TRIPP, S.D. – Construction of a $110 million to $120 million wind farm near Tripp is being delayed at least six to eight weeks because of investors’ uncertainty in the wind industry’s production tax credit.
Roland Jurgens, a senior project manager with Carstensen Energy, of Chokio, Minn., said Thursday the first 22 turbines are still expected to be built by the end of the year, and another 21 turbines should be done by early next year.
That’s despite a delay caused by investors uncertain how the Internal Revenue Service will apply its guidelines for projects still trying to qualify for the industry’s production tax credit, a large federal subsidy that allows developers to lower their tax bill by 2.3 cents per kilowatt hour during a project’s first 10 years.
“We are still moving forward,” Jurgens said. “The project is not dead.”
The tax credit expired in January after Congress failed to extend it, but any project deemed to have started construction before then can still qualify. Exactly which projects will meet that requirement has been up in the air since April, when there was a shift in management at the IRS, Jurgens said. That’s led to delays for wind energy projects across the the U.S.
“Everybody right now is waiting for an additional clarification from the IRS on these issues before they’re going to be able to move forward,” he said.
Investors in renewable energy projects are typically large banks or investment firms, Jurgens said.
“They don’t move unless they’re 100 percent certain a project will qualify,” he said.
Jurgens said the project near Tripp will be in favorable position to continue construction once the rules are clarified because of extra work done last year. Last year, work was done on foundations for four of the turbines and on service roads around in project area.
“From that perspective, we’re in good shape,” he said. “We’re just going to have to work a little harder to get it done.”
Jurgens said the initial estimate that 110 workers would be needed for construction could go up to compensate for the time lost because of the delay.
“We may throw a few more people at it to get it done a little more quickly,” Jurgens said.
William Douglas, of Brandon, was hired in April to inspect the substation and transmission lines during construction, and was told to be ready to work by early June, at the latest. He was told Monday about the problem with the project’s funding. It was terrible news for Douglas, who had turned down two other jobs in anticipation of the work.
“I’m pretty devastated, because I waited this long to start my job,” he said.
And Douglas says he isn’t alone.
“I know a lot of people other than myself were looking forward to the project going forward,” he said.
Despite the claim the project will start again in six to eight weeks, Douglas isn’t holding out hope.
“I’ve given up on it,” he said. “I think it’s just ridiculous.”
If the project overcomes the delay and is completed, the wind farm’s 43 turbines will produce 80 megawatts of electricity. NorthWestern Energy has agreed to purchase the electricity from B&H Wind, a group of 50 locals from the area who will own the turbines.
Paul Bachman, executive director of the South Dakota Wind Energy Association, said a bill to renew the tax credit is in the Senate, but isn’t expected to be acted on until after the November elections.
“We do still expect that to pass,” he said. “In the meantime, we’ve got projects in development that are in limbo until that issue is decided.”
Wind energy provides 26 percent of the electricity in South Dakota, making the state one of only six where more than 15 percent of the electricity comes from wind, according to the American Wind Energy Association. The others are Iowa, 27 percent, Kansas, 19 percent, as well as Idaho, Minnesota and North Dakota, all 16 percent.
The wind industry has invested an average of $15 billion annually in the last five years for new projects in the U.S., according to the AWEA. But growth declined significantly in 2013, when the industry added only 1,087 megawatts of power after a record 13,131 megawatts was added in 2012 – a 92 percent drop.
A total of 61,110 megawatts of wind power was being generated in the U.S. at the end of 2013, according to the AWEA.