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Oklahoma wind rush continues as questions remain over state incentives

Oklahoma was second only to Texas in adding wind capacity last year as the state rose to fourth place in the nation, a national trade group said Wednesday.

Oklahoma added 648 megawatts of wind capacity in 2014, pushing its total to 3,782 megawatts, the American Wind Energy Association said in its annual report. The state passed Oregon and Illinois to land in the fourth spot.

Nationally, the wind industry added 4,854 megawatts of capacity last year, four times the amount added in 2013. Still, that was well below the 13,000 megawatts added in 2012.

“The U.S. wind energy industry began to bounce back in 2014, which is great news,” Tom Kiernan, the association’s CEO, said in a conference call. “But uncertain federal policy is limiting our long-term growth.”

The United States had 65,877 megawatts of wind capacity at the end of 2014. Wind provided 4.4 percent of the electricity generated in the nation. In Oklahoma, wind accounted for almost 17 percent of the state’s electricity generation.

The wind industry continues to push for a renewal of the federal production tax credit, which offers a 2.3-cents-per-kilowatt credit for electricity generated from wind. Congress approved an extension at the end of 2014 that allowed projects to qualify if they started construction last year.

Though short, the extension allowed EDP Renewables to add another 1,000 to 1,200 of megawatts in the last part of the year, said Steve Irvin, executive vice president. Those developments are expected to come online in 2016 and 2017.

The association said the federal tax credit, along with state renewable energy goals and technology improvements, spurred a “wind rush” that has led to record low prices for wind energy.

“We’re looking at the cost of wind being half of what it was five or six years ago in many cases,” Irvin said.

The latest production tax credit estimates from Congress’ Joint Committee on Taxation put the 2014 to 2018 cost at $13.8 billion, or roughly $2.8 billion per year.

In its annual report, the wind association said the industry has invested about $100 billion in private capital since 2008 and employs more than 73,000 workers, including 4,800 in Oklahoma.

Legislature struggles with budget shortfall

In Oklahoma, state tax incentives for wind energy have been targeted by the Legislature as it grapples with a budget shortfall. Discussions continue at the Capitol about ending a five-year property tax exemption for new wind development, but keeping a half-cent per kilowatt-hour tax credit in place.

Jeff Clark, executive director of The Wind Coalition, said the industry understands the budget concerns in Oklahoma.

“We’ve stated many times we would work with them to adjust incentives to reflect their reality but also to keep the state competitive for investment,” Clark said in the conference call. “We have negotiated a solution that I hope will hold together through the end of the year, and we’re certainly working through that with the governor’s office and the House and Senate.”

The five-year property tax exemption is available for wind developers, large manufacturers and data centers. The state paid $64 million in ad valorem tax reimbursements to local authorities in 2013, with about half of that going to wind farms.

$29M in exemptions?

The Oklahoma Tax Commission estimates $29 million in property tax exemptions could go to qualified wind developments in 2014, with another $38 million this year.

By a vote of 85-3, the House on Wednesday passed Senate Bill 502, which would end the New Jobs/Investment Tax Credit for wind developers by Jan. 1, 2017. The incentive wasn’t used much by the wind industry, and the elimination isn’t expected to have any effect on the state budget, said its House sponsor, Rep. Earl Sears, R-Bartlesville.

Meanwhile, Gov. Mary Fallin has until Saturday to act on Senate Bill 808, which puts siting restrictions on wind farms. The bill wouldn’t let turbines be within 1.5 nautical miles of a school, airport or hospital. It also puts additional financial requirements on companies for the future decommissioning of old wind farms.

While the reduction in state tax incentives and additional siting restrictions in Oklahoma won’t stop development, Clark said the state might not be as attractive for some developers.

“Quite candidly, I think Oklahoma will be competitive for wind development, but I don’t think it will be as competitive as it has been historically,” Clark said. “I think it will lose projects to other states, but I think the wind resource in Oklahoma is a tremendous one.”