“The subsidies distort the energy market, and unless we can get that under control, the chance of ever lowering … or capping electrical rates for all Kansans will be impossible.”
“The estimated cost of decommissioning the current batch of turbines is around $4 Billion dollars. And with the expansion of solar facilities, the cost will be even higher. Who will pay for that? The state? The counties? The landowners? The wind companies? Nobody knows…”
The federal Production Tax Credit for industrial wind turbines (extended 13 times since 1992) gets much of the credit for birthing and expanding a wholly unnecessary, environmentally invasive industry. But state tax favors compound the distortion, turning uneconomic, inferior energies into profit-makers.
Here is the story of Kansas’s state property tax exemption for industrial wind turbines as told by Kansas Senator Mike Thompson (District 10). His testimony was filed on behalf of SB 374, which he sponsored to end the property tax exemption on renewables in the state.
A major excerpt follows:
The renewable energy industry is now a mature industry that has been receiving exemptions from property taxes in Kansas since 1999.
There are now close to 4,000 wind turbines across the state with another 6,500 on the drawing board. And, industrial scale solar installations will be expanding rapidly across the state as EVERGY has stated in their Sustainable Transformation Plan.
We are bending over backward to subsidize multi-national, multi-billion dollar companies that are using our state to create a giant industrial scale revenue source for their purposes, until it becomes unprofitable…at which point they will leave us stuck with the cost of decommissioning all of these facilities…for which there is no current plan.
The estimated cost of decommissioning the current batch of turbines is around $4 Billion dollars. And with the expansion of solar facilities, the cost will be even higher. Who will pay for that? The state? The counties? The landowners? The wind companies? Nobody knows…but we had better start saving up some cash in case we do.
Currently, these facilities pay what is called Payment in Lieu of Taxes (PILOT) which is a mere fraction of what they would pay in property taxes. Unfortunately, this was originally done to promote the proliferation of these industries in Kansas. And, as a result of these extremely favorable and welcoming tax structures, we have seen renewables explode in this state at the expense of our reliable base load sources of electricity.
Kansas electrical prices went from below the national average in 2002 before these renewables hit the scene in a big way…to above the national average due to the installation of these industrial scale turbines. And, Kansans now have the highest average electrical prices in our region to show for it.
The wind industry claims they make up for the unpaid property taxes with … PILOT funds. PILOT funds do not work for several reasons:
1) Negotiated at the County level and thus the dollar amounts vary wildly across the state
2) Counties are not required to share these funds with schools
3) PILOT funds can be “cut off” at any time since they are not regulated
4) Most importantly PILOT funds paid are an estimated $96 million less than what should be paid
In Linn County there is a power plant located in LaCygne that generates $15,888,000 in property taxes per year, close to $7 million of that goes directly to the school system. In neighboring Allen County, there is an Industrial Wind Development that is paying only $250,000 in PILOT funds. Per the Kansas Department of Revenue figures indicate they should be paying almost $4 million in property taxes. Let’s look at the Waverly wind facility in Coffey County for another example.
This wind project began paying PILOTs to Coffey County in 2015. As of 2021 the developers/owners of the Waverly Wind Farm have paid Coffey County $3,127,000 in lieu of property taxes. If you break that down, each turbine with an original cost of nearly $4 million dollars… has paid approximately $5,809.00 per year to the county.
In comparison, I pay $6,800.00 in property taxes for my home in Johnson County which I built in 2002! I pay $1,000.00 more per year in property taxes than a turbine that costs at least 8 times more than my home! In 2016, according to the Waverly Wind Farm website, the original investment in the 90 turbines was $338,000,000, meaning that each turbine originally cost $3.7 million apiece. Under current Kansas law, these turbines are exempt from paying property taxes for 10 years.
They are also allowed to fully depreciate within 7 years…so that once they finally start paying property tax, they will be fully depreciated. That ensures that these industrial scale facilities will continue to receive tax breaks that you and I never have an opportunity to receive.
If you are like me, your home valuations continue to climb each year and your property tax keeps climbing. But these depreciated turbines will never fully participate in contributing to our cities, states and counties…so that taxpayers like you and I have to pay MORE in property taxes than we should if these big wind companies would pay the full tax.
A research article published in 2017 shows the loss to Kansas counties and schools due to the fact that these facilities pay PILOTs instead of property tax, shows Kansans were shortchanged by $59.8 million dollars in 2017 alone. Here is a link to the article:https://investigatemidwest.org/…/rush-to-attract-wind…/
In addition to the property tax breaks, these industries receive massive Federal production tax credits and investment tax credits that make it possible for these facilities to earn money without producing any electricity at all. In contrast to the Kansas oil and gas industry, which is taxed 5 times on each barrel of oil, I can think of 5 ways in which we subsidize renewables before they even produce any electricity!
In contrast to our reliable energy sources such as nuclear, gas, and coal, there are many times when wind installations use more electricity than they produce. In fact, even in the windiest parts of Kansas, there may only be 1 or 2 days per year when these turbines produce their rated capacity (their listed nameplate capacity).
In other words, they almost NEVER produce the amount of electricity they are supposed to produce. Why should we subsidize an energy source that is not available on demand, increases costs, decreases reliability, and undermines our reliable sources of energy? It makes no sense, but that is what we are doing!
On top of that, these facilities engage in virtual power purchase agreements that act as backdoor funding mechanisms. Let me explain how that works. Some distant company decides they want a tax credit for investing in renewable energy. They can engage in a virtual power purchase agreement with a Kansas wind farm or solar facility … which will receive the money from that distant company. The distant company will get a tax credit … but may never get one kilowatt of electricity from the facility.
In fact, it’s likely that none of the electricity generated by the wind or solar facilities will reach their intended destination. Instead, those companies still get their power from a coal or gas plant but get a tax credit for subsidizing the “renewable” plant.
I would love to get a deal like that…do nothing but still get paid.
As you can see, there are multiple ways these facilities make money before they ever produce electricity. But with these heavy subsidies, when they do produce electricity, they force the wholesale price of electricity so low that our base load plants that supply us with electricity 24/7 must operate at a loss. That is one reason why investor-owned utilities like EVERGY are forced to retire plants that are being underutilized.
The subsidies distort the energy market, and unless we can get that under control, the chance of ever lowering…or capping electrical rates for all Kansans will be impossible.
You will hear the wind company claim that they create jobs, but once the construction phase of a wind farm is over, few permanent jobs are ever created.
Permanent Wind projects account for 0.1 jobs per MW on average according to Duke Energy and Wyoming Utilities. Kansas produces 7,016 MW of wind energy per year which equals 701 permanent jobs! Wind companies, however, are reporting 5,001 to 6,000 jobs! Looking at it a different way, the US Bureau of Labor reports “Wind Technician” jobs for some states but not Kansas. Technicians make up about ½ of the permanent wind labor force.
Texas has 1,600 technicians and it generates almost five times more Megawatts than Kansas. Oklahoma who generates 25% more than Kansas has 380 technicians. Yet wind reports over 5,500 jobs which would be 2,750 technicians. The wind company numbers are overinflated.