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Maple Ridge wind farm on the Tug Hill Plateau
Maple Ridge wind farm on the Tug Hill Plateau

Wind power facing economic headwinds

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A recent report from the agency that monitors New York's electric grid says the state can quintuple the amount of wind power pulsing through the system by 2018. But wind developers say the chances of hitting that mark are slim.

Wind farms are having trouble making profits for their owners. As the Innovation Trail's Zack Seward reports, more incentives may be needed if the state wants to meet its renewable energy goals.

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If you want to build a wind farm in New York state, a good place to start is with Robert Burgdorf.

BURGDORF: Developing a wind project is (chuckle) not for the faint of heart to begin with, but New York is particularly difficult.

Burgdorf is lawyer at Nixon Peabody, a law firm that's worked on several-dozen large scale wind projects, most of them in the Northeast.

Burgdorf's biggest challenge is navigating the dozen or so federal, state and local agencies that his clients have to go through to get their turbines spinning.

But once the regulatory hurdles are cleared, then comes the marketplace.

Federal and state incentives for alternative energy are out there. New York has a goal of getting 30 percent of its electricity from renewable sources by 2015. We're more than two-thirds of the way there, but only 1 percent is from wind.

NYSERDA, the state agency that sweetens the pot for energy projects, put out 200 million dollars of state money last spring, some of which went to large-scale wind farms.

But wind companies eyeing development in New York say the pot's not sweet enough. Developers want assurances that they can make money once the wind farms are built.

Otherwise, lawyer Burgdorf says, the state's lofty renewable energy goals may remain out of reach.

BURGDORF: What the developer is looking for is price certainty. And in Canada for instance they have this feed in tariff where the developer knows they will get X dollars per megawatt/hour for a certain period of time and from that they can model the finances, they can know whether the projects going to be successful and they know they can get financing.

MACDOUGALL My name's Jim MacDougall. I'm the manager of the feed in tariff program at the Ontario Power Authority.

Ontario's feed-in-tariff program is one year old, and so far it's been met with both praise and controversy.

The set price the province pays wind developers is more than two times the wholesale rate for electricity, and the wind farms get a 20 year contract with the government.

MACDOUGALL: In exchange for that we're getting the economic stimulus and the job creation that the government had tried to put in place as a result of introducing the feed in tariff in the province.

Experts say feed-in-tariffs are good at stirring up interest and getting projects moving. Wind developers rushed for Ontario's program, in the end offering three times more than what the province could handle.

But feed-in-tariffs don't come without a cost. Sandip Sen is the head of alternative energy at Citigroup.

SEN: You'll either pay for it in the form of higher taxes because the government will need to at some point pay back its debt. Or you'll pay for it in the form of higher power prices.

Citi's Sen says the Northeast is one of the toughest markets for wind, and that developers on this side of the border need the help. Geography and permitting are big challenges in New York, but economic factors are also working against wind. "The down economy means that the price of power is low, making wind projects relatively more expensive" according to Sen.

SEN: If you will the revenue line item for a wind project and/or renewable project at this point is facing headwinds.

Sen says it's federal policies that are really driving alternative energy development these days. A key grant program that pays up to a third of the cost of a wind project is set to expire at the end of the year. But the future of that program is uncertain.

In Rochester, I'm Zack Seward.

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