A Survey of State Support for Community Wind Power Development

Though historically confined to Europe, "community wind" projects – i.e., locally owned, utility-scale wind projects interconnected on either side of the meter – are a topic of increasing interest in the United States, not just among farmers and other potential local investors, but also among state policymakers interested in renewable energy. Several states are currently supporting community wind in a variety of ways, leading to the development of different types of projects. For example, Minnesota supports community wind by creating demand for renewables among the state's utilities, and by encouraging supply through cash production incentives for small wind projects selling power to third parties. As a result, community wind in Minnesota is dominated by projects that sell power to utilities through long-term contracts. Just across the border in Iowa, meanwhile, no size limit on net metering has led to behind-the-meter utility-scale wind projects (most often sited at public schools) as the dominant form of community wind development. In Massachusetts, a new collaborative effort focusing on towns and cities will likely lead to municipal-owned projects (on either side of the meter). Experience in these and other states demonstrates that, with an array of incentives and creative financing schemes targeted at small projects in place, there are opportunities to make community wind work. Where individual local investors are involved (primarily in Minnesota, to date), the potential availability of federal tax-based incentives has motivated the use of innovative ownership structures to maximize both state and federal incentives. One such structure seeks to distribute ownership across enough local investors such that they can collectively utilize the full value of federal tax credits. Another brings in a tax-motivated equity partner to utilize the federal credits in the project's early years, and then "flip" project ownership to local investors thereafter. With a number of these replicable ownership models now being successfully demonstrated and documented, and with the policy support of an increasing number of states, community wind in the United States may be approaching a "tipping point."