Publications: Wind Energy: Will It Benefit Your Municipality?

It is clear that the United States as well as other countries around the world will increasingly be using wind energy. It is a relatively low cost form of energy and will certainly help alleviate this country’s dependence on foreign oil. Current American wind farms will generate just over one percent of U.S. electricity powering the equivalent of over 4.5 million homes. However, that can be expected to grow over the next several years.

T. Boone Pickens, a billionaire and legend in the oil and gas business, has said that “The United States is the Saudi Arabia of wind power.”¹ He points out that 20% of America’s electricity could come from wind. He further points out that the development of wind power is an investment in America that holds the promise of creating high-skill jobs for thousands of Americans who would be employed in the manufacture of turbines and blades. A 2005 Sanford University study found that there is enough wind power worldwide to satisfy global demand seven times over – even if only 20% of wind power could be captured.² American wind farms will produce an estimated 48 billion kilowatt hours of wind energy in 2008.³ The American Wind Energy Association explains that one megawatt of electricity can power 250 to 300 homes. In Illinois, at the end of 2008, the power capacity was 1,000 megawatts with projects under construction which will provide an additional 171 megawatts. Illinois ranks eighth in the United States in existing capacity.

There is no question that wind energy will continue to be developed in the United States and that its growth and development will create jobs and also an alternative and cheaper form of energy. For municipalities the issue becomes how can it be of benefit to the community and what are the sources of local regulation?

On one level alternative forms of energy such as wind energy can reduce costs for municipalities in the same way that costs can be reduced for home owners and businesses. It simply becomes cheaper to operate provided there is a legal mechanism for offsetting the costs between the electricity provided in the traditional manner from a utility company and the electricity provided by wind energy. Utility companies themselves will benefit from wind energy by having an alternative source of power.

On another level small wind turbines can directly benefit the home owner or business. The small wind turbines were common on farms and ranches across the Midwestern United States before rural electrification programs. Wind generators power lights, radios and kitchen appliances in rural areas. Small turbines contribute a larger public benefit by reducing demand on utility systems now supplied primarily by centralized fossil fuel plants.⁴ Small turbines or small wind energy conversion systems are variously described but generally consist of a wind turbine, one tower, support system, blades and associated controls and conversion electronics which has a rated capacity of 10 to 100 kilowatts and a height of 35 feet or more up to 100 feet or even 200 feet.⁵ Miniwind energy conversion systems (miniwecs) are generally at a height of 35 feet or less and have a rated capacity of less than 10 kilowatts.⁶

Illinois Legislation

Illinois legislation currently allows municipalities to regulate “wind farms.” Section 11-13-26 of the Municipal Code, 65 ILCS 5/11-13-26 provides municipalities with authority to “regulate wind farms and electric generating wind devices within its zoning jurisdiction and within the 1.5 mile radius surrounding the municipality’s zoning jurisdiction.” This legislation became effective on August 16, 2007. Pursuant to this legislation, municipalities have been drafting zoning ordinances governing wind farms and electric generating wind devices.

In addition, Section 16-107.5 of the Public Utilities Act allows for what is termed “net electricity metering.”⁷ This legislation permits an “eligible customer” to have the benefit of net metering. The term “‘net electricity metering’ or ‘net metering’ means the measurement, during the billing period applicable to an eligible customer, of the net amount of electricity supplied by an electricity provider to the customer’s premises or provided to the electricity provider by the customer.” Section 16-107.5(b). In effect, the electricity provider charges the customer for the “net electricity supplied.”

If the amount of electricity used by the customer during the billing period exceeds the amount of electricity produced by the customer, the electricity provider charges for the net electricity supplied to and used by the customer. On the other hand if the amount of electricity produced by the customer during the billing period exceeds the amount of electricity used by the customer during that billing period the electricity provider supplying the customer supplies a credit to a subsequent bill for service to the customer for the net electricity supplied to the electricity provider. Section 16-107.5 (d)(1)(2). However, the statute does not provide that municipalities qualify as “eligible customers” within the meaning of the Act.⁸ Legislation has been proposed to rectify this situation but it went back to the Rules Committee and has died there.

In addition, Section 11-15.3-1 (of the Municipal Code 65 ILCS 5/11-15.3-1) provides that a municipality may own and operate a wind generation turbine farm, “either individually or jointly with another unit of local government, school district, or community college district that is authorized to own and operate a wind generation turbine farm, that directly or indirectly reduces the energy or other operating costs of the municipality.”⁹

This legislation gives a municipality either individually or jointly with other units of local government pursuant to an intergovernmental agreement, authority to develop a wind generation turbine farm. This would allow municipalities in conjunction with other local government bodies including school districts and community college districts to own and operate their own wind farms in order to reduce the energy costs of the municipality.

In this regard there are issues which have to be resolved, such as how the wind energy would be transmitted to the various local government entities from the wind farm. This would be especially true if the wind farm was located in a distant part of the state. Furthermore, the cost and expense of creating a wind farm can be enormous, running into the hundreds of millions of dollars. It should be noted that the legislation does provide that the unit of local government may ask for the assistance of any state agency including the Department of Commerce and Economic Opportunity, the Illinois Power Agency, or the Environmental Protection Agency in obtaining financing options for a wind generation turbine farm. It will be important for municipalities to see how this legislation is carried out in the near future.

Environmental Concerns

In addition there are environmental concerns. One must take into consideration the impact wind farms might have on the environment. Many zoning ordinances dealing with this subject have provisions related to raptors or birds of prey. The Bald and Golden Eagle Protection Act, 16 U.S.C. Section 668 (A), protects against harming a bald or golden eagle “knowingly or with wanton disregard for the consequences.”

Likewise, the Migratory Bird Treaty Act, 16 U.S.C. Sections 704, 712 and the Coastal Zone Management Act, 16 U.S.C. Section 1452, require an environmental plan to be approved in regard to the siting of electrical generator facilities. The “facilities shall be erected upon the sites selected to have the least adverse effects practicable on areas used for spawning, nesting, and seasonal migration of wild life species.”

A lawsuit filed in December 2007 by the Coastal Habitat Alliance was brought to enjoin construction of wind farms off of the Texas coast for violating these environmental standards. Coastal Habitat Alliance v. Patterson, United States District Court for Western District of Texas, Austin Division, AO7 CA 985ly (December 4, 2007).

Drafting A Zoning Ordinance

Pursuant to the legislation provided in the Illinois Municipal Code¹⁰ and for home rule municipalities pursuant to their home rule authority, municipalities have the authority to pass zoning ordinances which regulate wind energy conversion systems. These zoning ordinances require very careful consideration because of a variety of competing interests. For example, in some communities there is great resistance to the idea of having wind turbines 200 to 400 feet in the air with large rotating blades. In the case of Ecogen LLC v. Town of Italy¹¹ a wind farm developer sued the town under Section 1983 of the Civil Rights Act seeking relief from a moratorium prohibiting construction of windmills. The federal district upheld the moratorium even though it had extended to two years stating the following:

“The development of wind power projects, which convert wind energy into electricity, seems to be on the upswing in this country but that growth has not been universally welcomed…” See e.g. Felicity Barringer, “Debate of Wind Power Creates Environmental Rift,” New York Times, June 6, 2006 at p.18.

As in Don Quixote, where one person sees a windmill another sees a ‘monstrous giant’ looming over the countryside. This case involves one such proposed project that has met with local opposition.”

Specific Provisions Of A Zoning Code

The specific provisions of a zoning code should provide for the following:

1. Set Back Requirements. This includes set back requirements from adjacent property lines as well as overhead utility or transmission lines.

2. Noise Standards. The issue of noise is raised repeatedly in regard to the grant of a special use or conditional use permit and the decibel readings are usually measured from any residential, school, hospital, church or public library to the windmill structure.

3. Height Limitations. It is to be remembered that the Federal Aviation Administration would have to approve the siting so there would be no possible interference with an airport. We have found that height limits go to 450 feet.

4. Road Issues. This involves the right of the developer to use existing roads in exchange for providing road maintenance and repair to the roads damaged by the construction of the wind farm.

5. Interconnections. The WECS developer has to provide for interconnections to an electrical transmission grid which might very well mean the electrical power lines existing along right-of-ways. This raises other issues of the right of the municipality to charge for the use of its right-of-way. In this regard see Electricity Infrastructure and Maintenance Law, 35 ILCS 645. This law provides:

“This law is intended to create a ‘uniform system for the imposition and collection of fees associated with the privilege of using the public right-of-way for the delivery of electricity.’”

Section 645/5-4 provides that a municipality is entitled to require a franchise contract from an electricity deliverer as a condition of allowing the electricity deliverer to use any portion of any public right-of-way within the municipality for the placement and maintenance of facilities for distributing, transmitting or delivering electricity.

6. Determining The Scope Of The Zoning And Whether It Includes The Transmission Lines And Their Location. This determination can be critical because the energy generated must be able to leave the site and find its way into an electric grid so as to ultimately be useable. One of the basic issues during the approval process must be to determine the feasibility of transmission and permission that needs to be granted by the municipality to use public right-of-way. In addition, it is necessary to consider whether the zoning that must be approved extends beyond the wind farm where land in fee simple or easements have been purchased to run the power lines.

7. Decommissioning. One item that is often overlooked is the importance of a provision dealing with the decommissioning of the wind farm. This provision requires the removal of the turbines and the equipment from the project site and restoring the site to its original condition. As with other similar issues such as required subdivision improvements, municipalities might ask for financial guarantees such as a bond or Letter of Credit that the work will be performed.

Financial Advantages

Determining the financial benefits requires careful calculations by experts. For one thing not every site is conducive to a wind energy conversion system. While it seems obvious, it must first be determined whether there is sufficient wind at the site to make it worthwhile. Furthermore, the system has to be placed in such a way as to maximize the wind energy in the area. It would seem clear that where net metering is permitted that there is a strong likelihood that if there is sufficient wind energy in the area that a small wind energy conversion system will result in reduced electrical costs. The existing literature indicates that these costs can be cut in half or even reduced two-thirds from the current costs paid by a customer. This means that a municipality which constructs its own system for electrical power for its own requirements could save up to two-thirds of its current costs.

At last year’s IML annual conference, an engineering firm made a presentation which projected a cost of a wind turbine project to a municipality of $7,000,000. With the use of grant money and factoring in the cost of financing, the municipality would save over a period of 30 years, over and above the cost of the project, the sum of almost $7,000,000. The energy cost avoidance as shown was $15,859,175.12

Financing The Project

Clean Renewal Energy Bond (“CREB”) or sometimes referred to as CREBs are a tax credit bond. Congress has approved an additional $800,000,000 for these types of bonds. The new CREBs program allocates the $800,000,000 equally, one-third each, among three eligible groups: units of state and local government, municipal/public power companies and electric cooperatives. The Internal Revenue Code describes the regulations for the issuance and use of CREB bonds. These bonds must be issued by a “qualified issuer” which includes governmental bodies. The bonds are issued pursuant to an allocation by the Secretary of the Treasury. In addition to CREB bonds or as they are now referred to as NCREB, new clean renewable energy bonds, there are also qualified energy conservation bonds (QECBs). The new clean renewable energy bonds are similar to the “old renewable energy bonds” but unlike CREBs which now have a termination date of December 31, 2009, NCREBs have no termination date. QECBs provide the issuer with interest-free financing and the bondholders receive federal tax credit in lieu of interest. The allocations are automatic and proportionate based on population. Both types of bonds, QECBs and NCREBs, provide for payments in the form of tax credits from the federal government to the holders of those bonds. The bonds are subject to the national volume cap of $800,000,000. The issuer has the right to borrow for qualified purposes at rates of interest which may be significantly lower than the rates of interest on taxable debt or even other forms of tax exempt bonds. For governmental bodies the Secretary of the Treasury is granted discretion to determine the most appropriate method of allocating volume cap. These types of bonds are available to local governments to assist with the financing costs of qualified facilities used to generate electricity, which includes wind turbines.¹³

Conclusion

It seems clear that wind energy holds great promise for municipalities for the low cost generation of electrical power. Whether that benefit will be derived from a municipality joining with other governments through an intergovernmental agreement or developing its own wind farm, or whether it will come from “net metering” or simply from providing a small wind energy conversion system on the roof of city hall remains to be seen. There currently is in place legislation which allows for municipalities to become directly involved in wind energy conversion systems and at the same time to regulate through the use of the zoning power the location and development of wind energy conversion systems. There are also financing mechanisms in place which can greatly assist the municipality in carrying out a program harnessing the use of wind energy. The federal government has clearly made alternative forms of energy a high priority for the future of this country.

As you know, the devil is in the details and to that end it is necessary to review with experts the way in which your municipality might benefit from a wind energy program. The opportunity is there and given the imagination and perseverance of our local government officials there will, no doubt, be some very important benefits reaped by communities in our state and across the nation.
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¹ Pickens Plan, www.pickensplan.com/theplan 2008.
² www.pickensplan.com/theplan 2008 p.2.
³ American Wind Energy Association, www.awea.org.
⁴ Permitting Small Wind Turbines, A Handbook, California Energy Commission, p. 5, American Wind Energy Association’s Small Wind Advocate Team 2003.
⁵ See Sangamon County Illinois Zoning Ordinance.
⁶ See Sangamon County Illinois Zoning Ordinance.
⁷ 220 ILCS 5/16-107.5.
8 There was a bill that was introduced into the Illinois legislature by Rep. Fred Crespo. This bill would amend the Public Utilities Act to provide that the definition of “eligible customer” for the purposes of allowing net metering would include “electrical generating facilities owned or operated by school districts, community college districts, or units of local government pursuant to an intergovernmental agreement.” The bill provides, in part, as follows (HB0692):

“…(E)ach electricity provider shall allow meter aggregation for the purposes of net metering eligible renewable electrical generating facilities owned or operated by school districts, community college districts, or units of local government pursuant to an intergovernmental agreement. Electricity providers shall provide net metering to all parties to the intergovernmental agreement so that all energy produced by the eligible renewable electrical generating facilities is applied as a 1:1 kilowatt hour credit for each party to the intergovernmental agreement.”
The Bill, on 3/13/09, was re-referred to the Rules Committee where it has died.

⁹ A similar provision provides for a county to own and operate a wind farm either individually or jointly and for a school district to own and operate a “wind farm” or “wind generation turbine farm either individually or jointly with a unit of local government…” 55 ILCS 5/4200 and 105 ILCS 5/10-20.42. (This legislation became effective August 12, 2008.)
¹⁰ Section 11-13-26.
¹¹ 438 Fed. Supp. 2d 149 (W.D. N.Y. 2006).
¹² Johnson Controls, Inc., “Benefits of Harnessing the Wind to Illinois Municipalities,” 2008.
¹³ See 54 A, B and C, Internal Revenue Code.