Fiscal and economic impacts of state incentives for wind energy development in the Western United States

Abstract

Wind energy production in the United States has seen significant growth over recent years due, in large part, to the state and federal policies designed to encourage wind energy development. This research focuses on measures undertaken at the state level in the western region of the United States. Several of these states have implemented legislation in the form of financial incentives and renewable portfolio standards to support wind development. It is shown that state tax incentives and physical drivers have a significant positive impact on wind energy growth. There has been concern, however, about the fiscal impacts of financial incentives on state tax revenues. As a result, some states have removed tax incentives. A recent example is the removal of sales and use tax rebates for wind producers in Idaho. However, the removal of such incentives results in a net loss of tax revenues as well as negative economic impacts by hindering the development of wind energy projects. It is shown that attendant economic benefits from wind development results in significant positive fiscal impacts by increasing tax revenues for state and local governments. The increased tax revenues begin with the pre-construction and construction phases of such projects and continue to accrue throughout the life of project operations until eventual decommissioning. The removal of this incentive in Idaho results in a net reduction in tax revenues as well as the loss of significant economic benefits in terms of employment, incomes, and total output for the State.