By LINDA McGURK
Indiana Correspondent

INDIANAPOLIS, Ind.—Farmers and landowners toying with the idea of putting up a small wind turbine will find new incentives in the recently passed American Recovery and Reinvestment Act.
More commonly known as President Obama’s signature stimulus bill, the new legislation will direct billions of dollars toward energy conservation and renewable energy production, including wind energy.

Prior to the passing of the stimulus bill, tax payers could claim up to $4,000 in tax credits for purchasing and installing small wind energy property (i.e. wind turbines with a rated capacity of 100 kilowatts or less). Large-scale developers of wind energy could receive a production tax credit based on the amount of electricity produced by the turbines.

From Feb. 17, 2009, to Dec. 31, 2016, the stimulus bill removes the $4,000 cap on residential wind projects and makes available up to 30 percent of the cost of investment as a tax credit. It also extends the production tax credit for three years, but allows large-scale developers who qualify for it to choose an investment tax credit instead. The investment tax credit would be available the year the facility is taken into service.

For a limited time, businesses that are eligible for this investment tax credit could instead choose to get the equivalent amount as a grant from the Treasury Department. To be eligible, construction on the project must start in 2009 or 2010, and it has to be brought online before the credit expires on Jan. 1, 2013.

Paul Jones, partner in Ice Miller Tax Practice Group, said the full impact of the stimulus bill remains to be seen, but added, “I think the intention is to make these projects happen more quickly than they were last fall when the markets tanked.”

The new provisions also broaden the scope of who may benefit from a wind energy tax credit. “I have a client who is putting up a 1.5-megawatt facility and the production credit would not be viable for him. But the investment credit makes a pretty good subsidy,” Jones said.

The investment tax credit also applies to other types of renewable energy, including solar, geothermal, fuel cells and biomass.

The interest in wind energy in Indiana is already higher than ever, with several new utility-scale facilities currently in the planning or construction stages. Although the stimulus bill doesn’t contain any direct tax credits for landowners who consider leasing farm ground to developers, they will benefit indirectly as some of the projects will likely come underway faster than expected, and leasing agreements may be affected by the tax credits.

Landowners who are approached by developers should make sure their interests are represented, according to Jones. “Our advice to landowners is that they get their own counsel, since there are a host of issues involved,” Jones said.

Jones also said the details of how to apply the stimulus bill, which passed on Feb. 17, have yet to be worked out. “It (the stimulus bill) is very complex and there’s not a lot of guidance on how some of the programs work,” he said.

Chad Martin, Purdue University renewable energy extension specialist, agreed, “It’s so new that it’s hard to know what will happen, but there’s more and more information coming out,” he said about the stimulus bill. “We are not offering suggestions or recommendations to people until we know more.”

Martin said the investment tax credit for residential wind will make it more feasible for residents in rural areas to put up small wind turbines, but other factors will still be important when determining if the project will be cost-effective, including electricity rates and wind capacity.

In Indiana, where the wind capacity is rated moderate and consumer electricity rates are relatively low, around 10 cents per kilowatt hour, the payback time for a residential wind turbine could be long.

“For some people, it isn’t necessarily a money-making proposition to put up a wind turbine, they may just be interested in contributing to greener energy production,” Martin said, adding that consumer electricity rates probably need to be closer to 20 cents per kilowatt hour for wind energy to be more economical in Indiana.

A 10-kilowatt tower generally costs $30,000-40,000, although prices are starting to come down due to the recession, Martin said.
“You can have all the stimulus money in the world but if you don’t have the wind capacity for it (a turbine) it’s not going to pay back,” he said.