Most Central Plains states have long taken advantage of their proximity to the region’s ample wind resources. Therefore, it should come as no surprise that many of the top 10 wind states are located in the Midwest. Some, such as Iowa and Kansas, have further exploited the opportunity by investing heavily in component manufacturing. Except, that is, Nebraska.
With just 337 MW of installed capacity, Nebraska is a true outlier by comparison.
“Nebraska is not a populous state, and there’s not a big demand for energy,” explains Dave Rich, sustainability manager at the Nebraska Public Power District (NPPD), the state’s largest utility.
Nebraska is also a public power state, meaning that the state’s three principle electric utilities – the NPPD, the Omaha Public Power District (OPPD) and Lincoln Electric – are publicly owned and structured to not make a profit. As such, the state’s utilities have not been allowed to take advantage of federal programs, such as the federal production tax credit (PTC) and investment tax credit. Therefore, state utilities did not have the same incentive to own and operate wind farms as did investor-owned utilities in other states, such as MidAmerican Energy.
Traditionally, coal-reliant Nebraska had a surplus of energy. Still, early wind developers, such as Lenexa, Kan.-based TradeWind Energy, saw an opportunity for exporting wind out of the state to load centers east of the Mississippi, explains Frank Costanza, TradeWind’s executive vice president.
“The only problem was that when wind development was peaking in the 2000s, Nebraska had not yet joined a regional transmission organization (RTO), and there was no way to get those electrons to eastern markets,” Costanza recalls.
Ultimately, the plan never panned out due to the pancaking of additional transmission costs involved in crossing territories.
“Each system you cross has a transmission tariff that must be paid,” notes Costanza. “Therefore, you had to be careful to cross as few transmission systems as possible.” Ultimately, the potential for the added transmission costs made Nebraska less attractive.
“What was missing was the larger RTO transmission highway that eventually materialized when Nebraska’s public power utilities joined the Southwest Power Pool RTO in 2008.”
A further impediment to wind power was Nebraska’s lack of state incentives available to developers. The surrounding states have them. Nebraska does not. Therefore, wind developers built projects in the nearby states offering the best deals.
For example, neighboring Oklahoma offers a state production tax credit that pays $0.05/kWh. In addition, owners of wind farms operating in Kansas pay zero property taxes.
“Some of these programs can really be significant to the economics of a wind project,” notes Costanza. “That’s why these other states were getting development.”
“Lawmakers were scratching their heads,” Costanza recalls. “They didn’t see wind power in their state but saw development happening all around them.”
Slowly, however, lawmakers have moved to begin putting Nebraska on equal footing with the midwestern wind leaders.
Last year, Nebraska passed L.B.104, legislation that provides sales tax exemptions for the purchase of wind turbines, towers and other components. Introduced by state Sen. Steve Lathrop, D-Omaha, L.B.104 aims to keep Nebraska competitive with other high-wind states that offer similar tax incentives.
However, the proposal was controversial.
Critics, such as Gov. Dave Heineman, R-Neb., figured that the bill would immediately benefit out-of-state wind developers – especially Kansas-based TradeWind, which is planning to build the Rattlesnake Creek wind farm, a reported $400 million project located near the Iowa/South Dakota border. Heineman said the legislation would run counter to his vow to hold the line on tax increases. Following weeks of acrimony, though, he relented and signed the bill into law after a provision was added to prevent an increase in local sales taxes.
“I signed L.B.104 into law today because the most important issue in this bill is to protect Omaha taxpayers from a sales tax increase,” he said. “I do not favor the part of this bill that provides a Kansas company a special tax break, when the legislature didn’t provide new, significant tax relief to Nebraskans.
“As governor, if I had line-item authority for policy bills similar to my budget line-item authority, I would veto the special tax break for a Kansas company and keep only the portion of the bill that protects Omaha taxpayers from a sales tax increase,” he continued. “This was a difficult decision, but my most important priority is protecting Nebraskans from a tax increase.”
Responding to Heineman, TradeWind’s Costanza explains that the state of Nebraska ultimately will benefit in the form of property and other taxes. Landowners, he theorizes, stand to benefit by virtue of land lease payments.
“L.B.104 made Nebraska competitive with other wind-belt states, like Iowa, Kansas and Oklahoma, that are reaping thousands of jobs and hundreds of millions in local investment from recent wind energy development,” says Costanza. “When taken in totality, these various payments and economic development will dwarf, by multiples, the sales tax abatement granted by L.B.104. Rural communities in Nebraska, like the one we hope to work with, will see significant investments in the future that never would have happened if lawmakers had not taken this key step toward economic development.”
It is also important to bear in mind that Nebraska does not have a renewable portfolio standard mandating wind procurement for the state’s three primary utilities. And although the utilities have slowly embraced wind, 2013 produced a bumper crop of wind contracts. Last year, according to the American Wind Energy Association, Nebraska utilities inked more than 675 MW of capacity.
What’s the reason? Quite simply, wind energy prices are historically low and, therefore, have allowed utilities to lock in attractive rates for long-term power purchase agreements (PPAs).
The NPPD theorized that locking in a contract would allow developers to take advantage of federal PTCs.
By virtue of six PPAs (and Ainsworth, a utility-owned and -operated 60 MW wind farm), the NPPD says it is on track to meet its corporate goal of generating 10% of its electricity with renewables by 2020. By the end of 2013, the NPPD had 312 MW of wind generation on its system.
“Developers who have been successful obtaining PPAs [in Nebraska] have passed through 98 percent to 99 percent of the PTC in the PPA prices,” explains the NPPD’s Rich.
Wind developers are eager to lock in utility-friendly rates because finding an off-taker can go a long way toward securing financing.
The OPPD, for example, agreed to buy the output of up to 400 MW of wind-generated electricity from Geronimo Energy’s Grande Prairie Wind Farm – the largest amount ever purchased by the utility. The contract nearly doubles the OPPD’s wind-generated portfolio and allows the utility to reach its goal of 10% wind energy by 2020 six years early.
Ultimately, the future looks bright for Nebraska as state lawmakers continue to work to make Nebraska more friendly for renewable energy. w
When Will Nebraska Join The Party?
By Mark Del Franco
Proponents are hoping that a new sales tax exemption measure will incentivize more wind development in the state.
NAW_body NAW_body_bi NAW_body_b_i NAW_body_bNAW_body_i