Author Archives: Drew Kerr

How industry could become the next efficiency frontier

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A steel mill in Cleveland (Photo by Mark Tebeau via Creative Commons)

April 3, 2012

By Drew Kerr

Homeowners have been buttoning up their windows and doors. Businesses are installing LED lights. But what role should manufacturers play in the effort to conserve energy?

That’s the question industry officials, utility companies and policy makers are asking as the manufacturing-intensive Midwest seeks to regain a competitive edge in the global market and build a stable economy for the long term.

While energy prices in the Midwest are below the national average, researchers and energy efficiency advocates say efforts to promote conservation will play a key role in rejuvenating the region’s manufacturers and insulating them from future hikes in the cost of energy.

The question now: What’s being done to make it happen, and what are the challenges that have to be overcome in order to make progress?

Researchers and industry leaders say energy efficiency efforts have been slow to materialize for a host of reasons, both logistical and financial, that don’t exist in the residential or commercial arenas.

Costly equipment, workforce training and the inability for a single policy to address each company’s needs are among the unique challenges that have to be addressed.

Despite the obstacles, there is a belief that the issue is moving to the forefront as utilities look to meet new efficiency targets that will be difficult to reach without addressing their biggest energy users.

Companies are also facing new environmental regulations that could force them to replace aging equipment with new high-efficiency models, and are increasingly looking for ways to cut operational expenses.

A new report from the World Resources Institute, a Washington D.C.-based non-profit, is also providing policy makers for the first time with a state-by-state look at the way industrial actors use energy in the Midwest, which authors say they hope will provoke action on the issue.

While the industrial sector collectively uses a third of all energy in the United States, WRI’s report, released in February, provides a first-of-its-kind estimate of how much energy is being dedicated to the production of fuel, chemicals, metals, paper and other products across the Midwest.

The analysis showed that manufacturing accounted for nearly a quarter of the energy consumed in Ohio, Indiana, Iowa, and Wisconsin in 2006. Among the ten states included in the study, South Dakota devoted the least amount of its energy to manufacturing, at 5 percent.

“This paper is really just a snapshot of where industry is and where it has been,” said James Bradbury, a senior associate at WRI’s Climate and Energy Program who served as the report’s lead author. “The future work is where it is going and where policy can take it.”

A prime market

The Midwest is in many ways an ideal place to make a concerted effort to take on the issue of industrial energy efficiency.

The region accounted for nearly a third of all manufacturing activity in the United States in 2010. Manufacturing also accounted for 16 percent of the Midwest’s gross domestic product and 10 percent of its employment.

Nationally, manufacturing accounts for 12 percent of GDP, and employs around 12 million people.

While the numbers have waned as manufacturers have moved abroad, officials believe the industry remains strong and could begin to grow again with the right kind of investments, providing a lasting economic boost to the region.

In that context, Bradbury says a broad spectrum of players in the Midwest – labor groups, industry leaders and politicians – have coalesced around the issue.

The Midwest Governor’s Association has already formed a group to look into the issue. The group hosted a summit in January featuring industry leaders and policy makers and supported WRI’s recent analysis.

“There’s a lot of interest in seeing these plants stick around because they’re real anchors in their communities,” Bradbury said. “People are looking for ways to make sure moving forward these places can continue to operate.”

Several policies are already being pursued that could help in the effort, too.

Lawmakers in Ohio, a state with a $7.2 billion a year steel industry, are considering legislation that would allow blast furnaces and cogeneration systems, which use waste heat to create electricity, to count as renewable energy.

The designation would allow companies to sell renewable energy credits, reducing the amount of time needed to recoup investments in such technology. The effort – driven largely by the potential operators of a proposed $310 million power plant at a steel factory in Middletown, Ohio – has been opposed by wind and solar developers who feel it will detract interest in other forms of renewable energy.

Several states, including Ohio, Michigan, Iowa, Wisconsin and Illinois, have also set electricity or gas efficiency standards for reducing energy use statewide.

Still, Daniel Trombley, a senior industrial analyst with the American Council for an Energy Efficient Economy, said businesses have been slow to act because of the region’s relatively low energy prices, and that there is still a substantial amount of progress to be made.

“There have been some decent successes, but obviously there is still a lot more to be done,” Trombley said. “Some states are just scratching the surface and others have done nothing at all.”

Big goals, little money

Whatever intentions policy makers and industry officials may have, cost may prove a significant barrier for manufacturers looking to move aggressively in the direction of energy efficiency.

Installing new boilers, high-efficiency motors, and fixing leaks all pose challenges to manufacturers who are operating on tight margins and have little money to invest.

Manufacturers also demand quick paybacks, typically two years or less, and are reticent to spend money amid an uncertain economy, said Stacey Paradis, the deputy director of the Midwest Energy Efficiency Alliance.

“You have to remember many of these people are independent operations with a small amount of cash, so they have to be very judicious in how they use their resources,” Paradis said. “They’re protecting themselves now, and they’re waiting until things break down instead of investing earlier.”

To help, policy watchers say state governments, as cash-strapped as they are, could set aside bonding money or create revolving loan funds to help businesses cover the upfront investments needed to make efficiency improvements.

Self-direct programs that allow businesses to opt out of utility surcharges by making direct investments in their own efficiency measures could also play a role in paying for upgrades.  Xcel Energy– seen as a leader in the industrial efficiency field – recently introduced such a program in Minnesota.

Businesses say the most helpful form of assistance, though, may be outright cash or refunds.

“You can get low-interest loans anywhere now,” said Kevin Schmidt, the director of public policy services with the Ohio Manufacturers’ Association. “You’ve really got to get the grants so you can find the big projects that are like pipe dreams with five-year paybacks and get them down to three-year paybacks.”

Xcel Energy, seen as a leader in industrial efficiency, is doing some of that in Minnesota, where 85 companies have participated in a three-phase industrial efficiency program. The utility offers a free evaluation and rebates of up to 60 percent of the difference between traditional equipment and the energy efficient model to participants.

The analysis often leads company leaders to unexpected findings about the way they do business – highlighting everything from leaked air to employee behaviors like leaving lights on – said Kerry Klemm, a product portfolio manager with Xcel who focuses on industrial energy efficiency.

“It’s fun to see the way people change the way they look at energy and no longer see it just as an assumed cost,” she said.

Diverse industry, diverse needs

Promoting industrial-level energy efficiency is also challenging because it is such a diverse field, encompassing everything from ethanol producers to steel makers.

However well intentioned, the wide range of applications makes it hard for a national program – like the Advanced Manufacturing Partnership, which calls for a $120 million investment in industrial energy efficiency – to be successful, said Paradis, of the MEEA.

Instead, she said programs have to be built as locally as possible, sometimes tailored to the individual business itself.

“The key is to really understand that any kind of outreach has to be done individually, plant-by-plant,” Paradis, said. “This is not something where we’re going to be able to do a blanket policy and everything is going to change.”

Industry-specific needs include workforce training and equipment installation, which can sometimes cost a company more than the equipment itself. Companies also need help coming up with contingency plans that can be enacted while equipment is replaced, so production isn’t disrupted.

In some cases, “this equipment has simply been left on for 15 or 20 years so if you don’t have a solution ready to go when you shut that thing down, you’re locked out of savings for years and years,” said Trombley, of the ACEEE.

Whatever the challenges, efficiency advocates say investing in plant upgrades is both necessary and inevitable if the Midwest’s manufacturers are to last well into the future.

According to EPA data cited in WRI’s report, energy accounted for 6 percent of total costs in the iron and steel industries, 12 percent of costs in the paperboard industry, and 15 percent of costs in the cement industry.

And while energy prices are low now – around 40 percent of the energy used by manufacturers in the Midwest comes from relatively cheap natural gas – there is an acknowledgement that that is unlikely to continue for perpetuity.

“Rising energy prices are going to be more successful than any program government can come up with, but that’s not exactly the most desirable way to get things done,” said Schmidt, of the Ohio Manufacturers’ Association. “The question is how do we get people to do it and do it with low energy prices?”

Drew Kerr is a Minneapolis-based freelance reporter. He can be reached at drewbkerr@gmail.com.

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EPA backs off North Dakota haze reduction plan

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North Dakota officials are cheering a decision by the Environmental Protection Agency to bring their campaign for aggressive emission controls at a pair of coal-fired power plants to an end.

State officials announced on Friday that the EPA had agreed to approve the bulk of the state’s regional haze air quality plan, despite previously calling it inadequate and threatening to assume regulatory authority in the heavily coal-powered state.

It was immediately unclear what led the EPA to reverse its original position, but the decision followed a recent meeting between EPA Administrator Lisa Jackson and Gov. Jack Dalrymple.

The divide over what pollution controls should be used at coal-fired power plants in the state had led to serious tension between state and industry officials and the EPA. Local officials argued the EPA’s preferred technology was ill-suited for the lignite coal mined and burned in North Dakota and would cost at least $700 million.

The companies targeted for upgrades said the cost of meeting the EPA’s preferred technology could drive up energy rates for their customers as much as 25 percent.

State officials said on Friday that two companies targeted by the EPA – Minnkota Power Cooperative and Basin Electric Power Cooperative – will not have to use the technology originally recommended by the agency. But the companies will have to take some measures to meet the state’s plan to reduce the release of nitrogen oxides.

Officials are still working out the details of what technology should be used at two other coal plants, but an EPA official was quoted as saying the sides now agree on 90 percent of the state’s plan.

Environmental groups that had supported the EPA’s more aggressive pollution controls immediately expressed disappointment in the decision. Officials with the National Parks Conservation Association said they were evaluating their “full suite of options moving forward.”

The group previously sued the EPA after the agency proved slow to enforce the standards laid out in the Clean Air Act. The law required states to have plans to cut regional haze in place by 2008 in an effort to restore natural visibility at the country’s national parks and forest.

“NPCA is deeply disappointed that EPA has chosen to reverse course,” the NPCA said in a statement after the decision was announced. “This represents a missed opportunity to stem the damage that these facilities do to the health of local communities and the air quality at nationally-treasured places like Theodore Roosevelt National Park.”

But Sen. John Hoeven, who had fought the EPA’s plans, heralded the decision as a win for the state and local control.

“Our state has long demonstrated that we can promote strong economic growth and job creation, while doing a good job of protecting our air, land and water,” he said in a statement.

The EPA continues to work with several states to adopt regional haze plans. The agency announced in November that they would seek to finish approving plans by then end of this year and that they would give states five years to comply.

Drew Kerr is a Minneapolis-based freelance reporter. He can be reached at drewbkerr@gmail.com.

Photo by simplerich via Creative Commons

Green jobs, pink slips: Weatherization cuts hit hard

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While opponents have targeted the program for cuts, federal weatherization efforts have been among the top job-creators of the stimulus package. (Photo by ilovebutter via Creative Commons)

March 1, 2012

By Drew Kerr

The nation’s investment in weatherization is taking a nosedive, raising concerns that newly minted technicians trained to make homes more energy-efficient will soon find themselves scrambling for work even while there remains much work to be done.

At issue are cuts to the U.S. Department of Energy’s Weatherization Assistance Program, which is used to help low-income residents make energy efficiency improvements in their homes. The program is administered by state officials who distribute the money to local governments and community action groups that run weatherization programs.

The WAP has quietly existed since 1976, but received a $5 billion boost with the passage of the American Recovery and Reinvestment Act in 2009.  The investment, which came in addition to the continued regular funding stream, was seen as a way to provide jobs.

Since then, it has been criticized for getting off to a slow start and having a spotty job production record. A House proposal introduced in November called for its outright elimination following reports that contractors weren’t making critical improvements and were instead spending the money on work that had nothing to do with weatherization.

Still, proponents say the investment ultimately led to improvements at more than 600,000 homes while providing thousands of unemployed workers with much-needed jobs amid the housing collapse.

Their concern is that the momentum will be lost as stimulus funds run out and funding for the program falls amid efforts to trim the federal budget. The WAP program was cut from $171 million in 2011 to $65 million this year.

A group of 25 states – including Iowa, North Dakota, Minnesota and Ohio – are facing particularly austere years after being told in mid-February that they would not receive additional funding for the 2012 program year.

The states are being told to instead use whatever unspent weatherization funds they have to sustain their programs. The decision was made so that this year’s limited funding supply could be spread more evenly around the country, according to the DOE.

In Minnesota, which received $132 million in weatherization money from the stimulus package, officials say the decision could leave the state with less than $9 million to spend this year, crippling weatherization efforts just as momentum was beginning to build.

Minnesota officials say more than 18,500 homes were weatherized using stimulus money, and that the work created or maintained 500 jobs per quarter between September 2009 and July 2011.

Mike Rothman, the state’s Department of Commerce Commissioner, voiced his concerns in a Feb. 10 letter to U.S. Secretary of Energy Steven Chu in which he wrote the funding level would lead to “dramatic reductions in the number of homes weatherized and jobs created.”

Rothman said in an interview that he is working with the state’s congressional delegation to build support and remains hopeful the DOE will release more money, but that he has yet to get any response to the letter.

The National Association for State Community Services Programs has also voiced concerns about the cuts, and describes this year’s funding level as the “bare minimum to survive.” Officials with the organization say they do not expect anything to change this year, however, and are turning their attention to 2013.

President Obama’s 2013 budget proposal calls for $139 million in weatherization funds, but the NASCSP and other supporters say the weatherization program needs at least $175 million to maintain the still-fledgling industry.

“We’ve built up a certain capacity and now we have to do whatever we can to sustain that,” said Bob Scott, the NASCSP’s director of energy services.

Green job, pink slip

One of the biggest fears is that people who were trained to make home improvements will soon find themselves out of work. The WAP was credited with creating or maintaining around 13,000 jobs in the fourth quarter of 2011 – second only to highway planning and construction.

The job losses will come at places such as the Wisconsin-based community action agency Western Dairyland, which hired 16 people – many of them unemployed carpenters – after receiving $7 million in additional stimulus money in 2009.

While officials won’t know exactly how much money they will get for several months, they fear it will be less than the $2.5 million they have received in years past and that their staff will have to be cut.

“A lot of these guys were down on their luck, and you’d hate to lay them off just because of funding cuts,” said Mike Canaday, the program director for Western Dairyland’s weatherization program. “They very well may go back on unemployment like they were when we hired them.”

Officials say the industry needs continued federal support because weatherization has yet to become a priority for many homeowners, and those who need it most can’t afford the upfront costs of improvements, which can cost thousands of dollars.

Financing options, such as Property Assessed Clean Energy or utility-supported efficiency programs that allow ratepayers to pay for upgrades gradually as part of their utility bills are spreading, but still aren’t enough to sustain the industry on their own, they say.

“There is a growing awareness of energy efficiency, but it’s still an evolving market,” Scott said. “It’s not caught on to the extent people had wanted, and while it’s not a totally dead issue, it’s certainly not a national movement.”

Scott Whitworth, who oversees the weatherization division at Thor Construction, in Columbia Heights, Minnesota, has seen this firsthand.

The company added staff and invested around $100,000 to build out its weatherization division to take advantage of the stimulus funds, but has cut its 16-person weatherization staff nearly in half because of cuts in government funding.

Whitworth said the company plans to begin its own marketing campaign to build interest, but that homeowners have proven difficult to convince.

“We’re getting some referrals, but it’s still a process that has to be continually worked on,” he said. “There’s still a learning curve, there’s no doubt about it.”

Convincing people to consider a career in the industry is also becoming a challenge.

Class sizes at the Kansas Building Science Institute – a Manhattan, Kan.-based training center that provides courses for aspiring home energy auditors – doubled after the stimulus program was passed in 2009.

Many of those who flocked to the school were unemployed and eager to find a new career. But interest has evaporated as funding has dropped off, said Doug Walter, KBSI’s president.

“I wouldn’t say ebb is a good adjective – the numbers have plunged,” Walter said.

Work to do

Even those who don’t directly receive weatherization help can benefit, said Suzanne Watson, the policy program director for the American Council for an Energy-Efficient Economy.

Roughly a quarter of the energy consumed in the United States is used to power American homes, and anything that is done to curtail that use helps reduce the need for costly power generation and transmission infrastructure, she said.

Watson acknowledged that it is hard for people to think of energy efficiency as being “big enough” to offset such costs, but that a wide-reaching effort to reduce energy use can have a major impact.

Any money that isn’t spent on energy also becomes available to fuel other areas of the economy, which also need support Watson said.

“You’re essentially putting money back into the consumer’s pocket, which is spread back into the economy across all sectors,” she said.

More than 7.3 million low-income households have received weatherization services since the WAP’s inception, but an estimated 38.6 million American households are still eligible for weatherization assistance.

Meanwhile, household energy costs have increased for the last several years, climbing to an average of $1,419 in 2010, according to a recent USA Today analysis.

Low-income families see their energy use fall an average of 35 percent, saving $400 on their energy bills in the first year after receiving weatherization assistance, according to the Department of Energy.

Judd Shultz, the housing director for the Minnesota Valley Action Council in Mankato, said the agency’s waiting list, now at more than 300 homeowners, grows every day as people find it harder to pay their bills.

But the agency has already let 13 of their weatherization crew members go because of cuts, and Schultz said getting to all of those who want help will be impossible if more money isn’t made available.

“This doesn’t just hurt as a weatherization agency, but it hurts all those households that we can’t get to,” he said. “What we do makes a huge difference for these people.”

Drew Kerr is a Minneapolis-based freelance reporter. He can be reached at drewbkerr@gmail.com.

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Streetcar revival: Coming soon to a city near you?

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The streetcar system in Portland, Oregon, has been credited with sparking more than $3.5 billion in new residential and commercial development. (Photo by TriMet via Creative Commons)

Forget the bus and the skip the train, the future of American urban transit could be the old-fashioned streetcar.

Signs of what U.S. Transportation Secretary Ray LaHood has called a “streetcar revival” are popping up all over the country.

In St. Paul, officials are embarking on a yearlong, $250,000 study of potential streetcar routes, following the lead of neighboring Minneapolis, which has spent over $1 million studying two possible streetcar corridors.

The Twin Cities are among more than 80 U.S. cities – including Detroit and St. Louis – that are looking into street cars, according to the American Public Transportation Association.

And several cities have been building or expanding their systems over the last decade, including Atlanta, Portland, Ore., Seattle, Washington D.C. and New Orleans – a city that boasts the oldest continuously operating streetcar in the world.

The turn to streetcars is being led not just by nostalgia and the needs of an increasingly urban populous, but by a broader desire to spark economic activity, Governing reports.

“When Portland built its line in 2001, the city hoped it would encourage transit-oriented development,” Governing reported. “The line has done just that. Today, it is credited with leading to $3.5 billion in new construction, 10,000 residential units, and more than 5 million square feet of office and hotel space.”

A recent study of the Washington D.C. system also suggested that streetcars induced development, boosted property values and brought people closer to mass transit – factors that created as much as $291 million in new tax revenue for the city.

Such economic considerations are a relatively new factor in deciding how federal transportation dollars are spent.

In 2010, the Obama administration opted to add economic development potential and social benefits to the list of factors to be considered when deciding which transportation projects to support.

Since then, the DOT has provided nearly $350 million in funding for 11 streetcar and urban circulator projects across the country.

The resurgence in activity comes 50 years after streetcars nearly disappeared from the American landscape as automobiles crowded the streets and mass transportation gave way to buses.

But proponents tout them as more than just history-evoking tourism gimmicks. Besides the potential economic ripple effect, proponents say streetcars offer more universal accessibility and suggest their ability to attract urban dwellers reduces the need for car travel, cutting carbon emissions.

A 2010 study of a proposed $128 million system with seven streetcars and five miles of tracks in Cincinnati suggested the project could reduce vehicle miles traveled by over 1.2 million in its first year, saving more than 74,000 gallons of gasoline. The study also suggested the streetcar could eliminate nearly 14,000 tons of carbon emissions over 20 years

Not every streetcar project has been a boon, however. Tampa, Fla. officials received a report this week suggesting their streetcar system – supported through special assessments, ridership fees and an endowment – was plagued by financial mismanagement and hefty insurance costs.

Randal O’Toole, a senior fellow with the Cato Institute and the author of Gridlock: Why We’re Stuck in Traffic and What to Do About It, also panned the promise of streetcars in a recent commentary in the Atlanta Journal Constitution.

O’Toole, a proponent of buses, described streetcars as an “obsolete technology” that require more energy than cars and have a specious economic development record supported primarily by public subsidies.

“There is a good reason why all but six of the more than 800 American cities that once had streetcars replaced them with buses: Streetcar infrastructure is expensive to build, expensive to maintain and must be rehabilitated at high cost about every 30 years,” he wrote.

LaHood, though, doesn’t seem to be backing down. After attending a streetcar conference in Portland earlier this month, he continued to promote the promise of streetcars on his blog, writing that their revival “means greater mobility and more American jobs.”

Power from hog manure slow to catch on in Midwest

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Researchers in North Carolina have created a better way to convert hog manure to energy, but producers in the Midwest are unlikely to rush to implement it.

Their reservations are based on a combination of factors, but center primarily on the upfront costs involved.

With low energy costs and a price tag that can top $1 million, anaerobic digester systems, which capture methane to produce electricity, simply don’t justify the investment, producers say.

That’s particularly true as grant support that has been used to help offset the costs of such projects evaporates, they say.

The U.S. Department of Agriculture announced earlier this month that their Rural Energy for America Program, a large source of funding for farm-based renewable energy projects, was allotted $25.4 million this year, down from $75 million in 2011.

“These are expensive to put in, and if we already have cheap electricity rates the cost to make our own power still isn’t cost effective without getting grant dollars to install these systems,” said Bill Crawford, the president of the Minnesota Pork Board.

Anaerobic digesters have been around for more than a decade, and can be found across the Midwest. In agricultural applications, they are primarily located at dairy farms that have larger concentrations of animals and a better economy of scale.

Officials in Iowa, which is by far the largest pork-producing state in the U.S., as well as in Minnesota and Wisconsin said they knew of no hog farms using such systems. There is at least one in operation in Nebraska.

The North Carolina system was built, at a hog farm with 8,600 hogs that produces 400,000 gallons of waste a week, after the state incorporated hog manure into their renewable energy standard.

Renewable portfolio standards in Minnesota, Wisconsin, Illinois count anaerobic digesters as sources of renewable energy, but do not require their use.

Developed with the backing of Duke University and Google Inc., which are purchasing carbon offsets from the project, the system includes the same basic features as traditional anaerobic digesters.

But it is set apart from previous designs because it also includes a basin that removes ammonia and other pollutants from leftover liquid so that it can be used for irrigation and on the farm.

Builders say it also reduces the level of nitrogen, phosphorous and other pollutants in the manure, creating a usable fertilizer. Previously, farmers with unusable manure put it into lagoons that could degrade water and air quality.

“I think the important thing to note is that the potential exists to harvest the energy value of the waste to facilitate further treatment of the waste and assist the farmer with his operations as a whole,” said Gus Simmons, the director of engineering at Cavanaugh & Associates, which designed and built the system.

The North Carolina system is capable of creating around 500 megawatt-hours of electricity a year. Officials say that’s enough to power around 35 homes, although the electricity is being used entirely on the farm now.

It cost $1.2 million to build and, although a cost analysis is ongoing, Simmons said it has proven to be more efficient than expected, and that it will likely pay for itself within a decade.

Future systems could presumably cost less because the price tag included research and development costs that future developers won’t have to absorb. The designs are also being made available to the public, and the system can be built using equipment that is readily available to farmers.

“We tried to ensure that this system could be operated easily by a farmer using conventional style farming equipment, and were very deliberate in our design approach to create a system that was as close to conventional farming processes as possible,” Simmons said.

Still, despite finding promising results in the year the North Carolina system has been up, Simmons acknowledged variables between farms around the country – including climate, scale and energy costs – make each situation unique.

“Every farm is different, so it’s not as though you can replicate the exact dimensions and capacity and expect the same result,” he said.  

Photo by dannyakright via Creative Commons

Cutting haze in North Dakota: Is it money well spent?

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There has been plenty of recent discussion in North Dakota about the investment coal plant operators may have to make if –- or more likely when –- new federal haze regulations are put in place next year.

But even among those who support the Environmental Protection Agency’s effort to further reduce pollution from coal plants, there is disagreement over whether that money is being spent in the best way possible.

Though cost estimates are in dispute, two energy companies in western North Dakota say they will have to spend more than $700 million on emissions controls the EPA says are needed to restore natural visibility at the state’s national forests and parks.

Some environmentalists would like to see that money spent to expand energy efficiency programs or broaden the companies’ renewable energy portfolios, instead of prolonging the life of coal plants.

‘Best wind, worst coal’

North Dakota, despite having one of the country’s largest wind potentials, continues to get nearly all of its energy from coal, most of which is a lower-grade form known as lignite. About 12 percent of the state’s electricity comes from wind resources, according to the American Wind Energy Association.

“We have the best wind in the world, and the worst coal, so I think it’s pretty obvious what we should be supporting,” said Mark Trechock, the executive director of the Dakota Resource Council, a statewide environmental group.

The non-profit organization has supported the EPA’s haze regulation efforts — which stem from the decades-old Clean Air Act — but has also said that more emphasis should be put on energy efficiency and the development of wind turbines.

“This is a pivotal point for our state’s energy planning,” Trechock said. “If our state is going to stay in the energy business in the future we need to be ramping down coal, ramping up renewables and finally doing something about energy efficiency.”

One reason Trechock and others believe North Dakota has been slow to move on energy efficiency and renewables is that the state has an abundant supply of fossil fuels, including oil, natural gas and coal, that all support the state economy.

North Dakota’s energy rates are among the lowest in the nation, and the state consumes more energy per capita than almost any other in the country, according to the U.S. Energy Information Association.

The state has also perennially ranked at the bottom of the American Council for an Energy Efficient Economy’s state energy efficiency scorecard, and was ranked last again in 2011. The scorecard rates states based on building energy codes, utility incentives and efficiency standards.

‘It comes down to the ratepayers’

State and industry officials say progress is being made in both efficiency and renewable energy.

But coal, both cheap and abundant, is likely to remain the state’s cornerstone energy supply for some time, and is still the only reliable consistent supply of energy, they say. North Dakota officials often cite studies that project enough economically recoverable coal in the state to continue supplying the state’s coal plants for the next 800 years.

“We could not shut down our baseload coal facilities and continue to serve our membership,” said Daryl Hill, a spokesman for Basin Electric Power Cooperative, which says it will cost $200 million to meet regional haze rules expected to be finalized by the EPA early next year.

Hill said Basin has invested close to $1 billion in renewable energy development since 2001, and currently gets about 12 percent of its energy from renewable resources. Minnkota Power Cooperative, which estimates it will cost $500 million to meet the EPA’s proposed haze rules, gets 30 percent of its energy from wind turbines.

Both companies also say they work with their retail distributors to encourage energy efficiency.

State officials have also been openly skeptical of energy efficiency programs. The state’s Public Service Commissioner, Kevin Cramer, recently equated efficiency programs to socialism, suggesting they unfairly benefit those who participate at the expense of those who do not (paywall).

“It comes down to the ratepayers and it’s safe to say in this area people want to buy electricity as cheaply as possible,” said Mike Fladeland, the manager of energy development for the North Dakota Department of Commerce.

The long view

Still, Fladeland said companies are beginning to consider a post-coal world given the increasing regulations and potential costs involved.

“I’m sure investor-owned utilities are asking as part of their long-term planning, ‘If federal regulations become too cumbersome, where do we go with coal-fired generation?’” he said.

Michael Sciortino, a policy analyst who worked on the state’s energy efficiency scorecard and is digging deeper into the policies of low-ranking states, said companies would be wise to consider future costs now.

“There is a real pride in the fact that they keep rates very low, but that’s a short-sighted view,” he said. “What this boils down to is understanding that energy efficiency is cost effective in the long run.”

Brad Crabtree, a policy director at the Great Plains Institute, would rather see utilities invest in creating systems that would capture carbon emissions at coal plants instead of on the kind of haze-reducing technology the EPA is pushing for.

The Great Plains Institute, Dakota Resource Council and ACEEE are all members of the RE-AMP network, which also publishes Midwest Energy News.

Crabtree, a one-time candidate for the state’s Public Service Commission, said investing in new kinds of carbon sequestration would go farther to achieve the larger goal of reducing greenhouse gases and combating climate change than the technology the EPA wants.

“I’m not sure money that is invested to control haze is necessarily the right prioritization of resources when it won’t do anything at all to address CO2 emissions,” Crabtree said. “If all that money is spent to address haze and nothing is done to address CO2 than what have we gained?”

“At the end of the day, what keeps me up at night is not haze, but climate change,” he said.

Editor’s note: An earlier version of this story incorrectly stated the Spiritwood power plant employs carbon capturing technology. It does not.

Drew Kerr is a Minneapolis-based freelance reporter. He can be reached at drewbkerr@gmail.com.

Photo by Rick Griffith via Creative Commons

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EPA announces plan to throttle back park haze rules

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The Environmental Protection Agency has come to an agreement with environmental groups upset that haze-reduction efforts have been slow to materialize, giving advocates hope that a new set of deadlines will push states to finalize plans to meet three-decade-old clean air rules by the end of next year.

The timeline set forward in the agreement, announced by the EPA on Wednesday, cannot go into effect until public comments are collected and considered, but proponents say it is highly likely to be accepted.

If approved, the court-ordered timeline would compel states to come up with EPA-accepted plans to reduce haze on a staggered schedule or face federal intervention. States would have another five years to implement the plans from the time they are accepted by the EPA.

States have been slow to get such plans accepted and previous deadlines have passed without action. According to the federal Clean Air act, such plans were initially to be accepted by 2007 in an effort to restore natural visibility at national parks and forests by 2064.

A collection of environmental groups, including the Sierra Club and the National Parks Conservation Association, sued the EPA because of the missed deadlines and slow progress. That lawsuit would be settled by the agreement announced this week.

Several states – including North Dakota, Oklahoma and New Mexico – have put forward plans that have not been fully accepted by the EPA. State officials continue to fight the agency over how best to meet the haze-reduction goals, and have said they will take their cases to court if necessary.

The differences center primarily on the kind of technology that aging coal-fired power plants should install to reduce haze-forming nitrogen oxide emissions, and the cost of the technology being recommended by the EPA.

In North Dakota, state and industry officials estimate it would cost $700 million to install the emission-controlled technology recommended by the EPA, more than double the cost of using state-recommended technology.

The additional expenses would drive up utility rates, hamper the economy and have little additional impact on visibility, local officials have said.

Stephanie Kodish, a clean air attorney for the National Parks Conservation Association, said such arguments are overstated and that industry officials simply do not want to spend what is necessary to install the latest technology.

Settling those issues and meeting the new timeline, she said, should not be difficult for states still working out their differences with the EPA.

“There is nothing extraordinary about what the EPA is doing here,” Kodish said. “It’s not like this is a new regulation coming down the pipe. There’s a point where it just gets ridiculous.”

The move comes as North Dakota officials step up their already vocal fight against the EPA.

U.S. Rep. Rick Berg, North Dakota’s only member in the House of Representatives, introduced legislation last week that would allow states to revoke federal visibility plans and come up with their own strategies to reduce haze-causing emissions.

Berg’s plan, the Regional Haze Federalism Act, would allow state plans to override federal plans provided they include a cost-benefit analysis of visibility improvements and the economic costs of implementation.

Berg said he is pushing the bill because the EPA is taking a “one size fits all” approach that will be a “drain on job creation.” Local officials, he said, are best suited to determine how to improve air quality.

“I’m trying to make sure the authority rests with the state as much as possible,” Berg said in an interview. “Let’s let the people closest to the problem figure out the solution.”

The EPA is collecting public comments on proposed haze-reduction rules in North Dakota through Nov. 21, and the rhetoric on both sides of the debate has intensified.

The Sierra Club and NPCA this week launched a new public ad campaign, “Health, Not Haze,” that includes a website and full-page newspaper ads supporting the EPA’s efforts. Opponents of the EPA’s plans have also mounted an aggressive campaign, but Kodish, the NPCA attorney, said the public is firmly in support of clean air.

“The question is whether the majority of the population is going to be heard or be drowned out by interests who have the ability to control more air time,” she said.

Drew Kerr is a Minneapolis-based freelance reporter who covers the Twin Cities and beyond. He can be reached at drewbkerr@gmail.com.

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Funding for farm-based energy projects in question

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Biodigesters, like this one at a dairy farm in Wisconsin, are a major part of the ag industry's renewable energy efforts. (Photo via USDA)

November 10, 2011

By Drew Kerr

When Dave Pagoria looked at the list of expenses associated with his 40-acre apple orchard and pumpkin farm in rural Wisconsin, there was one item that stood out: Energy.

No other cost, he reasoned, offered more variability and uncertainty over the long-term.

His solution: a 13.3-kilowatt solar energy system. Installed in July 2010, the system provided around 73 percent of the energy used at his farm during its first year in use, said Pagoria, the owner of Helene’s Hilltop Orchard near Merrill.

Pagoria expects to recoup his investment in the system within four years, and is reassured by the fact that he faces much more stable energy costs going forward.

But the solar panels, which cost $78,000, may never have gone up at all, he says, without the help of a grant he obtained through the United States Department of Agriculture.

The USDA’s Rural Energy for American Program – in addition to solar energy tax credits and a complementary state grant – allowed Pagoria to cover all but $14,287 of the system. The remaining amount was paid for through personal savings.

“I looked at the price of energy, saw the variation and the spikes, and saw this as something I could do about it,” Pagoria said in an interview from the orchard. “But there’s no way I could have done it without the grants.”

Stories like Pagoria’s may become less common if the USDA-run grant program, also known as REAP, is slashed amid an effort to trim billions from the 2012 farm bill, the massive federal legislation that shapes agricultural policy.

Officials are still debating funding levels, but proponents fear the program may be sliced nearly in half, from $75 million in the 2011 fiscal year to $38.5 million in 2012. The cuts would follow a 25 percent reduction between 2011 and 2010.

Program advocates say such cuts could choke efforts to incorporate renewable energy into the rural economy, leave valuable private investments on the table and leave farmers without the kind of certainty that Pagoria now finds so comforting.

“Frankly, these investments that the USDA makes create more viable businesses in rural America,” said Bill Menner, the director of the USDA’s Rural Development program in Iowa. “In the end, it all comes down to dollars and cents.”

A growing resource

The REAP program, which started in 2003 as the Renewable Energy System and Energy Efficiency Improvement Grant and Loan Program, is designed to help rural small businesses and farmers make energy efficiency improvements, install renewable energy systems, complete energy audits and study alternative energy sources.

Money is given in both the form of loan guarantees and outright grants, and is considered the only comprehensive renewable energy program aimed specifically at the agricultural industry.

And although the program started small – $21.7 million went to 114 projects during the first year – it has rapidly grown in popularity. During the 2011 fiscal year, there were 2,008 awards made totaling approximately $96.5 million in grants and loan guarantees, according to the USDA. The latest round of awards was announced Wednesday.

Over the life of the program, the USDA has awarded over $340 million in grants and $210 million in loan guarantees to more than 7,750 projects.

Though proponents are careful to say the program has a broad appeal – with projects in each state in the country – the Midwest has obtained a lion’s share of the money.

And perhaps no other state has been as aggressive in pursuing REAP grants than Iowa, which has received more than 1,300 awards totaling $136.9 million in grants and loan guarantees since the program was created. The state has routinely used its allotted amount and captured unspent money from other states, accounting for as much as 40 percent of the awards given out nationally during peak years.

Officials in Iowa say that history is due in part to the fact that they have made concerted efforts to advertise the program.

“This was a very small program when it very first started up, but we went out and promoted it and in recent years it has just exploded,” said Menner, the Rural Development director in Iowa.

One of the main focuses in Iowa has been helping farmers replace antiquated, propane-intensive grain drying machinery with more efficient technology. Other projects in the region have included wood-fired boilers, flex-fuel pumping stations, geothermal systems and wind turbines.

One of the largest users of the REAP program is the dairy industry, which has pledged to reduce greenhouse gas emissions by 25 percent by 2020.

The industry’s main tool: anaerobic digesters, which store manure, separate liquid from solid and capture methane to produce electricity. In the 2011 fiscal year, the USDA distributed nearly $21 million for digesters around the country.

The awards included a $500,000 grant and $1.3 million guaranteed loan for a soon-to-be-installed system at the Heller farm near Alma Center, Wisconsin, which houses around 1,200 dairy cows. The system is estimated to generate 3.3 million kilowatt hours of renewable energy each year, which officials say is enough to power 400 average Wisconsin homes.

Blake Heller, the owner of the 48-year-old farm, said he had looked into the system for years, but could never have afforded it on his own. Heller said his farm won’t just benefit from selling back into the grid –Xcel Energy is purchasing the power – but also because it will eliminate the need to haul waste from the farm.

The farm uses sand bedding now, which requires five dump trucks to come to the farm six times a year, working three days straight, to haul all the waste, Heller said. Now, the solids will be spread on the feed crops Heller grows, and the liquid will be sent to a manure pit.

“It creates a hell of an efficiency not having to haul the manure out of here,” Heller said. “Producing energy isn’t the main point. The main point is to improve operations and lower expenses.”

Momentum killer

REAP advocates acknowledge such projects may be pursued without government support, particularly if the cost of renewable energy comes down, and some are already preparing for less money.

The dairy industry, for example, is promoting anaerobic digesters to utilities and encouraging them to invest as third-party owners of the systems. There are less than 200 such systems around the country now, but officials hope to have more than 1,300 installed within the next decade in an effort to meet their carbon-reduction goals.

“We’re not going to get to that number by relying on USDA loans and grants,” said Jerry Bingold, the director of renewable energy for Dairy Management Inc., which markets and builds support for the dairy industry. “We’ve anticipated this. This is really not a surprise.”

Bingold said the program was useful in showing the private sector such systems, around since the late 1970s, could work, however.

And while wind, solar and geothermal technologies could also attract private investment, proponents say renewables are still at a disadvantage compared to fossil fuels and that more government investment is needed.

“Some of these projects will still get done, it’s just a function of how much,” said Andy Olsen, a senior policy advocate for the Environmental Law & Policy Center, a Midwest-based public interest group that advocated for the program at its inception and is lobbying for more support now (ELPC is a member of the RE-AMP network, which funds Midwest Energy News).

“It’s very necessary for the government to be involved because the public subsidy that is the use of fossil fuels continues unabated,” Olsen added. “So long as we still have an economic system that fails to account for the cost to our society than we need to address that market failure.”

There are signs that farmers and small businesses are increasingly interested in going green, too.

During REAP’s first three years, there were an average of 146 applications per year; the second three years averaged 532 applications per year; and the most recent three years averaged 1,911 applications per year.

Of those who applied for funding in 2011, 42 percent were denied, according to the USDA.

“This program has been a real boon to the agricultural industry,” said Llloyd Ritter, the co-director of the Ag Energy Coalition, a new group of 50 organizations dedicated to maintaining support for clean energy in the new farm bill. “There’s no way to mince words – it’s going to be a big loss if this program is diminished.”

“I don’t think there’s any question that without REAP there are going to be less projects getting done,” he said.

Ritter, who helped author the bill while working for U.S. Sen. Tom Harkin, D-Iowa, said he the coming weeks will be critical to determining the fate of the program. The House and Senate are still hashing out a compromise, and details remain sparse, but a deficit-reduction plan is expected to be released by Nov. 23.

Agricultural Secretary Tom Vilsack has expressed his support, and more lawmakers are coming around as they learn more about the program, the situation remains “harrowing,” he said.

“It (REAP) really doesn’t have many detractors,” Ritter said. “It’s just a question of where the money comes from at this moment in time.”

Editor’s note: Jerry Bingold’s name was misspelled in an earlier version of this story.

Drew Kerr is a Minneapolis-based freelance reporter who covers the Twin Cities and beyond. He can be reached at drewbkerr@gmail.com.

CORRECTION: An earlier version of this story incorrectly stated that REAP funds must be spent on projects that are directly related to food production and included an incorrect total amount awarded by the program.

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North Dakota spars with EPA over park pollution rules

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The EPA’s Regional Haze Program aims to restore visibility in federal wilderness areas, like Theodore Roosevelt National Park, to natural levels.

Officials in North Dakota are mounting an increasingly vocal campaign against the Environmental Protection Agency, which they say is pushing air quality controls that won’t work and will burden consumers with higher electricity rates.

At issue is the EPA’s effort to get coal-fired power plants in the state to install new emission controlling technology they say would capture more nitrogen oxide emissions and improve visibility at national parks and other wilderness areas.

Visibility has been reduced by one-half to two-thirds what it would be under natural conditions at national parks and forests in the western United States because of haze-forming particulate matter such as nitrogen oxide and sulfur dioxide, federal officials say. At Theodore Roosevelt National Park, in western North Dakota, the National Park Service says visibility can be reduced from 120 miles in clear conditions to as little as 40 miles.

So, in 1999, the EPA launched the Regional Haze Program, which established a timeline for states to develop plans to improve air quality and restore natural visibility in the country’s national parks and forests by 2064.

Yet as the EPA moves forward with its plans, top North Dakota officials, utility executives and coal industry supporters say the agency is infringing on states’ rights and pushing unproven technology that will drive up utility costs at a time consumers can ill afford it.

While both sides say they hope a resolution can still be found, neither side appears willing to yield ground, and the rhetoric is intensifying.

A difference of opinion

The fight in North Dakota centers primarily on whether or not coal-fired power plants in a three-county area known as “coal country” should install selective catalytic reduction systems or selective non-catalytic reduction systems.

The EPA is pushing the plants to install the former, which they say would reduce nitrogen oxide emissions by up to 90 percent and are common at most new coal-fired power plants.

Officials with the North Dakota Department of Health –- who are in charge of helping the state meet the federal goals –- say they do not believe the systems are compatible with the lignite coal used in North Dakota. The sodium-rich, low-quality coal is damaging to the equipment, and vendors will not guarantee it will work, they say.

State and industry officials also say the air quality in the state is already among the best in the nation -– receiving high marks from the American Lung Association earlier this year –- and that the federal plans will make insignificant improvements compared to the state’s preferred technology, selective non-catalytic reduction systems.

The difference in opinion is also a matter of cost.

Officials with the Minnkota Power Cooperative, which has two coal-fired units at its plant in Center, North Dakota, say it would cost $500 million to install the selective catalytic reduction systems the EPA wants. The company has already installed selective non-catalytic reduction systems at a cost of around $40 million.

Meeting the EPA’s goals could drive up utility retail rates by 20 to 30 percent, according to Kevin Fee, a company spokesman.

Officials at Basin Electric Power Cooperative, which has two units near Stanton, North Dakota, say the EPA’s plans would add another $200 million to the $410 million the company is already spending to meet the state’s emission control plans.

While they say it remains unclear exactly how ratepayers could be impacted, they too anticipate higher energy costs and say such increases could have a devastating impact on the state’s economy.

“Why would we put a cost on consumers, particularly now when we have such economic hardship in the country, when we’re looking at it and saying it’s not going to do anything?” said Mary Klecker-Green, Basin’s supervisor of public and member communications.

EPA officials and their supporters have held firm despite the mounting opposition, saying the emission-control systems North Dakota officials are fighting against will work if properly calibrated and have been proven to work elsewhere, including at three Texas plants. They also say that the costs have been overstated by industry officials.

They are being supported by groups such as the Sierra Club and the National Parks Conservation Association, which have involved themselves in similar debates around the country.

Stephanie Kodish, a Tennessee attorney who works on coal litigation for the NPCA, said industry officials are using scare tactics to make their case. The real issue, she said, is complacency.

“It is improper to think that polluting facilities can operate in an unregulated environment,” she said. “Installing modern pollution controls is simply the cost of doing business.”

Who takes the lead?

The fight taking place in North Dakota is not unique. Officials in Oklahoma, New Mexico and other states have also objected to the EPA’s plans, citing high costs and disagreements about what emission-control technology should be used.

States were to have put forward and had plans to meet the EPA’s air quality goals by 2007, but North Dakota was found to be among 37 states that failed to submit plans addressing the EPA’s requirements in 2009.

Though progress has been made –- state and federal officials now agree on around 75 percent of North Dakota’s plans –- the question over how to limit nitrogen oxide emissions is proving to be a sticking point.

Dave Glatt, the chief of the state Department of Health’s Environmental Health Section, said the state spent four years and more than $1 million studying the issue before coming to the conclusion that the plants should use selective non-catalytic reduction systems.

The EPA, he said, doesn’t understand the nuances of North Dakota’s coal and is pushing a one-size-fits-all approach that will be fought in court if necessary.

For Glatt and other state officials –- the governor and state attorney general have also spoken out against the EPA’s plans –- the issue is as much about states’ rights as it is the technical details of compliance.

“When you look at the Clean Air Act, the intent was that federal government should be in the position to set the standard,” Glatt said. “But they also acknowledged that states were in a position to better understand their local conditions.”

“If we’re not allowed to decide on this issue, what decisions will we be allowed to make?” he said. “This is a state deference issue.”

EPA officials –- who will continue to accept public comments on the issue through the end of November -– say there is clear statutory authority for them to intervene if the state’s plans do not appear to go far enough, however.

They too are willing to do whatever it takes to implement the law, they say.

Officials say it is too soon to predict what will ultimately happen, and that coal is likely to remain a fixture of the state’s energy supply regardless of the cost. North Dakota gets nearly 82 percent of its power from coal, and officials say there aren’t any other baseload alternatives to turn to right now.

Whatever happens, though, coal supporters say their industry is operating in an increasingly hostile regulatory environment.

Steve Van Dyke, a spokesman for the Lignite Energy Council, which represents the state’s mining industry, said that’s unfortunate given the progress the industry has made over the years to improve its environmental record.

The state’s coal production tax –- which brings in about $3 million a year from coal companies –- has helped fund research and development that has improved the industry’s pollution controls, he said.

“I think the industry as a whole feels it’s been a kind of an evolutionary thing, that the plants that were built and came online in the 1970s and ’80s have been improved and modernized,” he said. “So far, it’s something that’s been workable. But this technology just doesn’t work.”

Glatt, of the state Department of Health, remains optimistic despite the disparity between the state and the EPA.

“My hope is that we will come to a resolution with the EPA,” he said. “Obviously we feel that we have a good record, that we have taken a very well thought out and reasoned approach here and that the science backs us up, as does the law.”

Drew Kerr is a Minneapolis-based freelance reporter who covers the Twin Cities and beyond. He can be reached at drewbkerr@gmail.com.

Photo by Jimmy Emerson via Creative Commons

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With tax credit in doubt, wind industry ponders future

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Minnesota wind developer Dan Juhl has seen the scenario before.

The wind production tax credit – seen as a key incentive to bringing new wind energy projects online – nears its expiration date, expires without legislative action and then comes barreling back, reviving the industry after a period of stagnation.

It’s a sequence of events that has played out three times in the last decade, most recently in 2003, and is unfolding again today. The current tax credit, which provides developers with 2.2 cents per kilowatt-hour for electricity produced from utility-scale wind turbines, is set to expire at the end of 2012.

Industry officials have called for a long-term extension, but so far no action has been taken. Senate Majority Leader Harry Reid, D-Nev., recently said he was “not confident” it would pass given the mood in Washington, and wind energy proponents said they would not hazard to guess at its fate.

You would think that Juhl, the chairman and chief executive at Juhl Wind Inc., would be carefully tracking the issue. His company is behind four of the 15 new wind energy projects expected to come online in Minnesota before 2012, and has longer-term ambitions.

But Juhl said he no longer relies on the whims of Congress when thinking about the future. The need for alternative energy, he said, is simply too strong to be tempered by tax policy, he said. And besides, the tax credit has always returned.

“The tax credit has been extended many times, and many times it’s at the very last minute or a month after,” Juhl said. “You can’t really throw in the towel; you just have to keep moving ahead.”

Others aren’t so confident, however.

Around the Midwest, wind energy proponents are making the case that the credit needs to be extended for a decade or more. The issue has risen to the top of the wind energy agenda, and urgency grows with each month that passes without action.

“Without a doubt, the expiration of the production tax credit is of great concern to our industry,” said Jeff Anthony, the director of businesses development at the American Wind Energy Association. “It has expired three times in the past, and each time it has resulted in major disruption.”

“It puts a big hiccup in the industry and just continues the boom and bust cycle that we’re trying to break,” he said.

Momentum lost

According to AWEA, 35 percent of all new generating capacity added in the United States over the last four years has come from wind turbines.The organization reported in August that there had been 2,151 megawatts of new wind energy capacity installed in the first half of 2011, up 72 percent from the same time period a year before.

Officials are forecasting continued growth, too. In Minnesota, now the country’s fourth-largest wind-energy-producing state, wind power is seen as the primary way to meet the state’s renewable energy standard.

Minnesota’s wind farms currently have a load capacity of 2,518 megawatts, enough to power 700,000 homes at a given time. The capacity will need to more than double for the state to obtain a quarter of its energy supply from renewable resources by 2020, according to a 2006 report (PDF) by the EnerNex Corporation. The model assumes energy consumption will increase 1 percent annually. The state aims to get a quarter of its energy from renewable resources by 2025.

In Iowa – which now leads the country in wind energy consumption – officials hope to get 30 percent of the state’s energy from wind by the end of 2012. Companies around the state are scrambling to get their projects completed by the end of next year, a rush that is playing out around the country as the tax credit deadline looms.

“There’s a huge rush to get every project in the ground right now,” said Harold Prior, the executive director of the Iowa Wind Energy Association, which is pushing for a ten-year extension of the tax credit.

But the momentum that has been building could come to an abrupt halt if the production tax credit is allowed to expire, industry officials say.

They point to previous instances when the tax credit was allowed to expire as evidence. In 2004, the last year after the production tax credit lapsed, just 389 new megawatts were installed nationally – a 76 percent drop from the year before.

Such a drop-off hurts manufacturers who make component parts, leads to job losses in the construction field and could slow progress for several years as companies adjust, officials say.

“Any smart business is going to have a plan for multiple scenarios, and most companies probably have a plan in place, but there is still likely to be a downturn as companies adjust,” said Josh Gackle, a policy manager at Wind on the Wires.

“That (adjusting) will be harder for some companies, easier for others,” he said.

Standards in play

State renewable energy standards, which require utilities to buy a set amount of energy from renewable resources, have helped support much of the wind industry’s growth in recent years. The standards are designed to create a market incentive for renewable resources, making them competitive with traditional energy supplies such as coal.

But the standards only work if alternative sources are reasonably priced, officials say, and losing the tax credit is almost certain to make buying wind energy more expensive. If allowed to lapse, the costs for new projects could be pushed to ratepayers, which could in some cases trigger cost-containment measures that would relieve utilities of their renewable-energy requirements.

In Illinois, for example, the state has called for 25 percent of the state’s energy to come from renewable sources by 2025. An estimated 75 percent of that energy is expected to come from wind.

But rates can increase no more than 0.5 percent above the previous year – a limit officials say could be exceeded if the production tax credit disappears, and costs are pushed on to consumers.

“If the PTC were to go away would the cost of complying go beyond that? Probably,” said Kevin Borgia, the co-founder and executive director at the Illinois Wind Energy Association.

Borgia and others say such a scenario is all the more frustrating given that fossil fuels have enjoyed near-permanent subsidies, making it difficult for renewables to compete on costs.

A recent report by DBL Investors, for example, found that the oil, gas and nuclear industries received substantially larger subsidies than renewables in the early years of their development, as measured as a percentage of federal spending.

“This (uncertainty) doesn’t happen with oil and gas industries, where the tax incentives have been permanent for 100 years,” Borgia said. “That provides clear, consistent signals for an industry. If we want to boost renewable energy, we need to provide stable signals to the market, and the current situation has really been this start-stop, constant uncertainty, and that needs to stop.”

Strong enough to stand on its own?

Whether or not the industry is capable of standing on its own without the tax credit is a question that only time will tell.

Prior, of the Iowa Wind Energy Association, said favorable purchase agreements, uncertainties over coal, nuclear and natural gas energy supplies, and the prospect of stable long-term wind energy costs are all working in the industry’s favor, with or without the tax incentives in place.

“There will be a point with this industry where we won’t be dependent on the production tax credit, and I think we’re getting close,” he said. “If it doesn’t get renewed, we’re going to learn a lot about whether we’ve reached that tipping point or not.”

Given the growth of the industry, Prior said, the money could more appropriately be used to upgrade infrastructure. Deficiencies in the country’s transmission system, he said, is one of the biggest obstacles to new development, he said.

“If they wanted to redirect the money, it should be directed to transmission projects,” Prior said. “There haven’t been a lot of upgrades in 50 or 60 years, and as more sources of generation come up, that’s something that really needs to happen.”

Others say there may be more effective incentive structures than tax credits.

John Farrell, a senior researcher with the Institute for Local Self-Reliance, advocates for a cash grant system that would allow investors with less capital, non-profits, and governments to participate in the wind energy build out, and a feed-in tariff system that ensures stable purchase prices.

Cash grants were approved as part of the stimulus package but are set to expire at the end of this year. And the tariff system, while popular in Europe, has been a non-starter in the United States. The tariffs would guarantee developers a set rate per kilowatt hour, paid by utilities under a regulated, long-term contract.

“We have advocated for that because it takes a lot of the risk and red tape out of the wind energy process,” Farell said. “The tax credit is probably the most difficult incentive to use.”

Still, Farell and others say extending the production tax credit remains the most politically acceptable means of supporting the industry, and that they would like to see it extended before tackling the larger, structural issues that exist.

Juhl, the Minnesota wind developer, says wind is the only energy supply that offers a long-term fixed cost, can be generated domestically and does not rely on fossil fuels.

“Hopefully our country is smart enough to realize we need to do everything we can to develop our own domestic resources of energy, and that wind is a part of that.”

EDITOR’S NOTE: An earlier version of this story misstated the increase in installed wind capacity from 2010 to 2011.

Drew Kerr is a Minneapolis-based freelance reporter who covers the Twin Cities and beyond. He can be reached at drewbkerr@gmail.com.

Photo by Bev Currie via Creative Commons

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