Oregon offers some of the most generous incentives in the country for developing wind farms such as this one near the Columbia River in eastern Oregon. Developers say the subsidies are crucial to investing in Oregon, but an analysis by The Oregonian suggests many of the projects would eventually be built to satisfy regional renewable-energy mandates, with or without tax credits. When Gov. Ted Kulongoski vetoed a bill this summer that would have slashed Oregon’s tax subsidies for large wind farms, he insisted the reduction went too far and would jeopardize the growth of Oregon’s green economy.
But during the past eight years, while the state has taken applications for $300 million in tax breaks to subsidize the development of the windiest, most transmission-accessible sites, it has yet to do any substantive analysis of how big a subsidy is necessary — if any — to continue attracting investments.
View full sizeWind developers such as Iberdrola Renewables, the largest developer of wind farms in the state, say the Business Energy Tax Credit is a decisive draw for them as Oregon competes in a 50-state marketplace. That sentiment is echoed by rural counties, which insist the jobs and tax revenue from wind development are the only thing blowing their way these days.
In contrast, the state’s biggest utilities, Portland General Electric and Pacific Power — which can use the credits to reduce customers’ rates — say the BETC has little or no impact on where they build. And critics argue the state is lavishing scarce tax dollars, more needed for schools and other state services, on a maturing industry that already enjoys substantial federal and local subsidies.
The truth is, there are many factors that drive developers’ siting decisions. But an analysis by The Oregonian suggests the tax credits probably come near the bottom of the list.
Mandated demand for renewable power, viable winds, nearby transmission and proximity to markets with high energy prices such as California drive development. While the BETC certainly has accelerated wind power in Oregon, taxpayers are subsidizing many projects that eventually would be built anyway. Consider:
Even at the reduced level the Legislature was contemplating and Kulongoski vetoed — reducing the maximum tax credits for large wind farms from $11 million to $3.5 million per project — Oregon’s BETC would remain one of the most generous wind farm subsidies of its kind in the nation.
Rules requiring renewable energy production in Oregon, Washington and California have collectively created one of the largest mandatory markets for green power in the country — one that will continue to grow for the next 15 years. Meanwhile, the bulk of the power generated by subsidized wind projects in Oregon is being shipped out of state.
Property taxes are lower in Washington, which gives the state a competitive advantage for investments save for Oregon’s tax credits, developers say. But property tax exemptions in Oregon help level that playing field, and counties and inidual landowners have discretion to negotiate fees to make projects more competitive.
This month, Kulongoski ordered a hurry-up analysis on whether the BETC is necessary for renewable energy projects, specifically wind energy. He wants the feedback before the Legislature meets in February.
Sen. Ginny Burdick, D-Portland, a sponsor of the original bill, says she has no problem with the basic strategy of providing incentives.
“But we’re greatly oversubsidizing these things and the benefits are flowing to California ratepayers,” she said. “I don’t think that’s what Oregon taxpayers signed up for.”
Cash on the table
Oregon’s Business Energy Tax Credit isn’t unique. North Dakota offers a more lucrative subsidy, and North Carolina has a smaller but similar incentive. But among front-running states in the country’s wind boom, Oregon’s is the subsidy to beat.
Texas, for example, offers an exemption from its state franchise tax, though state officials say Lone Star State coffers are forgoing little revenue associated with wind farms. Iowa, another leader, offers a production …
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