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How Wind Power Works

Government Incentives

Government incentives for both large- and small-scale producers contribute to the economic feasibility of a wind-power system. Just a few of the current economic incentive programs for renewable energy systems include:

  • Production Tax Credit: Basically, wind-power generators, usually businesses, receive 1.8 cents (as of Dec. 2005) per kWh of wind energy produced for wholesale distribution during the first 10 years the wind farm is up and running.

  • Net metering - In this system, individuals and businesses producing renewable energy receive credits for each kWh they produce beyond their own needs. When someone produces more electricity than he needs, his power meter runs backwards, sending that excess electricity to the power grid. He receives credits for the electricity he sends to the grid, which count as payment toward any electricity he draws from the grid when his turbine can't provide enough power for his home or business. (Many large energy companies don't much care for this setup since they are essentially purchasing the individual producer's wind power at retail price instead of the wholesale price they'd be paying a wind farm.)

  • Renewable-energy credits - Many states now have renewable-energy quotas for power companies, whereby those companies have to buy a certain percentage of their electricity from renewable sources. If someone with his own turbine lives in a state that has a "green credit program," he receives tradable credits for each megawatt-hour of renewable energy he produces in a year. He can then sell those credits to large, conventional-energy companies looking to meet their state or federal renewable-energy quota.

  • Installation tax credits: The federal government and some states offer tax credits for the costs of setting up a renewable-energy system. Maryland, for instance, offers businesses or landlords a credit for 25 percent of the cost of purchasing and installing a wind-turbine system if the energy-supplied building meets certain overall "green criteria."

a residential wind turbine and a utility-scale wind turbine
Photo courtesy NREL (left) and stock.xchng
Residential wind turbine (left) and utility-scale wind turbine

While wind energy is still subsidized by the government, it is currently a competitive product and, by most accounts, can stand on its own as a viable power source. The Battelle Pacific Northwest Laboratory, a U.S. Department of Energy science and technology lab, estimates that wind power is capable of supplying 20 percent of the United States' electricity based on wind resources alone. The American Wind Energy Association puts that number at a theoretical 100 percent. Whichever estimate is right, the United States probably won't be seeing those percentages anytime soon. The American Wind Energy Association projects that by 2020, wind will provide 6 percent of all U.S. electricity. While the United States has one of the largest installed wind-power bases in the world in terms of sheer wattage, percentage-wise, it is lagging behind other developed countries. The United Kingdom has a stated goal of 10 percent wind power by 2010. Germany currently generates 8 percent of its power from wind, and Spain is at 6 percent. Denmark, the world leader in clean-energy consumption, gets more than 20 percent of its electricity from wind.

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