Wind Power 1 Wind PowerLiterature Review and Current State of Affairs in VermontSusan SkalkaMarch 25th, 2008Wind Power 2 Introduction and Overview of the Emerging Wind IndustryThe idea of understanding certain assets as public and part of ‘The Commons’ in order tothen extract value for the public in terms of public revenue and conservation is gaining recognition in policy discussions, as the syllabus for PA 395/NR 385-Valuing Common Assets for Public Finance in Vermont states. Quantitative research on the value of common assets is needed to provide policy makers with the details needed for policy discussions. The growing wind power industry is a potential source of public revenue. Humans have been harnessing the power of the wind since the 1st century A.D.1, but in recent years new technology has made windmills much more efficient at transforming wind energy into electricity. Globally, wind energy contributes only 1% of the world's electricity used, but its production increased five-fold between 2000 and 20072, and the World Wind Energy Association expects that we will see a net growth rate of 21% per year over the next few years. The American Wind Energy Association predicts that by 2020, 5% of the U.S.'s energy will come from wind power, which would make wind power equivalent with hydropower in terms of its share of production.3 This paper will review the literature and existing situation as related to the wind industry with a particular focus on Vermont. Beginning with a theoretical overview, we will then look at the industry and existing taxes and subsidies in the U.S. before turning to the wind industry and the current management and regulatory structure in Vermont. A second paper will rely on this 1 A.G. Drachmann, "Heron's Windmill", Centaurus, 7 (1961), pp. 145-151 (From Wikipedia).2Global Wind Energy Council website. (n.d.) Retrieved 3.9.08 from http://www.gwec.net/index.php?id=28.3 American Wind Energy Association website. (n.d.) Retrieved 3.9.08 from http://www.awea.org/faq/index.html.Wind Power 3 background information to analyze potential methods of extracting public revenue from this industry in Vermont. Theoretical Overview Before turning to a more specific discussion of the wind industry in Vermont, it is important to examine some of the theoretical underpinnings of this conversation as related to the concept of 'The Commons'. The Commons is commonly defined as all the creation of nature and society that we inherit jointly and freely, and hold in trust for future generations.4 Wind is a natural asset because no human can rightly claim to have created it. In this sense it is like sunlight, air, and surface water. Common assets are the parts of the ‘The Commons’ that have a market value. The energy of the wind has a market value when that energy is transformed into electricity or other usable outputs. The concept of 'excludability' is important in this conversation as well. A good is excludable if it is possible to prevent those who haven't paid for its use from using it. The wind itself is not excludable. If I wanted to fly a kite or sail a sailboat, I wouldn't have to pay anyone to use the wind. However, in order to harness the power of the wind to create electricity, I need a windturbine and land to put it on, just as I would need a dam in order to create hydropower. In this sense,the flow of wind across land is quite similar in concept to the flow of a river across property. Just asa dam could be built on property to create electricity through hydropower, windmills can be built onland to generate wind power. Note that wind is measured as a flow and not as a stock. That is to say, it is measured as units over time (e.g. miles per hour) not as a quantity at a point in time. In the case4 On the Commons.org. Retrieved 3.17.2008 from http://www.uvm.edu/~gflomenh/PA395-CMN-ASSTS/CA-notes08.html.Wind Power 4 of the wind, turbines on one piece of property may have less influence on the flow of wind on the downwind piece of property than the building of a dam has on flow of the river across the downstream properties. Surface water is already legally considered part of the commons; wind flowing across property may not be treated that way yet. Just as land that has oil or mineral reserves under it, or streams flowing across it, is valuable, it has already been shown that land with the potential to generate energy from wind is increasing in value. For instance, the price of land in Kern County California went from $300 to $1000 per acre when the land was declared a wind energy zone.5 One can imagine a situation in which energy from wind become increasingly valuable, for instance (and dramatically), imagine a post-apocalyptic world where all the oil and coal is gone and the sun is blocked out by dust and the only way to generate power is from the wind. The land on which to put the windmills would be incredibly valuable. This would drive up the price of the land and the amount of rent that could be charged for putting turbines on the land. This would translate into economic rent being made by the land owners - essentially unearned because they would have done nothing to produce the extra revenue. Another consideration that has come up as related to wind power is that of its effect on the aesthetics of an area and the related effect on property values. The beauty of a place is something that does have value, and which is shared by all. Some argue that wind turbines reduce the aesthetic appear of a place, and decrease property value. However, others point out that not everyone agrees that wind turbines are unattractive, and that it is just a matter of getting used to them. In fact, some people find them to be “beautiful kinetic sculptures6” that represent the 5 Phoenix Economic Development Group, ECONorthwest. (November 2002). “Economic Impacts of Wind Power in Kittitas County”. Retrieved 3.9.08 from http://www.catenergy.com/pdf%20files/Kittitas%20Wind%20final.pdf.6 Nadeau, Lynn. Marblehead Reporter. 8.17.2005. Retrieved 3.17.2008 from http://www.wickedlocal.com/marblehead/archive/x902707695Wind Power 5 goodness of renewable energy. Power transmission lines are ubiquitous and yet we almost don't see them anymore. This is not to mention the relative attractiveness of a strip mine, oil refinery or power plant. In any case, this is a consideration that often comes up, even though it is quite arguable. Some studies, for
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