Wind Energy Weekly #686 Vol 15, 26 Feb 1996

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Vol. 15, #686, 26 February 1996, published by the American Wind Energy Association. The full text of the WEEKLY is available in hardcopy form for $595/year and is recommended for those with a serious commercial interest in wind (the electronic edition contains only excerpts). A monthly hardcopy publication, the WINDLETTER, more suitable for those interested in residential wind systems is included with a $50/year individual membership in the Association. AWEA's goal is to promote wind energy as a clean and environmentally superior source of electricity. Anyone sharing this goal is invited to become a member. For more information on the Association, contact AWEA, 122 C Street, NW, 4th Floor, Washington, DC 20001, USA, phone (202) 383-2500, fax (202) 383-2505, email windmail@mcimail.com. Or visit our World Wide Web site at http://www.econet.org/awea

ENERGY OUTLOOK

Survey finds new, sharp drop in support for nuclear Australian utility plans to acquire 400 MW of renewables

ENERGY POLICY

Minnesota proposal would tax carbon, lower other levies

MINNESOTA BILL WOULD TARGET CARBON EMISSIONS, SHIFT TAXES

The chairwoman of the House Tax Committee in the Minnesota Legislature and a colleague have introduced legislation that would tax carbon emissions from the burning of fossil fuels and use the revenue obtained to lower property and payroll taxes.

The Economic Efficiency and Pollution Reduction Act of 1996 (EEPRA), described as "a $1.5 billion tax shift" bill, was introduced February 6 by State Rep. Ann Rest (DFL-New Hope), who chairs the Committee, and State Sen. Steve Morse (DFL-Dakota), chairman of the Environment Subcommittee of the Senate Finance Committee.

The proposal appears to be in line with recommendations of author and businessman Paul Hawken, who proposes a series of environmental taxes in his recent book THE ECOLOGY OF COMMERCE, and with Worldwatch Institute, which also called for environmental taxes in its STATE OF THE WORLD 1996 (see WIND ENERGY WEEKLY #681, January 22, 1996).

The bill would phase in a tax of $50/ton on carbon emissions over five years. Renewable energy sources such as wind, hydro, and ethanol would be exempted from taxation, while nuclear power would be "taxed at the same rate as the average for all non- nuclear electricity," according to a fact sheet on the bill.

In introducing EEPRA, Rest and Morse acknowledged that the bill is probably too complex to become law this year. Rest, however, said she believes the concept is a "visionary" one that should be considered as the state ponders changes in its system of taxation. Democratic-Farmer-Labor legislators have been looking for ways to reduce reliance on local property taxes as a funding mechanism for local schools, and have talked about sales and business taxes as alternatives.

Roughly half of the revenue raised by the bill, the two said, would be used to lower property taxes, with the balance going toward a payroll tax rebate.

David Morris, president of the Institute for Local Self- Reliance (ILSR), a nonprofit research group based in Minneapolis and Washington, D.C., said EEPRA would increase the average family's energy costs by $220/year. But the same family, he said, would realize a tax savings of $250/year, based on an income of $25,000 and a property value of $75,000. The tax burden would fall most heavily on manufacturing plants with high energy use and low employment, Morris said.

EEPRA's specific provisions include the following:

An ILSR fact sheet outlining the reasons for the proposal and its provisions stresses the need to reorient the tax system. Currently, it says, "we tax activities that we would actually like to encourage, like employment and investment, while we undertax or do not tax at all activities we would prefer to discourage, like inefficiency, pollution, and the consumption of non-renewable imported fuels. A tax shift that increases the cost of inefficiency while reducing the cost of employment or property addresses this perverse result of our tax system."

In testimony last year before a Minnesota House Tax Committee hearing, Morris elaborated on the point: "While economists find that our present tax system raises the price of 'goods,' they also increasingly agree that our present pricing system underprices 'bads' like pollution and resource inefficiency. When we buy a gallon of gasoline or a kilowatt- hour of electricity or purchase any product, we are not paying the full environmental cost of extracting and processing that product and disposing of it. Internalizing these real environmental costs into the prices of . . . products can encourage businesses and households to become more efficient."

The proposal is limited to carbon, the fact sheet says, because "a carbon tax is easier to administer than [a series of] taxes on individual pollutants. Equally important, a carbon tax is an excellent surrogate for many kinds of pollution. For example, the single largest source of mercury emissions is coal- fired power plants. Sulfur emissions largely come from burning coal and diesel fuel. Volatile organic compound (VOC) emissions come from the evaporation of gasoline . . . "

EEPRA's $50/ton tax on carbon and accompanying tax on nuclear power will increase the cost of electricity from coal and nuclear by about 1.2 cents/kWh, the fact sheet said: "The price of gasoline will rise by 13 cents per gallon. The price of natural gas will rise by 15 cents per thousand cubic feet (Mcf). The price of fuel oil will go up by about 13 cents per gallon." Nuclear power would be taxed, it adds, because "Although nuclear power does not generate carbon emissions, it does generate significant pollution in the form of radioactive wastes, which must be stored and protected for hundreds of years."

A second fact sheet addresses one question that is likely to receive significant attention as EEPRA is debated:

"Q: Won't pollution taxes make Minnesota's industries less competitive?

"A: The fastest growing industries in most states, both in terms of jobs and sales, are the service and knowledge-intensive industries. Minnesota's largest industry is health services and medical technology. Energy-intensive and mineral extraction industries will play a diminishing role in the nation's and the state's future . . . "

Additional information about EEPRA can be found at the ILSR World Wide Web site, http://gopher.great-lakes.net:2200/partners/ILSR/ILSRhome.html

NEW POLL FINDS PESSIMISM ON OUTLOOK FOR NUCLEAR

Nuclear energy's long slide from grace with utilities is not over yet, according to a poll of power company executives and independent power producers released in early February by the Washington International Energy Group, a consulting firm.

The survey, which shows a steep drop in positive views of nuclear over the past year, suggests that nuclear is being hammered by some of the same forces related to utility restructuring as wind. While both wind and nuclear are more expensive than the cheapest fossil-fired power plants--making the short-term outlook problematic in a market that is increasingly driven by spot prices--nuclear has two added problems: (1) reactors are large and costly, requiring investments in the billion-dollar range and up; and (2) cost overruns and environmental protests make the construction of new nuclear plants extra risky from a financial point of view.

When asked "Will there be a resurgence of nuclear power?" just eight percent of respondents said yes, while 80 percent said no. This compares with 31 percent yes and 46 percent no on the same question in 1995.

To the question "Would you consider ordering a new nuclear power plant?" only two per cent of those surveyed said yes, while 89 percent said no. Again, this marks a further drop from a level of 10 percent yes, 74 percent no in 1995.

Forty-one percent of respondents said they expect to relicense reactors already operating, while 30 percent said they do not and 29 percent were not sure.

According to the report, "The sharp decline in the number of respondents expecting a resurgence of nuclear power is significant. It leaves little hope that new nuclear generation will remain an option for utilities in a time frame that has any practical significance."

Copies of the entire survey may be obtained at a cost of $45 from the Washington International Energy Group, phone (202) 331- 9820.

QUEENSLAND COMPANY TO BOOST RENEWABLES BY 400 MW BY 2010

The Queensland Transmission and Supply Corporation (QTSC) has called for the supply of 200 MW of electricity by the year 2001 from Queensland's sugar mills and has also committed to encouraging the development of other renewable energy sources with plans to purchase 400 MW of capacity by 2010, according to a report from the U.S. Department of Commerce.

Total generation for the State of Queensland is 6,600 MW. The state government will call for tenders early next year for the supply of renewable and alternative energy to produce 200 MW of power progressively over the next decade.

QTSC is one of Queensland's largest enterprises with fixed assets of A$5 billion and annual turnover of A$2 billion. The company employs 6,400 employees and supplies electricity to 1.4 million customers, mainly households, and owns 185,000 km of electricity transmission and distribution lines. It commenced operation on 1 January 1995 with a plan to coordinate and forecast the state's existing and future electricity needs. The company is a holding company for eight subsidiary corporations, responsible for major transmission and electricity distribution services in Queensland.

The group plans to sell its expertise to other Australian states and offshore, participate in competitive interstate markets, and use existing infrastructure to enter new markets as well as develop environmentally-friendly supply options.

Favorable progress has been made with the following alternative forms of energy:


                              NEWS
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              *             from the               *
              *  AMERICAN WIND ENERGY ASSOCIATION  *
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For immediate release - May 30, 1996 Contact: Randall Swisher or Jessica Maier, (202) 383-2500

STATEMENT OF RANDALL SWISHER EXECUTIVE DIRECTOR, AMERICAN WIND ENERGY ASSOCIATION ON KENETECH WINDPOWER'S BANKRUPTCY FILING

The American Wind Energy Association (AWEA) is saddened by Kenetech Windpower's filing for bankruptcy protection.

Kenetech Windpower has been a leader in wind energy in the United States and in the world since 1980, when it first began installing wind power plants in northern California. Its present financial difficulties are a clear signal that America is in danger of losing out in a rapidly-growing, multi-billion-dollar global energy market that it dominated during the 1980s. Unfortunately, that danger is heightened by constantly shifting federal energy policies and a domestic playing field where the rules are written by the established energy interests of today to stifle those of tomorrow.

Wind energy is one of the great technology success stories of the past decade--costs have plummeted by more than 80 percent since the early '80s. Now the world market for wind turbines is taking off, as European nations give strong backing to renewable energy and overall energy demand surges in the developing world:

The U.S. should be mobilizing a coordinated effort between government and industry to capture a share of this market, which is expected to grow steadily through at least the first third of the next century as energy demand increases and environmental concerns mount. Instead, federal lawmakers and regulators have undercut the domestic industry with a series of cross-cutting and misguided decisions. In 1995 alone,

At this writing, the U.S. is virtually the only industrialized nation whose government is failing to effectively support domestic wind energy development as a foundation for improved international competitiveness in the future. Even India is moving ahead of America, installing nine times as much capacity as the U.S. did in 1995.

Responsibility for Kenetech's problems cannot be laid solely at the feet of the federal government. As Kenetech has acknowledged, its most recent turbine, the 33-KVS, had many problems. But this technical failure is in striking contrast to the performance record of a host of U.S. and European wind turbine manufacturers, whose strong, consistent performance over the last decade has contributed greatly to the growing worldwide interest in wind energy technology. Kenetech's failure should in no way be taken as a failure of the wind industry as a whole.

Despite Kenetech's missteps, the fact remains that our government's inconsistent policies and its overwhelming emphasis on short-term fixes to problems at the expense of long-term policies has made managing a growing company in the renewable energy business far more difficult than it should be.

For America's wind industry to prosper and compete effectively in the growing world market, the following policies must be pursued, and pursued consistently, over at least the next decade:

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AWEA, formed in 1974, is the national trade association of the U.S. wind energy industry. AWEA's membership of over 800 includes turbine and component manufacturers, project developers, utilities, academicians, and interested individuals from 49 states.

Information and policy resources are available through AWEA's World Wide Web site at http://www.econet.org/awea

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