuels. In addition, power companies purchasing surplus power from local producers should be offered tax incentives, so as to pay higher prices and in so doing, encourage more production among the investors.

Technology plays a key role in the production and distribution of wind energy. In this regard, states and the federal government should invest in innovations aimed at designing large scale production turbines. Similarly, the government should help investors in installing surplus energy storage facilities to conserve power to be used in calmer periods.

Works Cited

Meersman, Tom. Wind power takes a blow around Minnesota. Star Tribune. Jan. 2010. Retrieved 08, April 2010 < http://www.startribune.com/local/81195972.html

Hoff, Mary. Minnesota’s wind-power industry is picking up speed. In Catch the Wind. Accesses 09, April 9, 2010 < http://www.dnr.state.mn.us/volunteer/novdec03/wind.html.

Roberts, Kate. Minnesota 150: The People, Places, and Things That Shape Our State. Minnesota: Minnesota Historical Society, 2007.

Siegel, Jeff. “A new Way of Life, A new Generation of Wealth.” The Green Chip Review. Retrieved 08, April 2010 < http://www.greenchipstocks.com/report/community-wind-power/547

Dan, Fink; Wind Power utilization and benefits. New York: Buckville Publications, 2008

Favell, M. Small Wind Turbines: Tapping into Wind Energy. Chicago: Prentice Hall, 2003