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Small Wind Could Grow If Incentives Put On Par With Solar

| Written by John Farrell | No Comments | Updated on Jul 26, 2007 The content that follows was originally published on the Institute for Local Self-Reliance website at https://ilsr.org/small-wind-could-grow-if-incentives-put-par-solar/

The American Wind Energy Association (AWEA) recently released the results from their Small Wind Turbine Global Market Study, reporting that high up —front costs are preventing small wind systems from reaching their growth potential. The small wind industry has been experiencing annual growth in the range of 14-25% since 1985. AWEA says that Increased federal incentives could double the growth rate. While homeowners and businesses are installing solar photovoltaic (PV) at an increasing rate in the past few years, small wind is lagging.

With about 7,000 small wind systems sold last year, AWEA claims that correcting the disparity in federal incentives between solar and wind would fix the problem, and further encourage larger investments in small wind systems.

The market for small wind systems, systems with capacities less than 100kW, has not seen significant federal policy changes since 1985. While the costs of electricity produced by small wind turbines has declined nearly 40% to 10 cents/kWh, hardware costs have not changed much and still inflict a high upfront burden on the consumer.

Purchasing and installing a small wind system typically cost $3,000 – $5,000 per kW for grid-connected installation. Residential friendly systems (3-5 kW) will shave 60%-80% off the owner’s electric bill. AWEA reports current payback periods for the average wind system range from 6 to 30 years, depending upon a number of factors (wind resource quality, siting, permitting costs, prevailing energy costs, and turbine performance).

Compared to small wind, barriers in the solar PV market have been significantly lessened on the federal level. The Business Energy Tax Credit and the Residential Solar and Fuel Cell Tax Credit (with a $2,000 cap) enacted in 2005, both provide up to 30% tax credits to commercial and residential solar users. These incentive policies are credited in part to the 36% solar PV growth rate in 2006.

Adopting similar incentives for small wind would result in similar gains, according to AWEA. A study performed by Lawrence Berkeley National Laboratory in 2004 estimated that a 30% federal investment tax credit with no cap would lower average payback period of small wind projects by 4.5 years. “The advent of a 30% federal Investment Tax Credit could lead to an estimated 40% annual growth for each year the credit is in place,” claims AWEA. Cap or no cap, a 30% incentive significantly helps homeowners reduce the initial costs.

Wind and solar are often complementary technologies, used at the same project site and would benefit even further from equity in incentives. AWEA reports that, “Over 80% of all grid-connected small wind systems 10kW of capacity and less include some PV component, indicating that two technologies share similar markets.” Wind and solar hybrid systems are currently being sold for around $7,000 per kW, with increasing popularity. Solar PV costs are projected to keep falling, and in order for small wind to keep pace and hybrid technology to be more attractive, federal incentives could prove effective.

AWEA’s study consisted of a survey distributed to manufacturers, individuals, organizations and companies. Respondents identified “Economics/cost to consumer”, “Restrictive zoning and permitting rules and/or costs, and “Lack of financial incentives” as the top 3 barriers to increased adoption of the technology.

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About John Farrell

John Farrell directs the Energy Democracy initiative at the Institute for Local Self-Reliance and he develops tools that allow communities to take charge of their energy future, and pursue the maximum economic benefits of the transition to 100% renewable power. More

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