South Dakota Wind Facts

South Dakota has the wind potential to power 50% of the nation’s electrical demands, yet few are taking advantage of it. South Dakota’s current wind production of 98 MW barely scratches the surface.

However, South Dakota does not have the transmission infrastructure or the policies that are favorable to renewable fuels like its neighboring states. Lawmakers are working to combat these problems and to introduce legislation that promotes wind energy production. A new law allows South Dakota’s Public Utilities Commission to participate in the Midwest Renewable Energy Tracking System designed to track the trade and sale of renewable energy credits. This gives South Dakota wind producers the opportunity to sell their wind power and their renewable energy credits to utilities, businesses or individuals interested in supporting renewable energy. Property tax and excise tax incentives are in place to encourage further growth.

Although South Dakota’s transmission lines are at capacity with no room for growth, there is a plan in place to upgrade transmission lines from border communities through Minnesota. This plan has the capabilities of transporting wind energy from South Dakota to Minneapolis and Chicago. Currently, the South Dakota Public Utilities Commission is reviewing three proposed transmission line projects that have hundreds of megawatts of capacity. Three transmission lines are proposed in Brookings county, three in Grant and Deuel counties, and one running from Brandon, South Dakota to the Minnesota border.

South Dakota wind facts as of January 2008:
• Total installed wind energy capacity (MW): 98
• Current wind energy capacity under construction (MW): 90
• Total wind energy potential (Billions of kWh/year): 1,030
• Average potential power output (MW): 117,200
• Ranks 4th in US for potential wind energy output.
• Ranks 17th in US for current wind energy output.

Financial Incentives

Small Commercial Wind Energy Property Tax Assessment:
Commercial wind facilities with less than 5 MW nameplate capacity are assessed at the local level. A property value assessment only takes into account the base, foundation, tower, and substantiations, not the wind turbine or blades. Also, wind energy companies are not subject to discretionary property tax formulas.

Large Commercial Wind Exemption and Alternative Taxes:
Legislation enacted in March 2008 exempts wind farms with nameplate capacities of 5 MW or greater from all taxes on real and personal property levied by the state, counties, municipalities, schools, and other political subdivisions. In lieu of these taxes, facilities pay alternative annual taxes of $3/kW of capacity and 2% of the gross receipts of the wind farm. To qualify for this alternative taxation, wind developments must be constructed after July 1, 2007.

To encourage construction of new transmission capabilities, a partial rebate is available to developments that also construct transmission lines to serve their wind farm facilities. The total rebate cannot exceed 50% of the combined cost of the transmission lines and wind farm collector system. The maximum rebate in one year is 90% of the gross receipts tax for the first 5 years and 50% of the gross receipts tax for the next 5 years. No rebates will be issued after this 10-year period. Up to 80% of the rebate may be issued in the form of a tax credit in lieu of full payment of the gross receipts tax.

Renewable Energy Systems Exemption:
This property tax exemption applies to wind energy systems on residential and commercial property, so long as it does not produce energy for re-sale. The property tax exemption includes any federal renewable energy income tax credit that is applicable at the time the owner begins the assessment.

Residential Systems:
• Applies to the entire assessed value, can be transferred when the property is sold.

Commercial Systems:
• Applicable to 50% of the installed cost, cannot be transferred when the property is sold.
• Can claim exemption for three years after installation.
• After three years, a portion can be claimed for an additional three years in accordance to the following:
• Year 1: 75% of the exemption
• Year 2: 50% of the exemption
• Year 3: 25% of the exemption

Reduced Excise Tax:
Contractor’s excise tax is reduced from 2% to 1% for wind generation facilities that produce more than 10MW. No exemption or refund is given for sales or use taxes.