a

GAO

United States Government Accountability Office

Report to the Ranking Democratic 

Member, Committee on Agriculture, 

Nutrition, and Forestry, U.S. Senate

September 2004 RENEWABLE 

ENERGY

Wind Power’s 

Contribution to 

Electric Power 

Generation and 

Impact on Farms and 

Rural Communities

GAO-04-756
www.gao.gov/cgi-bin/getrpt?GAO-04-756.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Lawrence J. 

Dyckman at (202) 512-3841 or 

dyckmanl@gao.gov. 

Highlights of GAO-04-756, a report to the 

Ranking Democratic Member, Committee 

on Agriculture, Nutrition, and Forestry, 

U.S. Senate 

September 2004

RENEWABLE ENERGY

Wind Power’s Contribution to Electric 

Power Generation and Impact on Farms 

and Rural Communities 

Wind power provides electricity 

without polluting the air or 

depleting nonrenewable resources. 

Wind power relies on steady winds 

to turn the blades of powergenerating turbines. Because these 

turbines generally are located on 

rural lands, wind power could also 

provide economic benefits to 

farmers and rural communities. 

The 2002 farm bill created a 

renewable energy program and 

authorized $115 million for the U.S. 

Department of Agriculture (USDA) 

to provide assistance for renewable 

energy projects, including wind 

power. GAO was asked to examine 

(1) the amount of electricity 

generated by U.S. wind power and 

prospects for its growth, (2) the 

contribution of wind power to 

farmers’ income and rural 

communities, (3) the advantages 

and disadvantages for farmers of 

owning a wind power project 

versus leasing land for a project, 

and (4) USDA’s efforts to promote 

wind power in rural communities. 

To ensure USDA’s timely and full 

implementation of its renewable 

energy program, USDA should (1) 

identify ways to accelerate its 

development of the program 

regulation, (2) work with the 

Environmental Protection Agency 

(EPA) to determine what 

assistance that agency can provide, 

and (3) continue to examine ways 

to streamline the program 

application process. USDA agreed 

with GAO’s recommendations. 

Wind power accounted for only about one-tenth of 1 percent of total U.S. 

electric power generation capacity in 2003, but wind power capacity 

quadrupled between 1990 and 2003, and the Department of Energy has 

projected continued growth through 2025. However, most of the nation’s 

wind potential remains untapped. Wind power’s growth will depend largely 

on the continued availability of federal and state financial incentives, 

including tax credits, and expected increases in prices for fossil fuels. 

Although wind power does not contribute significantly to total farm income 

in the 10 states with the highest installed wind power capacity, it has 

considerably benefited some farmers and rural communities. For example, a 

farmer who leases land for a wind project can expect to receive $2,000 to 

$5,000 per turbine per year in lease payments. In addition, large wind power 

projects in some of the nation’s poorest rural counties have added much 

needed tax revenues and employment opportunities. 

Farmers generally find leasing their land for wind power projects to be 

easier than owning projects. Less than 1 percent of wind power capacity 

installed nationwide is owned by farmers. Leasing is easier because energy 

companies can better address the costs, technical issues, tax advantages, 

and risks of wind projects. However, ownership of a turbine may double or 

triple the farmer’s expected income over leasing. 

USDA has not fully utilized all of the farm bill’s renewable energy provisions 

to promote wind power. In particular, although it offers grants under its 

renewable energy program, USDA has not issued a regulation to offer loans 

and loan guarantees as well. A higher program level could be achieved by 

using these funding mechanisms. Loans also may be a more cost-effective 

way to provide federal assistance than grants. USDA also is missing 

opportunities to obtain EPA’s assistance in implementing the program. For 

example, EPA’s Office of Air and Radiation has extensive contacts with 

utilities interested in purchasing power from renewable sources. Finally, 

applicants and others have raised concerns about the complexity of the 

application process and short time frame for completing applications. 

Areas with Strong Wind Resource Potential 
Page i GAO-04-756 Renewable Energy

Contents

Letter 1

Results in Brief 5

Background 9

Wind Power Is a Small but Growing Part of the Nation’s Electric 

Power Generation Capacity 13

Wind Power Does Not Contribute Significantly to Total Farm 

Income, but Some Individual Farmers and Communities Have 

Benefited 34

Leasing Land for Wind Power Projects Is Easier Than Owning, and 

Most Farmers Do Not Qualify for Tax Credit 38

USDA Can Do More to Promote Wind Power 45

Farm Bill Provisions Promote Renewable Energy Systems, Including 

Wind Power, but USDA Has Not Made Full Use of These 

Provisions 45

Conclusions 61

Recommendations 61

Agency Comments 62

Appendixes

Appendix I: Objectives, Scope, and Methodology 64

Appendix II: Sources for Information on Wind Power Generation 69

Appendix III: Results of NREL Modeling on Potential Economic Impacts of 

Wind Power on Rural Communities 73

Appendix IV: Summary of Visits to Wind Power Projects in Five States 84

Projects in California 84

Projects in Colorado 88

Projects in Iowa 90

Projects in Minnesota 94

Projects in Texas 100

Appendix V: The Wind Project Development Process 102

Appendix VI: Comments from the U.S. Department of Agriculture 104

Appendix VII: GAO Contacts and Staff Acknowledgments 106

GAO Contacts 106

Staff Acknowledgments 106

Related GAO Products 107
Contents

Page ii GAO-04-756 Renewable Energy

Tables Table 1: Major Steps in the Wind Power Project Development 

Process 39

Table 2: Four Types of Lease Payment Options 40

Table 3: Minnesota Initiatives That Promote Small 

Landowner-Owned Wind Projects 44

Table 4: Farm Bill Provisions to Further Wind Power’s Growth 46

Table 5: Status of USDA’s Implementation of Farm Bill Provisions 

That Support Wind Power’s Growth 47

Table 6: USDA Grant Assistance for Renewable Energy and Energy 

Efficiency Projects in 2003 50

Table 7: Counties Included in NREL’s Economic Analysis 74

Table 8: Economic Impacts during Construction Period of 150 MW 

Wind Power Project Owned by Out-of-Area Energy 

Company 79

Table 9: Economic Impacts during Construction Period of 40 MW 

Wind Power Project Owned by Out-of-Area Energy 

Company 80

Table 10: Economic Impacts during Operations Period of 150 MW 

Wind Power Project Owned by Out-of-Area Energy 

Company 81

Table 11: Economic Impacts during Operations Period of 40 MW 

Wind Power Project Owned by Out-of-Area Energy 

Company 82

Table 12: Economic Impacts during Operations Period of 20 Locally 

Owned Wind Power Projects, Each with a 2 MW

Capacity 83

Figures Figure 1: Wind Farm in Lake Benton, Minnesota 2

Figure 2: Horizontal and Vertical Axis Wind Turbines 10

Figure 3: U.S.-Installed Wind Power Generating Capacity, 1981 

through 2003, in MW 15

Figure 4: Installed Wind Power Generating Capacity by State, as of 

December 2003, in MW 16

Figure 5: Areas with the Highest Wind Potential in the United 

States 18

Figure 6: Leading States’ Installed Wind Power Capacity Compared 

with Wind Potential 19

Figure 7: Renewable Portfolio Standards for 17 States, as of August 

2004 25
Contents

Page iii GAO-04-756 Renewable Energy

Figure 8: Fluctuations in the Installation of New Wind Power 

Capacity Related to the Changing Availability of the 

Production Tax Credit (PTC) 32

Figure 9: Horizontal Axis Wind Turbines, Altamont Pass, 

California 84

Figure 10: Vertical Axis Wind Turbines, Altamont Pass, California 85

Figure 11: Wind Turbines, Solano County, California 86

Figure 12: Wind Turbines, Weld County, Colorado 88

Figure 13: Wind Turbine, Dickinson County, Iowa 90

Figure 14: Wind Turbines, Buena Vista County, Iowa 92

Figure 15: Wind Turbines, Pipestone County, Minnesota 94

Figure 16: Wind Turbine, Rock County, Minnesota 96

Figure 17: Wind Turbines, Pipestone County, Minnesota 98

Figure 18: Wind Turbines, Pecos County, Texas 100

Abbreviations

AWEA American Wind Energy Association

BSE bovine spongiform encephalopathy

DOE Department of Energy

EIA Energy Information Administration

EPA Environmental Protection Agency

kW kilowatt

kWh kilowatt hour

MW Megawatt

MWh Megawatt hour

NOFA Notice of Funds Availability

NREL National Renewable Energy Laboratory

OMB Office of Management and Budget

PTC production tax credit

RBS Rural Business-Cooperative Service

USDA United States Department of Agriculture

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. It may be reproduced and distributed in its entirety without further 

permission from GAO. However, because this work may contain copyrighted images or 

other material, permission from the copyright holder may be necessary if you wish to 

reproduce this material separately.
Page 1 GAO-04-756 Renewable Energy

United States Government Accountability Office

Washington, D.C. 20548

A

September 3, 2004 Letr

The Honorable Tom Harkin

Ranking Democratic Member

Committee on Agriculture, Nutrition, and Forestry

United States Senate

Dear Senator Harkin:

Wind-generated electricity—wind power—has the potential to provide 

electricity to homes and businesses without causing air pollution or 

depleting nonrenewable resources, unlike electricity generated by fossil 

fuels (coal, natural gas, and oil). Furthermore, because wind power has no 

fuel costs—wind power depends on the energy of the wind—its operating 

costs are lower than the costs for power produced from fossil fuels,1

although its capital costs are greater. Wind power relies on frequent, strong 

winds to turn the blades of power-generating turbines. In the United States, 

a wind turbine with generating capacity of 2 megawatts (MW),2

 placed on a 

tower situated on a farm, ranch, or other rural land, can generate enough 

electricity in a year—about 6 million kilowatt hours (kWh) 3—to serve the 

needs of 500 to 600 average U.S. households. Figure 1 shows part of a wind 

power project, also referred to as a wind farm, in Lake Benton, Minnesota.

1

Wind power is fueled by the kinetic energy of the wind, which is continually replenished 

through atmospheric processes. The power available in the wind is proportional to the cube 

of its speed: doubling the wind speed increases the potential available power by a factor of 

eight.

2

A watt is the basic unit used to measure electric power. A kilowatt (kW) equals 1,000 watts 

and an MW equals 1,000 kW or 1 million watts. 

3

Electricity production and consumption are measured in kilowatt-hours, while generating 

capacity is measured in kilowatts or megawatts. If a power plant that has 1 MW of capacity 

operates nonstop during all 8,760 hours in the year, it will produce 8,760,000 kWh. An 

average U.S. household consumes roughly 10,000 kWh a year. However, on average, wind 

power turbines typically operate the equivalent of less than 40 percent of the peak (full load) 

hours in the year due to the intermittency of wind. 
Page 2 GAO-04-756 Renewable Energy

Figure 1: Wind Farm in Lake Benton, Minnesota

Note: The farm depicted has 143 turbines producing enough electricity annually to serve about 33,000 

typical U.S. homes.

In addition to environmental benefits, wind power has the potential to 

contribute significantly to America’s growing energy needs while providing 

economic benefits to farms and communities in rural America.4

 In this 

connection, the Department of Energy’s (DOE) “Wind Powering America” 

program has set a goal of producing 5 percent of the nation’s electricity 

from wind by 2020. DOE estimates that achieving this goal would add $60 

billion in capital investment in rural America, provide $1.2 billion in new 

4

Wind power also can contribute to the nation’s energy diversity and security. The 

administration’s National Energy Policy states that sound energy policy should encourage a 

diverse portfolio of domestic energy supplies and that renewable energy can be a reliable 

source of energy at a stable price. Furthermore, with regard to national energy security, 

while the nation’s transmission grid and central power plants remain vulnerable to terrorist 

attack, renewable sources are geographically dispersed and contain no volatile or 

radioactive fuel stocks. 

Source: HDR Inc.
Page 3 GAO-04-756 Renewable Energy

income for farmers and rural landowners, and create 80,000 new jobs by 

that year.

About 90 percent of wind power generation now occurs in 10 

predominately midwestern and western states—California, Colorado, 

Iowa, Minnesota, New Mexico, Oklahoma, Oregon, Texas, Washington, and 

Wyoming—that generally have extensive open spaces with frequent, strong 

winds. Areas considered favorable for wind power generation have average 

annual wind speeds of about 16 miles per hour or more. 

The Farm Security and Rural Investment Act of 2002 (farm bill) authorized 

$115 million through fiscal year 2007 for farm-based renewable energy 

initiatives,5

 part of which will go to wind power projects. The U.S. 

Department of Agriculture (USDA) is responsible for implementing the 

farm bill’s provisions in consultation with DOE. While many people could 

benefit indirectly from the clean air and economic growth brought about by 

wind power development, farmers and other rural landowners, such as 

ranchers (hereafter referred to as farmers) can benefit directly. They can 

receive lease payments from commercial developers for the turbines 

placed on their land or own projects outright, selling electricity to a local 

utility. Furthermore, even large wind turbines use only about a quarter-acre 

of land each, including access roads, so farmers can continue to plant crops 

and graze livestock up to the base of the turbines. 

Wind power’s developers have relied on the federal production tax credit, 

which provides a credit for electricity generated by renewable energy 

sources such as wind turbines—about 1.8 cents per kWh during 2003. 

Recipients of the tax credit receive it for up to 10 years from the project’s 

initial operation. This credit has helped to offset the significantly higher 

capital costs per unit of generating capacity needed to start up wind power 

projects compared with projects for fossil fuel power generation, 

according to government and industry experts. Experts also expect that 

future improvements in wind power technology and forecasts for higher 

5

Pub. L. No. 107-171, § 9006, 116 Stat. 134, 482 (2002). Specifically, section 9006 of the farm 

bill provides that the Secretary of Agriculture shall make available $23 million from the 

funds of the Commodity Credit Corporation each fiscal year—for fiscal years 2003 through 

2007—for renewable energy systems and energy efficiency projects. These funds are to be 

used to make loans, loan guarantees, and grants to farmers, ranchers, and rural small 

businesses. Grants are to be made based on demonstrated financial need. Grant amounts 

must not exceed 25 percent of the cost of the activity funded, and the combined amount of 

the grant or loan made or guaranteed must not exceed 50 percent of the activity’s cost.
Page 4 GAO-04-756 Renewable Energy

fossil fuel prices will help wind power compete with other sources of 

electric power generation without reliance on the tax credit. 

You asked us to report on (1) the amount of wind power generation in 

relation to all U.S. electricity generation and the prospects for wind power’s 

growth, (2) the contribution of wind power generation to farmers’ income 

and to the economic well-being of rural communities in the 10 states with 

the highest wind power generation capacity, (3) the advantages and 

disadvantages for farmers of owning a wind power project versus leasing 

their land to a commercial wind power developer, and (4) the efforts of 

USDA to promote the development of wind power on farms and in rural 

communities. 

To conduct this work, we interviewed officials or reviewed documentation 

from DOE’s Energy Information Administration (EIA), Office of Energy 

Efficiency and Renewable Energy, and National Renewable Energy 

Laboratory (NREL); USDA’s Economic Research Service, Office of Energy 

Policy and New Uses, Farm Service Agency, National Agricultural Statistics 

Service, and Rural Business-Cooperative Service; the Environmental 

Protection Agency (EPA); the Federal Energy Regulatory Commission; 

commodity groups such as the National Corn Growers Association; the 

Union of Concerned Scientists; the American Wind Energy Association 

(AWEA); the Edison Electric Institute; the Electric Power Research 

Institute; and Windustry (a rural-based, wind stakeholder organization). We 

also visited nine wind power projects in five states with substantial 

installed wind power generating capacity: California, Colorado, Iowa, 

Minnesota, and Texas. At these locations, we generally met with 

landowners, project investors and owners, state and local taxing 

authorities, community leaders, and electric utility officials. To some 

extent, our work was limited because we did not have access to some 

proprietary cost and income data. We focused on utility-scale wind power 

projects—projects that generate at least 1 MW of electric power annually 

for sale to a local utility. Utility-scale projects account for most U.S. wind 

power generation. In addition, we reviewed our own past work, relevant 

publications of the Congressional Budget Office and the Congressional 

Research Service, and applicable laws, regulations, and executive orders. 

We conducted our review from February 2003 through August 2004 in 

accordance with generally accepted government auditing standards. We 

did not independently verify the data obtained from any of these sources. 

However, as appropriate, we discussed with these sources the measures 

they take to ensure the accuracy of these data. These measures seemed 

reasonable. Appendix I provides additional information on our scope and 
Page 5 GAO-04-756 Renewable Energy

methodology. Appendix II provides further information on the sources used 

in our work. 

Results in Brief Nationwide, wind power accounted for only about one-tenth of 1 percent of 

total electric power generation capacity in 2003, and an even smaller 

percentage of electric power actually generated. However, U.S. wind power 

generating capacity quadrupled between 1990 and 2003—to 6,374 MW—

and DOE has projected continued growth for this renewable power source 

through 2025. On a percentage basis, wind power capacity has been 

growing at a much higher rate than other sources of electric power 

generation—an average annual growth rate of 28 percent during the period 

1999 through 2003. In addition, according to DOE, the U.S. Midwest 

theoretically has enough wind power potential to meet a significant portion 

of the nation’s electricity needs. However, this potential remains largely 

untapped: Many of the states with the greatest wind potential, such as 

North Dakota and South Dakota, have seen little investment in wind power 

projects. Several factors constrain growth in these states, such as the lack 

of (1) nearby significant population centers with the large electric power 

demand needed to justify substantial investments in wind power and (2) 

adequate transmission capacity to carry electricity produced from wind 

power in sparsely populated rural areas to distant cities.

Other factors, however, promote growth, such as state financial and tax 

incentives and environmental and energy security concerns. For example, 

state incentives have promoted wind power projects in California, Texas, 

and Minnesota—the leading states in installed wind power projects. In 

addition, wind power does not create the pollution or greenhouse gas 

emissions associated with fossil fuel power generation, and expanded use 

of renewable energy sources such as wind power can help reduce the 

nation’s dependence on imported fossil fuels. Still, according to DOE and 

industry sources, the principal factor encouraging investment in wind 

power projects will be the continued availability of the federal production 

tax credit. If this credit is available for projects initiated through 2010, DOE 

estimates that wind power generation capacity could increase to 48,000 

MW or more by 2025, enough to power about 13 million U.S. homes, based 

on current usage rates; without it, this generation capacity is likely to 

increase to 11,000 MW. As with any federal tax credit, there are impacts on 

the nation’s budget. For example, the Congressional Joint Committee on 

Taxation estimates that if the authorization for the production tax credit 

were extended through 2006, its cost to the Treasury for the 10-year period 

ending in 2013 would be $3 billion, or about $300 million annually. 
Page 6 GAO-04-756 Renewable Energy

Wind power does not currently contribute significantly to total farm 

income in the 10 states with the highest installed wind power capacity, but 

some individual farmers and rural communities have benefited 

considerably from this energy source. In these 10 states, net farm income 

was about $14 billion in 2002, but total direct income to farmers from wind 

power ranged from only $10 million to $45 million, representing a fraction 

of 1 percent of net farm income. However, wind projects located on farms 

have increased some individual farmers’ income by tens of thousands of 

dollars annually. For example, a farmer who leases land to a wind project 

developer can generally expect to obtain $2,000 to $5,000 per turbine per 

year in lease payments, depending on factors such as the size of the project, 

the capacity of the turbines, and the amount of electricity produced. In 

addition, lease arrangements generally assure farmers that they will have a 

relatively stable income from wind power generation for the life of the 

lease, which may exceed 20 years. Furthermore, large wind power projects 

have been established in some of the nation’s poorest rural counties. In 

general, these rural communities have little industry, but have benefited 

from the tax revenues and employment opportunities associated with these 

wind projects. For example, in 2002, the school districts in Pecos County, 

Texas, received about $5 million in property tax revenues from wind power 

projects. These projects also created about 30 to 35 full-time permanent 

jobs to operate and maintain the projects. 

Farmers generally find leasing their land for wind power projects to be 

easier than owning projects. Wind power projects owned or partly owned 

by farmers account for less than 1 percent of utility-scale wind power 

capacity installed nationwide. Leasing is easier because, unlike farmers, 

energy companies have the financial resources and legal and technical 

expertise to address the costs, complexity, tax advantages, and risks of 

wind power development. However, ownership may be more profitable 

than leasing. For example, whereas lease payments for a single turbine may 

provide several thousand dollars a year to a landowner, a farmer’s 

ownership of the turbine may double or triple that income. On the other 

hand, a farmer-owner may be able to afford the installation of only one or 

two turbines, but leasing land to an energy company could result in the 

installation of a dozen or more turbines. In the latter case, although the 

farmer’s income per turbine would be less, the total income received by the 

farmer would be substantially greater. Although the federal renewable 

energy production tax credit is usually considered crucial for wind power 

development, individual farmers generally cannot use this credit because 

they lack sufficient tax liability. One state—Minnesota—provides a 

financial incentive to overcome this obstacle. Specifically, Minnesota offers 
Page 7 GAO-04-756 Renewable Energy

a renewable energy cash incentive—1.5 cents per kWh of electricity 

produced—for wind projects up to 2 MW, regardless of income. In addition, 

some Minnesota farmers have entered into equity partnerships with other 

investors to benefit from the production tax credit indirectly. In these 

cases, the investor generally owns a majority interest in the project for the 

first 10 years, receiving most of the project income and the benefits of the 

credit. After this 10-year period, the majority ownership is transferred to 

the farmer, who will receive most of the associated income.

USDA has not fully utilized all of the farm bill’s renewable energy 

provisions to promote wind power development on farms and in rural 

communities. For the Renewable Energy Systems and Energy Efficiency 

Improvements Program (Renewable Energy Program)—the key program 

for supporting wind power and other renewable energy initiatives—USDA 

offered grants totaling $7.4 million for 35 wind power projects in eight 

states in fiscal year 2003, the program’s first year, but it has not 

implemented the loan and loan-guarantee components of the program. 

Without the latter, USDA has not fully fulfilled farm bill provisions and 

limits the ability of the program to promote renewable energy sources. For 

example, USDA budget documents indicate that the addition of loans and 

loan guarantees would increase the program level to about $200 million 

annually. Direct loans would be made from funds borrowed from the U.S. 

Treasury. Guaranteed loans would be made from funds loaned by banks 

and other private lending institutions. Loans also may be a more costeffective way to provide federal assistance than outright grants. USDA has 

not offered loans and loan guarantees because it has yet to issue a 

regulation for the program. It had planned to issue the proposed and final 

regulations in the Federal Register during fiscal year 2004. However, the 

agency was unable to hold to this schedule and, as a result, announced only 

the availability of grants again in fiscal year 2004. USDA officials cited 

several factors as delaying the agency’s completion of the program 

regulation, including the notice and comment provisions of the 

Administrative Procedure Act, delays in hiring a contractor to help develop 

the regulation, and the newness and uniqueness of the program. 

In addition, USDA may be missing opportunities to leverage information, 

resources, and expertise available from EPA to implement the Renewable 

Energy Program. It also may have further opportunities to simplify the 

application process for the program. USDA invited only one EPA office to 

participate in USDA’s Rural Energy Working Group. This office promotes 

energy generation from the anaerobic digestion of biomass. However, other 

EPA offices may be able to assist the program’s implementation as well, 
Page 8 GAO-04-756 Renewable Energy

including providing specific assistance for wind power. For example, 

officials in EPA’s Office of Air and Radiation, which works with electric 

power utilities interested in purchasing electricity from renewable sources, 

said they could assist wind power applicants in locating potential buyers 

for the electricity to be produced. Regarding the application process, 

applicants and other stakeholders have expressed concerns about the 

complexity and time constraints of completing required feasibility studies, 

negotiating tentative agreements with an electricity buyer, preparing the 

required financial information to demonstrate need under the program, and 

compiling information needed for environmental assessments. Although 

USDA acknowledges these concerns and made changes to its 

implementation of the program in fiscal year 2004 based on these concerns, 

there may be further opportunities to simplify and streamline the 

application process. 

In light of these issues, we are recommending that USDA identify ways to 

accelerate the development of the regulation for the Renewable Energy 

Program in order to make loans and loan guarantees available to program 

applicants expeditiously. In addition, we are recommending that USDA 

work with EPA to identify other EPA offices that may be able to assist 

USDA in implementing the program and that USDA continue to examine 

ways to simplify the application process for the program based on input 

from applicants and other stakeholders. 

In commenting on a draft of this report, USDA agreed with the 

recommendations and stated the agency would take every opportunity to 

expedite the rule making process, increase coordination with EPA, and 

examine ways to simplify the grant application process. USDA’s comments 

are reprinted in appendix VI. USDA also provided us with suggested 

technical corrections, which we incorporated into this report as 

appropriate. 

We also provided a draft of this report to DOE and EPA for review and 

comment. Their clarifying comments were incorporated into this report, as 

appropriate. 
Page 9 GAO-04-756 Renewable Energy

Background

Description of Wind Power Wind power is one of several renewable energy options. Other renewable 

sources include sunlight (photovoltaics), heat from the sun (solar thermal), 

naturally occurring underground steam and heat (geothermal), plant and 

animal waste (biomass), and water (hydropower). Unlike fossil fuels,6

renewable energy sources are continuously replenished.

Wind turbines can be used by themselves or be connected to a utility power 

grid. Stand-alone turbines can be used for pumping water—for example, to 

irrigate fields. However, homeowners and farmers in windy areas can also 

use stand-alone turbines to generate electricity for their own personal or 

on-farm use. For utility-scale sources of wind power, a number of turbines 

are usually built close together to form a wind farm. Currently, more than 

50 electric power utilities use wind farms to produce part of the electricity 

supplied to their customers.

In general, wind turbines are divided into two major categories: horizontal 

axis turbines, which resemble a windmill, and vertical axis turbines, which 

resemble an eggbeater. Figure 2 depicts each type of turbine.

6

Most U.S. electricity generation is made with fossil fuel and nuclear technologies—coal (52 

percent), nuclear (20 percent), natural gas (16 percent) and oil (3 percent). There are about 

5,000 major power plants in the United States, with a generating capacity of about 800,000 

MW. 
Page 10 GAO-04-756 Renewable Energy

Figure 2: Horizontal and Vertical Axis Wind Turbines

The horizontal axis turbine is the most commonly used, constituting nearly 

all utility-scale turbines in the United States. To generate electricity, this 

type of turbine captures the wind’s energy with two or three propellerlike 

blades that are mounted on a rotor. These rotors sit atop towers, taking 

advantage of the stronger and less turbulent wind at 100 feet (30 meters) or 

more above ground. The turbine blades generally are constructed of 

fiberglass, may be up to 20 meters in length, and may weigh several 

thousand pounds each. A horizontal axis turbine typically has a mechanism 

to keep the rotor headed into the wind, while a vertical axis turbine can 

accept wind from any direction. 

Tower

Vertical axis wind turbine Horizontal axis wind turbine

Generator

Gearbox

Rotor

Nacelle

Source: Izaak Walton League of America.
Page 11 GAO-04-756 Renewable Energy

Federal Role in Promoting 

the Use of Wind Power

The federal government represents the largest institutional user of energy 

in the world, and thus it is potentially a large market for wind and other 

renewable energy sources.7

 Specifically, through its purchasing decisions, 

the federal government has the opportunity to affirm its energy and 

environmental policies and goals, including its goals for promoting the use 

of renewable sources such as wind power. In this regard, Executive Order 

13123, issued in 1999, requires federal agencies to increase their use of 

renewable energy to a percentage determined by the Secretary of Energy. 

In 2000, the Secretary directed that federal agencies obtain the equivalent 

of 2.5 percent of their electricity from renewable sources by 2005.8

 As of 

March 2003, federal agencies were using about 663 million kWh of 

renewable energy, or about 48 percent of the goal established by the 

Secretary. For example, according to Department of Defense officials, 15 

military bases, including Edwards Air Force Base in California, Shriever Air 

Force Base in Colorado, and Ellsworth Air Force Base in South Dakota, use 

wind power to varying degrees. In addition, one of these bases, Dyess Air 

Force Base in Texas, bought 78 million kWh of wind power-produced 

energy in 2003, meeting the base’s entire electricity needs for that year. In 

addition, other federal agencies, including DOE, EPA, and USDA, are using 

wind power for part of their energy needs. For example, USDA’s Animal 

and Plant Health Inspection Service purchases 25 percent of the electricity 

used at its National Wildlife Research Center in Colorado from windgenerated sources. 

The federal government is also the nation’s largest landholder, controlling 

nearly 700 million acres of land.9

 Much of this land is in the western United 

States and includes some areas of the country with the highest wind 

potential.10 Thus, according to federal and industry officials, areas on these 

federal lands could be leased to wind power or other renewable energy 

7

With approximately 3.3 billion square feet of facility space and over 500,000 vehicles, the 

federal government is the largest single energy consumer in the nation.

8

Solar, wind, biomass, and geothermal systems installed after 1990 qualify as renewable 

resources under the executive order. 

9

The federal government’s share of the nation’s total surface area is about 29 percent. Four 

agencies—the National Park Service, the Fish and Wildlife Service, and the Bureau of Land 

Management within the Department of the Interior, and the Forest Service within the 

Department of Agriculture—manage about 655 million acres, or 96 percent of all federal 

lands. 

10Most federal lands in the 48 contiguous states are located in 11 western states.
Page 12 GAO-04-756 Renewable Energy

developers, with the federal government collecting substantial land rental 

payments. For example, the Department of the Interior’s Bureau of Land 

Management (Bureau) has rented some of the land that it manages in 

California and Wyoming for wind projects. Overall, these projects include 

more than 1,300 turbines with a total production capacity of nearly 900 MW, 

and the associated rental payments provide more than $800,000 in income 

to the Bureau annually.11 The administration’s National Energy Policy also 

recognizes this potential.12 For example, the policy recommends that the 

Secretaries of the Interior and of Energy re-evaluate access limitations to 

federal lands in order to increase renewable energy production, such as 

biomass, wind, geothermal, and solar, on these lands.13 Although the 

establishment of renewable energy production on federal lands would 

result in some environmental impacts, some federal and industry officials 

note these impacts would be far less than the mining, drilling, and hauling 

associated with fossil fuel extraction. 

In addition, through various programs, the federal government has helped 

to promote the use of wind power by municipal electric utilities; rural 

electric cooperatives; state, local, and tribal governments; businesses; and 

consumers. For example, DOE, in conjunction with wind stakeholders 

across the country, launched the Wind Powering America program in 1999 

to increase the use of wind energy in the United States in order to promote 

rural economic development, protect the environment, and increase the 

nation’s energy security.14 The program’s original goals included (1) 

providing 5 percent of the nation’s electricity from wind by 2020, with nearterm goals of 5,000 MW by 2005 and 10,000 MW by 2010; (2) increasing the 

number of states with at least 20 MW of installed wind capacity to 16 by 

11In addition, the Bureau of Land Management tentatively plans to rent other land it manages 

for wind power projects. Specifically, the Bureau anticipates renting land for about 3 

gigawatts of wind power development between 2005 and 2025 in 11 western states. In this 

regard, the Bureau plans to publish an environmental impact statement in the Federal 

Register in September 2004 seeking comments on this proposal. 

12National Energy Policy: Report of the National Energy Policy Development Group, 

Office of the Vice President, May 2001.

13See Department of Energy and Department of the Interior, White House Report in 

Response to National Energy Policy Recommendations to Increase Renewable Energy 

Production on Federal Lands (Washington, D.C.: Aug. 20, 2002). 

14See www.windpoweringamerica.gov.
Page 13 GAO-04-756 Renewable Energy

2005 and 24 states by 2010;15 and (3) increasing the federal government’s 

use of wind power to 5 percent of its annual consumption of electricity by 

2010. The program’s work is organized under four themes: state-based 

activities, rural economic development, greening federal electricity 

consumption, and utility partnerships. Among other things, the program 

encourages partnerships between government and industry; educates, 

equips, and supports state wind working groups; and develops innovative 

pilot projects, such as identifying rural ownership options for small wind 

systems. 

In another case, EPA promotes the use of wind power and other renewable 

sources of electricity—collectively known as green power—through its 

Green Power Partnership Program. Specifically, EPA provides technical 

assistance and public recognition to companies and organizations that 

make a commitment to using green power for a portion of their electricity 

needs. More than 200 companies, including a number of major 

corporations, participate in this program. In addition, the Department of 

Housing and Urban Development’s community development block grants 

have been used to assist municipal-owned utilities to purchase wind 

turbines. For example, in Iowa, three cities received community 

development block grant funds in either fiscal year 2002 or fiscal year 2003 

to erect wind turbines for energy generation;these grants totaled about $1 

million. Furthermore, as discussed later in this report, USDA has several 

programs that can be used to provide financial assistance for renewable 

energy projects on farms or other rural lands. 

Wind Power Is a Small 

but Growing Part of the 

Nation’s Electric 

Power Generation 

Capacity

Although wind power accounted for about one-tenth of 1 percent of total 

U.S. electric power generation capacity in 2002, it had quadrupled in 

generating capacity between 1990 and 2003, and has been growing at a 

much higher rate than other sources of electric power generation. 

Nevertheless, wind power’s potential remains largely untapped. A number 

of factors, including limited transmission capacity and the higher capital 

start-up costs of wind power compared with fossil fuels in some markets, 

hamper wind power’s expansion, although other factors, such as federal 

and state financial incentives, have helped spur expansion. According to 

DOE estimates, the nation’s wind power generation capacity will continue 

15In August 2004, DOE officials indicated that this second goal had been revised to increase 

the number of states with at least 20 MW of installed wind capacity to 32 by 2005 and with at 

least 100 MW of installed wind capacity to 30 states by 2010. 
Page 14 GAO-04-756 Renewable Energy

to grow through 2025, but higher levels of production depend on the 

continued availability of federal and state financial incentives, particularly 

the federal production tax credit, expected price increases for fossil fuels, 

and continued research and development leading to further improvements 

in wind turbine technology. 

Wind Power Accounts for 

Less Than 1 Percent of Total 

U.S. Capacity, but Has 

Quadrupled Since 1990

As of December 2003, wind power capacity accounted for about one-tenth 

of 1 percent of total U.S. generating capacity16—about 6,370 MW—up from 

1,525 MW in 1990. This growth exceeds the goal established by DOE’s Wind 

Powering America program for wind energy generation of at least 5,000 

MW nationwide by 2005. This rate also makes wind power the fastest 

growing source of electric power generation, on a percentage basis, in the 

United States in recent years.17 For example, from 1999 through 2003, the 

average annual growth rate of wind power was 28 percent, and in 2003 

alone, enough new wind turbines were erected to provide electricity to 

400,000 to 500,000 U.S. homes.18 Figure 3 shows the growth in U.S. wind 

power generating capacity from 1981 through 2003. 

16While wind power’s share of total electric power generating capacity is small, its share of 

actual electric power generation is smaller. Wind power turbines are “on-line”—that is, they 

are actually generating electricity—only when wind speeds are sufficiently strong (i.e., at 

least 9 to 10 miles per hour) to turn the turbine blades. In contrast, power plants that use 

coal, natural gas, or nuclear fuel generally operate without interruption, except when idled 

by equipment problems or for maintenance.

17Worldwide, installed wind power capacity increased by about 500 percent between 1997 

and 2003. As of December 2003, this capacity was estimated at 37,220 MW; Europe accounts 

for about 73 percent of this capacity. Germany (14,000 MW) has the most capacity; the 

United States (6,374 MW) is second. Other leading countries include Spain (5,780 MW), 

Denmark (3,094 MW), and India (1,900 MW). 

18An average U.S. household uses about 10,000 kWh of electricity each year. One MW of 

wind power capacity can generate between 2.4 million and 3 million kWh annually. 

Therefore, one MW of wind generates about as much electricity as 240 to 300 households 

use each year. The level of U.S. wind power capacity as of December 31, 2003—6,374 MW—

provides as much electricity as is used by 1.5 million to 1.9 million households annually. 
Page 15 GAO-04-756 Renewable Energy

Figure 3: U.S.-Installed Wind Power Generating Capacity, 1981 through 2003, in MW

As of the end of 2003, about 90 percent of wind power generation occurred 

in 10 predominantly midwestern and western states—California, Colorado, 

Iowa, Minnesota, New Mexico, Oklahoma, Oregon, Texas, Washington, and 

Wyoming. Two of these states—California and Texas—accounted for about 

one-half of the nation’s 6,374 MW of installed wind generation capacity, as 

of the end of 2003. Figure 4 shows installed wind power generating 

capacity in these 10 states and other states with at least 0.1 MW of installed 

capacity, as of December 2003. 

1983

1985

1987

1989

1991

1993

1995

1997

19992002

2003

Source: AWEA.

Number of megawatts

1981

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2001

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Year
Page 16 GAO-04-756 Renewable Energy

Figure 4: Installed Wind Power Generating Capacity by State, as of December 2003, in MW

The nation’s wind potential—particularly in areas with frequent, strong 

winds needed to generate electricity from wind power—remains largely 

MT

0.1

NE

14.0

AL

TN

2.0

ND

66.3

OK

176.3

SC

WI

53.0

MN

562.7

AR

0.1

CO

223.2

MS

IA

471.2

VA

MO

IN

LA

SD

44.3

KS

113.7

GA

TX

1,293.0

OH

3.6

NV

NM

206.6

MD

DE

NJ

MI

2.4

NC

FL

IL

50.4

AZ

DC

PA

129.0

VT 6.0

WA NH 0.1

243.8

OR

259.4

ID

0.2

WY

284.6

UT

0.2

KY

WV

66.0

AK

1.1

HI

8.6

NY

48.5

ME

0.1

MA 1.0

RI

CT

CA

2,042.6

Generating capacity (in megawatts)

Source: AWEA.

Negligible

0.1 to < 100

100 to < 400 

400 to < 1,000

1,000 and above
Page 17 GAO-04-756 Renewable Energy

untapped.19 According to a DOE study, the Midwest, including the Great 

Plains, theoretically has more than enough potential wind energy to fulfill 

the entire nation’s electricity needs. Specifically, just three wind-rich 

states—North Dakota, Texas, and Kansas—could accomplish this. Figure 5 

shows areas of the United States with the highest wind potential.20

19According to DOE, 37 states have wind resources that would support utility-scale wind 

power projects. 

20Wind power developers also are evaluating the potential for offshore wind energy 

production on the U.S. outer continental shelf.
Page 18 GAO-04-756 Renewable Energy

Figure 5: Areas with the Highest Wind Potential in the United States

Moderate

Good

Excellent

Resource potential

Source: U.S. Department of Energy, National Renewable Energy Laboratory.
Page 19 GAO-04-756 Renewable Energy

A Number of Factors Act to 

Either Constrain or Promote 

Wind Power’s Growth 

As a comparison of figures 4 and 5 shows, states with the greatest installed 

wind power capacity are not necessarily the states with the greatest wind 

potential. In addition, figure 6 shows this discrepancy for the leading states 

in each category.

Figure 6: Leading States’ Installed Wind Power Capacity Compared with Wind Potential 

Note: The top 18 states for wind resource potential, as measured by annual energy potential in billions 

of kWh, factoring in environmental and land use exclusions for wind class 3 and higher. 

This discrepancy occurs, in part, because of factors that constrain growth, 

such as access to transmission lines, as well as factors that encourage 

development, such as state incentives. The following factors constrain the 

growth of wind power:

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

16

17

17

18

18

North Dakota is number 1 in wind power potential and number 13 in installed capacity.

California is number 1 in installed capacity and number 17 in wind power potential.

Installed capacity

Wind resource potential 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

States ranked in numerical order

States ranked in numerical order

Source: GAO analysis of AWEA information.

North Dak

Texas

ota

North Dakota

South Dakota

Wyoming

Kansas

Montana

Nebraska

Oklahoma

Minnesota

Colorado

New Mexico

Idaho

Michigan

New 

California

Wisconsin

York

Iowa

Texas

Minnesota

Wyoming

Colorado

New Me

Oklahoma

Pennsylvania

Kansas

West Virginia

South Dakota

xico

California

Iowa

Oregon

Washington

Illinois

New York

Illinois

Wisconsin
Page 20 GAO-04-756 Renewable Energy

• The cost of wind power production in relationship to fossil fuels. 

According to AWEA, the cost of electricity from utility-scale wind power 

projects was as high as 30 cents per kWh in the 1980s, far greater than 

the cost of electricity from alternative technologies using fossil fuels to 

generate power.21 Various state and federal incentives helped overcome 

wind power's cost disadvantage in many locations, as did dramatic cost 

reductions due to improvements in wind turbine technology. At present, 

DOE estimates the cost of generating electricity from wind power 

ranges from 3 to 6 cents per kWh. Cost reductions also occurred in 

fossil-fuel power generation technologies, but recent increases in 

natural gas fuel costs may result in further market penetration by wind 

power. For example, if natural gas prices continue to be substantially 

higher than average levels in the 1990s, wind power is likely to be 

competitive in parts of the country with good wind resources and 

transmission access. However, wind power will continue to be too 

expensive to compete with fossil-fuel generation in parts of the country 

with poor wind resources. Although cost reductions due to 

technological improvements affect all segments of the electric industry, 

they tend to be particularly important for newer power generation 

technologies such as wind power in comparison to fossil-fuel generation 

technologies. Furthermore, continued federal and state actions that 

promote renewable energy power generation or raise the cost of 

emissions from fossil-fuel technologies could also play a significant role 

in improving the competitiveness of wind power. 

• Connection to the power transmission grid. In general, frequent, strong 

winds tend to be found in sparsely populated areas, which may be far 

from transmission lines or lines with adequate capacity to bring power 

to consumers. For example, renewable energy generators in the windrich areas of the Upper Midwest, such as North Dakota, may want to 

transmit electricity to heavily populated areas in other states. However, 

as with any remotely located power source, a renewable energy 

generator can incur transmission pricing mechanisms that charge 

according to the distance covered or according to the number of utility 

territories crossed. In addition, transmission capacity is limited in many 

areas of the nation for all electric power sources. According to AWEA 

21The cost of electricity from a particular power generation technology depends on the 

capital costs of the associated equipment, the projected lifetime of the equipment, the 

amount of energy produced each year, and the cost of borrowing money to construct the 

power generation plant. Simply stated, the cost of energy is the sum of various costs (e.g., 

capital and operations and maintenance) divided by the annual energy generation. 
Page 21 GAO-04-756 Renewable Energy

and industry sources, transmission congestion policies generally 

allocate limited capacity on a “first-come, first-served” basis and 

discriminate against recent market entrants. Moreover, interconnection 

policies are often controlled by utilities that make it difficult for new 

entrants, such as wind power projects, to have timely interconnection at 

reasonable rates. The Federal Energy Regulatory Commission, which is 

responsible for approving rates for the transmission of electricity—and 

overseeing the sale of electricity—in competitive wholesale markets, is 

currently developing market standards for new entrants, such as wind 

and other renewable sources, to connect to the transmission grid. DOE 

is also conducting research to develop efficient, lower-speed wind 

turbines for deployment in less windy areas of the nation; such turbines 

would enhance the ability of industry to bring cost-effective wind power 

closer to population centers and avoid already congested long-distance 

transmission lines. 

• Intermittency of wind power. Renewable energy sources such as wind 

power have unique technical characteristics that can constrain their use 

in an existing transmission system that was built to accommodate large 

central-station power plants located near population centers. This 

system relies on precisely predicting and controlling power plant output 

to avoid blackouts and other disruptions. As a result, with this system, 

the value of electricity is determined in part by the time of day at which 

the electricity is delivered to the grid and also by the probability that it 

will be available when needed. In general, fossil fuel and nuclear power 

generation plants can be run without interruption and are consistently 

available when called upon, except when idled by equipment problems 

or for maintenance. However, wind power is an intermittent source in 

that wind speed and availability can vary from day to day, and thus the 

amount of electricity produced varies. On average, wind power turbines 

operate the equivalent of less than 40 percent of the peak hours in a year 

due to the intermittency of wind. While penalties may apply whenever 

energy deliveries vary from scheduled amounts, the possibility of 

penalties is of particular concern for intermittent sources. As a result, 

utilities that derive part of their electricity generation from wind power 

may have to develop or purchase costly reserve capacity in case wind 

power is not available on demand. However, some federal and wind 

industry officials downplayed the importance of this factor, noting that 

if wind power constitutes less than 20 percent of a utility’s generating 

capacity, the remaining capacity may be sufficient to meet demand 

during periods of low winds. Furthermore, according to DOE, recent 

studies show that in cases where wind power constitutes up to 10 
Page 22 GAO-04-756 Renewable Energy

percent to 20 percent of a utility’s generating capacity, the additional 

operating cost of integrating wind power is only up to 0.5 cents per kWh. 

Specifically, this amount represents the ancillary cost due to the 

variability of wind.22 

• Barriers to marketplace entry. As emerging technologies, renewable 

energy sources such as wind power face market entry barriers. For 

example, developing new renewable facilities requires high up-front 

costs to build the necessary infrastructure, such as construction costs to 

connect power lines to the transmission grid. According to DOE, the 

average cost of building new power lines to connect wind turbines to 

the transmission grid could be $100,000 or more per mile, depending on 

such factors as the size of the wind project, terrain, and the transmission 

line rating. In addition, manufacturers produce renewable energy 

components on assembly lines, where mass production can reduce 

costs. As long as relatively few units are produced, prices will remain 

high. Economies of scale would likely lead to cost reductions for wind 

and other renewable technologies. Furthermore, small renewable 

energy projects have high transaction and other costs at various stages 

of the development cycle. For example, lending institutions charge more 

to evaluate the creditworthiness of many small projects than one large 

one. These institutions also are generally unfamiliar with new 

technologies and are more likely to perceive them as riskier, causing the 

institutions to lend money at higher interest rates. Higher financing 

costs are especially significant for the competitive position of renewable 

energy sources such as wind power because these sources generally 

require higher initial investments per unit of electricity produced than 

fossil fuel plants, even though renewable sources have lower operating 

costs. 

• Impacts on visual landscape, bird deaths, and noise issues. Although 

wind power turbines do not emit pollutants, they do present some 

environmental issues. According to AWEA and industry sources, wind 

power project developers must gauge a local community’s receptivity to 

the placement of wind turbines in scenic areas that may have high wind 

potential, such as ridge lines, mountain passes, or off-shore coastal 

areas, or else risk expensive litigation. Regarding birds that die when 

they collide with turbine blades, these sources said that developers 

22Ancillary costs are the costs of transmission and generation services necessary to support 

the transmission of capacity and energy from resources to loads. 
Page 23 GAO-04-756 Renewable Energy

should study the numbers and species of birds (and bats) present at 

various times of the year at potential site locations. In general, if the 

locations are commonly used by endangered or threatened avian 

species or are in bird migration pathways, they may be unsuitable for 

wind power development. New construction techniques and 

technologies may help to reduce bird deaths,23 such as switching from 

latticework towers that entice birds to perch to smooth-sided cylindrical 

towers that do not offer perches. In addition, the longer blades on 

newer, larger turbines turn more slowly—about 21 to 23 revolutions per 

minute in optimum wind conditions—than earlier turbines with shorter 

blades, making these longer blades more visible to birds in daylight. 

Concerning noise, new turbine designs and engineering as well as the 

use of appropriate setbacks from residences have helped to decrease 

the importance of this issue. For example, aerodynamic noise has been 

reduced by adjusting the thickness of the turbine blades’ trailing edges 

and by orienting blades upwind of the turbine tower. 

Several factors help promote wind power’s growth. First, according to 

federal and industry officials, direct public sector support programs have 

been important to increasing the demand for wind power in the United 

States because of wind power’s competitive disadvantages in most 

domestic markets. For example, the federal production tax credit, 

established by the Energy Policy Act of 1992, as amended, is available to 

tax-paying owners of wind or “closed loop” biomass energy generation 

systems.24 The act provides a credit of 1.5 cents per kWh for the first 10 

years from initial plant operation, indexed for inflation, for electricity 

generated by renewable energy sources such as wind turbines; it was 1.8 

cents per kWh during 2003. According to our analysis, using this incentive, 

a moderate-sized wind farm with 30 MW of generating capacity could 

receive up to $1.6 million a year in tax credits. In addition, in some cases 

this tax credit may be combined with the 5-year depreciation schedule 

allowed for renewable energy systems under the Economic Recovery Tax 

23According to wind industry sources, bird deaths resulting from collisions with cars, 

airplanes, windowpanes, tall buildings, and transmission lines, as well as from hunting, 

predators, and accidental poisoning, far exceed bird deaths associated with wind turbines. 

However, the number of bird deaths attributable to wind power may grow as more turbines 

are installed.

24Pub. L. No. 102-486, 106 Stat. 2776, 3020 (1992), codified at 26 U.S.C. § 45. Closed-loop 

biomass refers to plants grown exclusively to provide fuel for electric power generation. 

Closed-loop biomass excludes forest biomass, mill waste, or urban waste.
Page 24 GAO-04-756 Renewable Energy

Act of 1981, as amended.25 In conjunction with the tax credit, this 

accelerated depreciation allows an even greater tax break for renewable 

projects facing high initial capital costs. The authority for new facilities to 

qualify for the production tax credit expired at the end of calendar year 

2003;26 as of August 2004, legislation was pending in Congress that would 

reauthorize this tax credit.27 

At the state level, the states with the most installed wind power capacity 

generally have implemented strong policies providing regulatory, financial, 

or tax incentives to wind power development. For example, 17 states have 

implemented renewable portfolio standards. Under these standards, 

utilities must derive a certain percentage of their overall electric generation 

(on a sales basis) from renewable energy sources, such as wind power. 

California and Texas—2 of the 17 states that have instituted these 

standards—also are the leading states with installed wind power capacity. 

California requires that 20 percent of the state’s electric generation be 

derived from renewable sources by 2017. In Texas, the requirement is 2.7 

percent by 2009. Figure 7 shows the states that have enacted these 

standards, including the target amount of generation from renewable 

sources and the associated dates for achievement. 

25Pub. L. No. 97-34, 95 Stat. 230 (1981), codified at 26 U.S.C. § 168(e)(3)(B)(vi).

26To qualify for the tax credit, the facility was required to have been placed in service before 

January 1, 2004. 

27See H.R. 4520 and S. 1637, 108th Cong. (2004). 
Page 25 GAO-04-756 Renewable Energy

Figure 7: Renewable Portfolio Standards for 17 States, as of August 2004 

a

Minnesota law requires utilities to make a good faith effort to generate or procure 10 percent of the 

electricity they generate by 2015 from eligible renewable energy technologies, including wind. 

Minnesota’s Public Utilities Commission required each utility to develop formal plans as to how they 

would meet this objective. In addition, Minnesota law requires one utility operating in the state, Xcel 

Energy, to develop 1,125 MW of wind power by December 31, 2010.

b

In 1991, Iowa enacted legislation requiring investor-owned utilities operating in the state to purchase a 

combined total of 105 MW of the generation from renewable sources. According to an Iowa Public 

Utilities Board official, this represented about 2 percent of the total electricity generated by those 

utilities at that time.

c

Illinois enacted legislation creating the Illinois Resource Development and Energy Security Act. The 

legislation adopted a statewide renewable energy goal of at least 5 percent of total energy by 2010, 

HI

20% by 2020

Source: GAO analysis of information from the Union of Concerned Scientists, the Interstate Renewable Energy Council, and state

officials in Iowa, Minnesota, and Texas.

TX

2.7% by

2009d

NM

10% by

2009

NV

15% by 2013,

solar 5%

of total

annually

CA

20% by

2017

IA

2% by

1999b IL

15% by

2020c

MN

10% by

2015a WI

2.2% by

2011

ME

30% by

2000

MA

4% by

2009

CT

10% by

2010

RI

16% by

2019

NJ

6.5% by

2008

MD

7.5% by

2019

PA

varies by

utility

AZ

1.1% by

2007,

60% solar

17 states 
Page 26 GAO-04-756 Renewable Energy

and at least 15 percent by 2020. However, the legislation does not include an implementation 

schedule, compliance verification, or credit trading provisions.

d

In December 1999, the Public Utility Commission of Texas issued a renewable energy mandate rule 

establishing the state’s renewable portfolio standard. In addition to the 880 MW of existing renewable 

generation in Texas at that time, the standard called for 2,000 MW in new renewable generation to be 

installed by 2009. If this goal is met, an official in the Texas Office of Public Utility Counsel estimated 

that renewable generation will represent about 2.7 percent of total electricity demand in the state by 

2009. 

Multiple states have taken other, similar actions to support renewable 

energy sources, including wind power. Specifically, according to the 

Database of State Incentives for Renewable Energy compiled by the 

Interstate Renewable Energy Council in August 2004:

• Thirty-two states and the District of Columbia have implemented net 

metering laws, which allow customers with their own power generating 

units, such as small wind turbines, to sell power that is excess to their 

needs back to the power grid, enabling the flow of electricity to and 

from the customer through a single meter.28

• Twenty states offer property tax exemptions or special assessments for 

renewable energy sources, and 6 states allow localities to offer this 

exemption. 

• Fifteen states allow sales tax exemptions for renewable energy sources. 

• Twenty states offer personal or corporate income tax incentives for 

renewable energy sources. 

• Many states have grant (20), loan (18), and rebate (12) programs to 

promote renewable energy sources. Utilities or private sources offer 

these types of financial incentives in many of these states as well. 

• Fifteen states have public benefit funds for renewable energy sources. 

In these states, a surcharge is assessed to all customers on utility bills. 

The money generated goes into a public benefit fund to, among other 

things, support renewable energy research and development and 

education programs. 

28Net metering laws typically include a limit on the size of the generating units, usually 

ranging from 1 kW to 1,000 kW. Some states that have net metering provisions do not qualify 

wind power for this incentive. 
Page 27 GAO-04-756 Renewable Energy

Some states promote wind power creatively. For example, California has 

formed a collaborative—known as the California Wind Energy 

Collaborative—to promote wind power’s growth in the state. The 

collaborative includes officials from federal and state government 

agencies, wind energy developers, electricity suppliers, environmental 

groups, and the academic community. Its primary purpose is to coordinate 

statewide activities related to wind power and to recommend policies to 

support its growth. The collaborative has developed a number of 

recommendations, such as (1) simplifying the permitting process for 

establishing a wind project in California and (2) focusing research and 

development on, among other things, improving turbine performance and 

reliability, addressing transmission grid and interconnection challenges, 

and enhancing wind forecasting. The California State Energy Commission 

funds the collaborative, providing about $350,000 annually for its activities. 

A second factor helping to further wind power’s expansion is 

environmental benefits. Wind power is considered a green technology 

because it has only minor impacts on the environment.29 In contrast, fossil 

fuel power plants are a significant source of air pollution. In general, these 

plants produce harmful emissions, such as carbon dioxide, nitrogen oxides, 

sulfur dioxide, mercury, and particulate matter, which can pose human 

health and environmental risks, such as acid rain and global warming.30 In 

some cases, these emissions may increase as electricity generated by fossil 

fuels increases to meet growing demand.31 For example, EIA forecasts that 

if this generation increases by 42 percent from 2000 through 2020—from 

3.5 trillion kWh in 2000 to almost 5 trillion kWh in 2020—annual emissions 

of carbon dioxide and mercury from these plants will rise nationwide by 

29The raw material acquisition, manufacture, transportation, and installation of wind 

turbines may result in minor environmental effects. For example, fossil fuel resources may 

be used in the production and transport of wind turbines and their components. In addition, 

the preparation of the foundation and construction of the turbine on site may result in some 

pollution due to soil erosion and engine exhaust until heavy equipment such as cranes, 

bulldozers, and backhoes are removed and ground cover is re-established around the base 

of the turbine. However, the operation of the turbine to produce electricity does not cause 

air or water pollution. 

30EPA data for 2000—the most recent available—indicate that conventional power plants 

were the single greatest industrial source of certain pollutants, emitting 40 percent of the 

nation’s carbon dioxide, 37 percent of its mercury, 22 percent of its nitrogen oxides, 63 

percent of its sulfur dioxide, and 21 percent of its particulate matter. 

31GAO, Air Pollution: Meeting Future Electricity Demand Will Increase Emissions of 

Some Harmful Substances, GAO-03-49 (Washington, D.C.: Oct. 30, 2002). 
Page 28 GAO-04-756 Renewable Energy

about 800 million tons (or 35 percent more) and 4 tons (or 9 percent more), 

respectively.32 To some extent, these anticipated increases could be offset 

by an increasing reliance on nonpolluting, renewable sources such as wind 

power. For example, according to DOE, by 2020, the growth of wind power 

could eliminate millions of tons of atmospheric carbon that would 

otherwise be released by fossil fuel power plants, thereby reducing 

greenhouse gas emissions. 

Fossil fuel power plants are also the nation’s second largest user of water 

resources after agriculture.33 Specifically, power plants use about 48.2 

trillion gallons of fresh water from rivers, lakes, and other sources each 

year, primarily to produce steam to turn turbines and for cooling, according 

to the U.S. Geological Survey. This amount represents nearly 40 percent of 

the nation’s total water usage. Power plants’ water requirements will likely 

rise as demand for electricity grows over the next 2 decades. Although 

state and local authorities protect certain water uses, such as for drinking 

water, when approving the construction of new power plants, these plants 

nevertheless can affect aquatic ecosystems. For example, drawing water 

into a plant can kill fish, and discharging water with elevated temperatures 

back to its source can damage aquatic organisms or habitats. Wind power, 

as an alternative energy source, does not use water to generate electricity.

In addition, increasing environmental consciousness has created “green 

consumerism”—a segment of consumers who are willing to pay more for 

products, including wind-generated electricity, whose production, 

application, and disposal are less harmful to the environment. Thus, 

utilities may offer customers the option of paying a higher rate for 

electricity produced from renewable sources such as wind power in lieu of 

electricity produced from fossil resources, arrangements often referred to 

as green pricing programs. For example, in the program sponsored by Xcel 

Power in Colorado, known as Windsource®, customers pay a premium of 

32Carbon dioxide emissions have been linked to global climate change, among other effects, 

and exposure to mercury can lead to nervous system disorders and birth defects. EIA 

projects slight decreases in emissions of nitrogen oxides and sulfur dioxide, sources of acid 

rain and smog, due to technology improvements and regulatory measures. Specifically, EIA 

forecasts that by 2020, power plants’ total emissions of nitrogen oxides and sulfur dioxide 

will decrease nationwide by about 100,000 tons (2 percent) and about 2 million tons (19 

percent), respectively. 

33Power plants consume only about 3 percent of the water they draw from a particular 

source during the process of generating electricity. In contrast, agriculture consumes about 

61 percent.
Page 29 GAO-04-756 Renewable Energy

$2.50 per 100 kWh for wind-generated electricity. According to some 

sources, customer interest in this program was an important factor in the 

installation of more than 230 MW of wind power capacity in the state.34 In 

Texas, Austin Energy has a green pricing program, known as 

GreenChoice®, for wind power, which accounts for about 4 percent of its 

annual electricity sales. Although participating customers generally pay a 

premium for this wind-generated electricity, demand is such that this utility 

is currently negotiating to add an additional 91 MW of wind power capacity. 

As an added inducement, this utility offers its wind power customers the 

choice of locking in a rate for a period of 10 years, while regular customers 

are subject to possible rate increases if the costs for fossil fuels increase. 

A third factor is energy security. This could help promote wind power and 

other renewable energy sources in order to reduce the nation’s dependence 

on foreign fossil resources, including oil and natural gas. For example, the 

United States currently imports about 65 percent of the oil and 15 percent 

of the natural gas it uses. Natural gas, in particular, is increasingly used to 

produce electricity,35 and according to DOE, the anticipated growth in 

demand for this fossil fuel will lead to an increasing reliance on imports. 

According to DOE, this dependence harms the U.S. trade balance and 

exposes our economy to potential supply disruptions.36 In light of these 

concerns, federal legislative and regulatory initiatives have encouraged a 

diversified energy portfolio. For example, the Public Utilities Regulatory 

Policies Act of 1978, as amended, was enacted in part to encourage the 

34According to DOE officials, Colorado’s Public Utility Commission also deemed wind 

power to be a cost effective alternative under least cost planning. 

35The United States used about 23.5 trillion cubic feet of natural gas in 2000 in five sectors: 

residential, commercial, industrial, electric generation, and transportation. DOE expects the 

country’s consumption of natural gas will increase to 33.8 trillion cubic feet per year by 

2020. More than half of this increase is predicted to come from gas-fired electric generation.

36According to the National Energy Policy Initiative, even in peacetime, the United States 

pays tens of billions of dollars a year for the readiness costs of military forces whose 

primary mission is intervention in the Persian Gulf region. A significant portion of those 

costs can be attributed to protection of oil production sites and transport routes. The 

economic, diplomatic, and military cost of foreign oil dependence is likely to increase as 

low-cost reserves become increasingly concentrated in that region, further increasing the 

potential market power of a few Middle Eastern countries. 
Page 30 GAO-04-756 Renewable Energy

development of alternative energy resources.37 More recently, the 

administration’s National Energy Policy, issued in May 2001, states that 

sound energy policy should encourage a diverse portfolio of domestic 

energy supplies and that renewable energy can be a reliable source of 

energy at a stable price because it does not depend on the availability of 

fossil fuels. Furthermore, while the nation’s transmission grid and central 

power plants remain vulnerable to terrorist attack, renewable sources, 

such as wind power, are geographically more dispersed and contain no 

volatile or radioactive fuel stocks. 

Fourth, government and industry experts expect that improvements in 

wind power technology and forecasts for higher fossil fuel prices will 

continue to help wind power compete with other sources of electric power 

generation. For example, technology improvements in turbine design and 

components have dramatically increased the efficiency and cost 

competitiveness of wind power generation, and continuing research and 

development will likely lead to further improvements. Regarding forecasts 

for higher prices, EIA projects that 69 percent of the 235,000 MW of new 

generating capacity needed in the United States by 2020 will be fueled by 

natural gas and another 9 percent by coal.38 In recent years, prices for 

natural gas have, at times, spiked dramatically, and the market for natural 

gas remains volatile, with small shifts in the supply of or demand for gas 

likely to cause wide price fluctuations.39 In addition, DOE and industry 

sources anticipate that as domestic and international demand for natural 

gas increases in the electric and other industrial and commercial sectors, 

the prices for natural gas will rise, making alternative energy sources such 

as wind power more competitive. 

3716 U.S.C. §§ 2601 et seq. The act requires utilities to purchase power output from nonutility 

facilities at prices not exceeding the utilities’ “avoided cost” of generating it or purchasing it 

from another source if the facilities are (1) generators that produce electricity using solar, 

wind, waste, or geothermal sources; or (2) co-generators that produce both electricity and 

heat or steam for industrial or commercial purposes. 

38These percentages exclude electricity that is generated by industrial and other facilities 

that is then sold to electric utilities. 

39GAO, Natural Gas: Analysis of Changes in Market Price, GAO-03-46 (Washington, D.C.: 

Dec. 18, 2002).
Page 31 GAO-04-756 Renewable Energy

Growth of Wind Power Will 

Depend on Continued 

Government Financial 

Incentives and Prices for 

Fossil Fuels

According to EIA forecasts prepared at our request, future wind power 

capacity could increase to 48,000 MW or more by 2025—enough to power 

about 13 million homes based on current usage rates—if the federal 

production tax credit were to remain available through 2010. On the other 

hand, if this credit is not available after December 31, 2003 (its 

authorization expired after that date and it had not been reauthorized as of 

August 2004), capacity will increase to only about 11,000 MW by 2025.40

According to EIA and other DOE officials, these forecasts are likely 

conservative estimates because the assumptions used were conservative.41

Other stakeholders have offered larger estimates. For example, AWEA 

estimates that wind power capacity could grow to 100,000 MW by 2020, 

representing about 6 percent of total U.S. production. In another case, the 

National Petroleum Council estimates that renewable capacity—primarily 

wind power—will grow to between 73,000 MW and 155,000 MW by 2025, 

with the larger number dependent in part on proactive public policies to 

promote renewable sources. Despite these varying estimates, DOE and 

industry sources agreed that the key to the potential future growth of the 

wind industry is the continued availability of the production tax credit or 

other subsidy support, although expected increases in fossil fuel prices, 

particularly for natural gas, also will be an important factor. 

DOE and industry sources noted that prior periods of uncertainty about the 

availability of the production tax credit led to a boom-and-bust cycle in the 

installation of new wind power capacity. For example, in years in which the 

authorization for the credit expired and its renewal was delayed,42 the 

installation of new capacity fell dramatically compared with the years in 

which it was available without interruption. Figure 8 provides information 

on this cycle. 

40In its Annual Energy Outlook 2004, EIA projects that wind capacity will increase to about 

16,000 MW by 2025 without the production tax credit, primarily due to expected higher 

natural gas prices and an increase in known, near-term wind projects that are being planned. 

41These assumptions are discussed in appendix I.

42In the past, when the authorization for the production tax credit expired and its renewal 

was delayed, the credit’s renewal was made retroactive to the prior date of expiration. 
Page 32 GAO-04-756 Renewable Energy

Figure 8: Fluctuations in the Installation of New Wind Power Capacity Related to the 

Changing Availability of the Production Tax Credit (PTC)

Note: Authorization for the credit for new facilities lapsed on Dec. 31, 2003. In 2003, the 

administration’s proposed energy bill would have extended the authorization for 3 years, but this 

legislation was not enacted. As of August 2004, legislation was pending before Congress that would 

reauthorize this credit for 3 years.

According to DOE and wind industry sources, the expiration of the 

production tax credit at the end of 2003 has significantly reduced wind 

power expansion. Potential developers are reluctant to commit resources 

to the planning and construction of new capacity without the certainty that 

the tax credit will be reauthorized. For example, AWEA estimates that the 

uncertainty over the reauthorization of the tax credit has caused the loss of 

over 2,000 manufacturing and construction jobs related to wind power and 

put about 2,000 MW of new wind energy production and nearly $2 billion in 

economic activity on hold. Thus, industry sources expect a significant drop 

in the installation of new capacity in 2004 from 2003 levels—capacity 

expansion in 2003 was a near record 1,700 MW, attributable in large 

measure to the availability of the tax credit. 

According to EIA, without the production tax credit, wind power will be 

relegated to a niche resource whose expansion will depend largely on longPTC

authorized

October 24, 1992

Wind capacity (thousands of MW)

Source: California Energy Commission.

Year

0

1

2

3

4

5

6

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

1st PTC 

expiration,

June 30, 1999

2nd PTC

expiration, 

December 31, 2001

3rd PTC

expiration,

December 31, 2003
Page 33 GAO-04-756 Renewable Energy

term trends in natural gas prices.43 Furthermore, in the view of some 

stakeholders, the most stable, predictable production tax credit would 

have a long-term or permanent authorization that would not induce market 

booms and busts but would facilitate steady market development for wind 

power and other renewable sources. Other stakeholders note, however, 

that to the extent this credit would be used, tax revenues would be lost to 

the federal government that could be used for deficit reduction or other 

purposes. For example, the Congressional Joint Committee on Taxation 

estimates that if the authorization for the production tax credit were 

extended through 2006, its cost to the Treasury for the 10-year period 

ending in 2013 would be $3 billion, or about $300 million annually. On the 

other hand, some stakeholders believe that renewable energy sources 

require subsidies such as the production tax credit to level the playing field 

because various subsidies for fossil fuel and nuclear technologies have 

made it difficult for renewable energy sources to compete, even when 

renewable technologies become cost competitive with these conventional 

technologies. In general, it is difficult to quantify all of the subsidies 

provided to the fossil fuel and nuclear power industries, and there is 

sometimes disagreement on how to define a subsidy. Nevertheless, many 

stakeholders maintain that these subsidies are substantial—measuring in 

the billions of dollars annually. For example, EIA estimates that the federal 

subsidies to the oil, natural gas, coal, and nuclear power industries totaled 

about $2.8 billion in fiscal year 1999, the most recent year for which EIA 

compiled these data.44

43NREL officials noted that if the states continue to expand requirements for renewable 

portfolio standards, then further expansion of wind power and other renewable sources 

may occur even in the absence of the production tax credit and regardless of fossil fuel 

prices. 

44Stakeholders also cite additional, hidden subsidies resulting from the fact that the full 

environmental and health costs of the fossil fuel and nuclear industries are not accounted 

for. For example, according to the Department of Labor, the federal government has paid 

about $40 billion over the past 33 years to cover the medical expenses of coal miners who 

suffer from “black lung disease.” These subsidies mean that the true cost of coal is not 

reflected in its market price. In addition, according to the Department of Health and Human 

Services, air pollution is estimated to be associated with 50,000 premature deaths and an 

estimated $40 billion to $50 billion in health-related costs annually. Fossil fuel power plants 

account for much of this pollution. 
Page 34 GAO-04-756 Renewable Energy

Wind Power Does Not 

Contribute 

Significantly to Total 

Farm Income, but 

Some Individual 

Farmers and 

Communities Have 

Benefited 

Wind power does not currently contribute significantly to total farm 

income in the 10 states with the highest installed wind power capacity, 

although some individual farmers and rural communities have benefited 

considerably from this energy source. However, wind projects located on 

farmland have increased some individual farmers’ income significantly, 

according to our site visits and analysis. In addition, large wind power 

projects established in some of the poorest rural counties in the United 

States have generally benefited these counties through the tax revenues 

they produce and the employment opportunities they provide. 

Wind Power Accounts for 

Only a Very Small Amount 

of Total Farm Income, but 

Provides Substantial 

Income to Some Farmers 

and Communities 

In the 10 states we examined, total net farm income exceeded $14 billion in 

2002, but total direct income to all U.S. farmers from wind power ranged 

from only $10 million to $45 million, representing only a fraction of 1 

percent of net farm income in these states. Nevertheless, wind projects 

located on privately owned farmland—the majority of U.S. wind power 

projects, according to AWEA—have increased individual farmers’ income 

by as much as tens of thousand of dollars annually, according to our 

analysis and site visits. In most cases, the farmers do not have an 

ownership interest in the projects. Rather, they receive lease payments 

from energy development companies for the use of the land and the 

associated “wind rights.” According to AWEA and other sources, the 

compensation a farmer receives for leasing land for wind power turbines 

effectively amounts to between $2,000 and $5,000 per year per MW of 

installed capacity. However, actual compensation received varies widely, 

depending the following factors: 

• The number of turbines. One California project includes turbines with a 

total generating capacity of approximately 60 MW. Based on data 

developed from our site visit to this project, we estimate that one of the 

landowners has enough turbines on his land to have generated over 

$200,000 in annual lease payments from the project owner. In another 

case, an Iowa project consisting of about 260 turbines has a total 

generating capacity of approximately 190 MW. However, the turbines are 

spread out over separate properties owned by 65 farmers. According to 

the project owner and one of these farmers, the average annual lease 

payment is about $2,000 per turbine, with each farmer’s total payments 

depending on the number of turbines located on that farmer’s land.
Page 35 GAO-04-756 Renewable Energy

• The value of electric power generated by the project. Land lease income 

is often linked to wind power project revenues. For example, land lease 

income may be a percentage of the gross revenues from the sale of the 

project’s wind power. Thus, the higher the sale price of power, the 

higher the lease income to the landowner. The price paid by utilities for 

the electricity produced from wind power projects has varied by 

location and over time. Nationwide, these prices currently range from 

$20 to $35 per MW hours (MWh). However, power purchase contracts 

signed in California in the early 1990s tended to be well above this 

range. For example, the price currently received for electricity from one 

California wind power project is about $70 per MWh. 

• The terms of the lease payments. The lease payments may include a 

single lump sum payment, fixed annual fees per turbine or per unit of 

power generation capacity, or a percentage of the project’s gross 

revenues. The farmer may receive additional lease payments for other 

structures or considerations related to the wind project, such as 

substations, operations and maintenance buildings, and rights-of-way, 

including roads leading to and from the project and transmission poles 

and lines to connect the project to the local power grid. In cases in 

which the farmer has an ownership interest in the project, the potential 

financial benefits may be even greater per turbine. However, farmerowned wind projects tend to be smaller, because farmers generally do 

not have the financial resources of an energy development company to 

establish larger projects with more turbines. 

Whatever the lease arrangements, the income farmers receive from wind 

projects located on their land is relatively stable compared with the income 

they derive from crop and livestock production, according to some farmers 

and other sources. Although the income from wind projects may be 

modest, these individuals said, it serves as an important hedge against 

possible fluctuations in income from crop and livestock production.45

Furthermore, income from wind turbines located on a farmer’s land 

45Various federal farm programs also help to protect farmers from fluctuations in 

commodity prices. For example, between 1999 and 2002, farmers received about $60 billion 

in farm program payments—averaging $15 billion annually—from USDA to help support the 

production of major commodities, such as corn, cotton, rice, soybeans, and wheat. 

According to USDA, in 2002, about 2.1 million farms produced and sold agricultural 

products. From these farms, aproximately 1.3 million producers received farm payments. 

Large farming operations get the most payments because the payments are based primarily 

on the amount of crop produced or the historical acres farmed. 
Page 36 GAO-04-756 Renewable Energy

generally does not fluctuate significantly, although higher or lower average 

wind speeds from one year to another can affect the amount of royalty 

payments a farmer receives. Royalty payment rates—for example, 4 

percent of gross revenues for electric power generated—are generally 

negotiated for a period of years. In addition, contracts between a 

landowner and a wind project owner often have a provision for minimum 

payment per turbine per year to protect a landowner’s income in cases of 

unusual low-wind periods or if a turbine is out of operation because of 

weather-related damage or maintenance. In some cases, a farmer said the 

additional income from the wind project helps keep the farm solvent and 

the farmer’s family on the farm. 

Wind Power Benefits Rural 

Communities by Providing 

Additional Investment, 

Employment Opportunities, 

and Tax Revenues

The construction and operation of a large wind project in a rural county is 

likely to increase the county’s general level of economic activity and 

wealth. Constructing a large wind power project with several dozen 

turbines requires the services of multiple businesses and scores of skilled 

and unskilled workers, as well as the purchase of equipment and material, 

such as turbines, towers, asphalt, cement, concrete, and electrical cables. 

In these activities, wind power project developers and operators have 

directly benefited rural communities by hiring local people and purchasing 

locally some of the goods and services needed to construct and operate a 

project. Furthermore, according to DOE, increasing the proportion of the 

nation’s energy generation attributable to wind power to 5 percent by 2020 

would add about $60 billion in capital investment in rural America; provide 

an estimated $1.2 billion in new income to farmers, Native Americans, and 

rural landowners; and create approximately 80,000 new jobs. (To determine 

the overall economic benefits of increasing wind power to farms and rural 

communities, any losses to the fossil fuel industry need to be counted as an 

offsetting factor.) 

In general, a county with a larger, more diversified economic base can more 

likely provide these services and supplies, thereby retaining more of the 

project’s direct economic benefits. For example, according to the 

developers of a large wind project—High Winds in Solano County, 

California—they obtained much of the services and supplies needed to 

construct this project within the county, which has over 400,000 residents 

and a diversified business community. However, if a county cannot provide 

some of the services and supplies needed, other nearby counties or cities 

that can provide these services and supplies may benefit. In Pipestone 

County, Minnesota, for example, wind power developers purchased some 

supplies locally, such as concrete, but had to contract with a firm in Fargo, 
Page 37 GAO-04-756 Renewable Energy

North Dakota, for a crane large enough to erect the turbines and with a firm 

in Minneapolis to do the electrical wiring. Pipestone County, located in 

southwestern Minnesota, has about 9,800 residents and a small business 

community. 

Furthermore, businesses and individuals directly employed by the wind 

project are likely to spend part of their income at local businesses, such as 

restaurants, hotels, and gas stations, and hardware, clothing, and food 

stores. In some cases, the benefits from these activities may exceed the 

level of a project’s direct benefits. For example, according to the Fort 

Stockton Economic Development Corporation in Pecos County, Texas, the 

county experienced a 10 percent increase in gross sales during the 

construction of several wind power projects. 

The property tax revenues resulting from the establishment of a wind 

power project in a county creates additional revenues that support schools, 

hospitals, fire protection, and other public services. Following are some 

examples:

• Lincoln County, Minnesota, with a population of about 6,200, obtained 

about $470,000, or 18 percent of its property tax revenues, in 2003 from 

local wind power projects with a combined capacity of 156 MW. 

• Pipestone County, Minnesota, obtained about $660,000, or 8 percent of 

its property tax revenues, in 2001 from wind projects with a combined 

capacity of 113 MW. 

• In Pecos County, Texas, with a population of about 16,000 the school 

districts received about $5 million in 2002 from property tax revenues 

directly associated with wind power projects in that county. For 

example, the Iraan-Sheffield School District, obtained one-third of its 

property tax revenues from wind power projects that year. These 

projects also added about 30 to 35 full-time permanent jobs to operate 

and maintain the projects.

For some counties, tax benefits may have to be deferred to attract wind 

power developers. These counties have offered generous tax abatements, 

forgoing part or much of the tax revenues that would have otherwise been 

collected for the period covered by the abatement. For example, to attract 

wind power developers, Texas’s Upton County offers a tax abatement of 10 

years, waiving all property taxes during this period with the exception of 

taxes collected for schools. 
Page 38 GAO-04-756 Renewable Energy

In terms of other taxes, counties that have sales taxes or that receive a 

share of state sales tax revenues are likely to realize income from the sale 

of taxable goods and services connected with the construction and 

operation of a wind power project. In addition, in states that have a 

personal or corporate income tax, the increased employment and business 

opportunities associated with a wind power project are likely to increase 

these tax revenues, which are then shared with counties in the state or 

used for public projects that benefit county residents. 

To better gauge the significance of general increases in economic activity, 

we asked NREL to use its Wind Impact Model to estimate these benefits, as 

well as direct benefits, for the counties we visited. NREL developed a 

number of estimates, varying the size of the wind project but otherwise 

keeping key model assumptions constant. In general, the results of NREL’s 

analysis confirm our observations from our site visits. For example, NREL 

estimates that the operation of a 150 MW project located in Alameda 

County, California—a county with a large population and diversified 

economic base—would result in the creation of 65 new jobs in the county 

and increase total income in the county by $5.4 million. However, the same 

size project located in Upton County, Texas, which has a much smaller 

population and economic base, would result in only 47 new jobs and an 

increase in total county income of $2.75 million. This is because in the case 

of Upton County, more of the staff needed to operate the project would be 

hired from outside the county. Nevertheless, the impact of the local hires 

on employment in Upton County may be greater than in Alameda County 

because the population of Upton County is so much smaller. A detailed 

discussion of this model and NREL’s analysis is contained in appendix III. 

Leasing Land for Wind 

Power Projects Is 

Easier Than Owning, 

and Most Farmers Do 

Not Qualify for Tax 

Credit 

Ownership of a wind power project may be more profitable to a farmer 

than leasing, based on our fieldwork and analysis. For example, whereas 

lease payments per turbine may provide several thousand dollars a year to 

the farmer, ownership may double or triple that income per turbine as the 

profits are not shared with an energy company. On the other hand, a farmer 

may only be able to afford to construct 1 or 2 turbines, as the cost per MW 

of installed capacity is about $1 million. In contrast, leasing land to an 

energy development company could result in the installation of a dozen or 

more turbines. In the latter case, although the farmer’s income per turbine 

is less, the total income received by the farmer would be substantially 

greater. In addition, farmers and other small investors generally lack 

sufficient tax liability to take full advantage of the federal renewable energy 
Page 39 GAO-04-756 Renewable Energy

production tax credit. However, some states offer incentives that help 

landowners develop wind power projects.

Farmers Find Leasing Is 

Easier Than Owning Wind 

Power Projects

Nationwide, farmers and other landowners own less than 1 percent of 

utility-scale wind power capacity. We found that farmers generally find 

leasing their land for wind power projects to be easier than owning projects 

because of the complexity of, and risk associated with, developing a wind 

power project. In general, development of a project may take 2 years or 

more from conception to completion, especially when multiple turbines are 

involved. Table 1 summarizes the major steps in project development. 

These steps are also discussed in greater detail in appendix V.

Table 1: Major Steps in the Wind Power Project Development Process

Source: GAO analysis of AWEA, NREL, and National Wind Coordinating Committee information.

Note: These steps are not necessarily sequential or mutually exclusive or inclusive.

a

The cost of adding connecting lines from the project to high voltage transmission lines can be 

expensive, adding substantially to a project’s cost.

b

The power purchase agreement guarantees that the buyer will purchase the energy from the seller at 

a negotiated price for a specified period of time, thereby creating a predictable long-term cash flow. 

This agreement is considered an asset of the project and is usually critical to obtaining financing for it.

The associated capital costs for a wind power project could also be 

daunting to an individual landowner—approximately $1 million per MW of 

Step Conditions generally considered or required

1 Detailed wind data for the proposed project site: local wind data from airports or meteorological stations; wind data on 

an hourly basis at varying heights for about 1 year; a minimum annual average wind speed of 11 to 13 miles per hour. 

2 As applicable, information on the potential effects on birds—particularly endangered or protected species; receptivity 

of neighbors and local communities; possible obstruction of air traffic by the turbines; interference with aerial crop 

dusting; possible need for environmental impact assessment. 

3 A lease or easement agreement negotiated with the farmer that grants the developer (1) a right of access to and 

across the property to construct, operate, and maintain the project; (2) a right to transmit the electricity from the 

property; and (3) a term sufficient for financing the project, usually 25 years or more. 

4 Permission to construct and operate the project from local permitting authorities, including land use and construction 

permits.

5 Easement rights of access to interconnect to transmission lines.a

6 A power purchase agreement between the project owner and the utility that will buy the electricity produced.b

7 Project financing from a bank or other lending institution; and federal or state assistance programs for renewable 

energy sources. 

8 Services and supplies related to site preparation, construction of turbines, substations, and access roads, and 

operation and maintenance of the project. 
Page 40 GAO-04-756 Renewable Energy

generating capacity installed. Thus, even purchasing just one or two utilityscale wind turbines can be a substantial investment for even a large farm or 

ranch. 

Leasing land to a wind power developer relieves a farmer of many of the 

formidable challenges of developing a wind power project, but the benefits 

of leasing may depend on the type of the lease arrangement offered. Table 2 

summarizes information on lease payment options. 

Table 2: Four Types of Lease Payment Options

Source: Oklahoma Wind Power Initiative.

A landowner may need expert advice—from an attorney to ensure the lease 

protects the landowner’s interests and from a financial adviser to 

understand the income and tax implications of various lease payment 

options. For example, University of Texas officials indicated that legal and 

technical resources available to the university were critical to negotiating a 

favorable lease agreement for a wind project on university property. 

Landowners may also face other problems in leasing land for wind power 

projects, as illustrated in the following examples:

• A Minnesota wind developer went bankrupt before completing the 

project. Unable to collect from the developer, the construction 

contractor that poured the concrete foundations for the turbines placed 

a lien on the farmer’s land. In the end, the farmer assumed responsibility 

for completing the project.

Option type Advantages and disadvantages to landowner

Lump sum payment A one-time payment for all turbines placed on the land, with no ongoing royalties. Advantage: 

provides substantial cash to pay a debt or purchase farm equipment. Disadvantages: precludes 

benefits from future increases in wind power value and may complicate the sale of the land 

because a prospective buyer stands to gain nothing from the turbines. 

Fixed annual payment A fixed dollar amount per turbine per year. Advantage: minimizes risk of income fluctuation. 

Disadvantages: prohibits the landowner from benefiting from future increases in wind power 

value. 

Fixed payment plus percentage of 

revenue

A fixed payment per turbine per year, plus a percentage of the turbines’ gross generated 

revenue. Advantage: The fixed payment holds even when the wind is low or the turbines do not 

operate. 

Percentage of revenue only A larger percentage of the turbines’ gross generated revenue. Advantage: more profits if wind 

power values increase. Disadvantage: more risk of not receiving revenue. 
Page 41 GAO-04-756 Renewable Energy

• In California, a landowner who leased land to wind developers for 200 

turbines had to renegotiate leases with the tenant farmers who also use 

this land. These farmers charged that they were disadvantaged by the 

wind power project because (1) the turbines prevented them from using 

aerial crop dusting; (2) the project created obstacles, such as the 

turbines, substations, and access roads, that the farmers had to drive 

their equipment around, causing their fuel costs to rise; and (3) the 

turbines and associated structures had reduced the acreage available for 

cultivation (by approximately 40 to 50 acres out of a total of 1,100 

acres). Although he lost some revenue from the renegotiated lease 

agreements with the tenant farmers, the landowner indicated he had 

more than recouped these losses from the income associated with the 

lease agreement for the wind turbines. The landowner also said the 

tenant farmers ultimately benefited by the adjusted (lower) rents for the 

land they farm. 

During our fieldwork, some farmers indicated it was difficult to make 

informed decisions about owning a wind power project or leasing their 

land to a commercial wind power developer because of a lack of readily 

accessible information. One farmer also noted it would be helpful to have a 

forum in which farmers could exchange relevant information and 

experiences. A number of entities offer information on wind power, 

including the pros and cons of ownership versus leasing. These include 

AWEA, NREL, the Union of Concerned Scientists, Wind Powering America, 

and Windustry. They also include state-based groups such as the California 

Wind Energy Collaborative, Iowa Policy Project, Minnesota Sustainable 

Energy for Economic Development Coalition, Oklahoma Wind Power 

Initiative, and Texas Renewable Energy Industries Association. However, 

federal and industry officials said that while access to information is 

important, it is not enough. According to these officials, given the 

complexity of owning a wind project or leasing land to a wind power 

developer, farmers and other rural landowners should seek legal, financial, 

and technical advice, as appropriate, before making a commitment to a 

project.

Farmers Generally Cannot 

Use the Production Tax 

Credit 

Farmers generally cannot use the federal renewable energy production tax 

credit, which many stakeholder groups view as crucial to making wind 

energy projects economically viable for project owners because of these 

projects’ high capital costs. According to Department of Treasury officials, 

for a farmer who does not materially participate in a wind power project to 
Page 42 GAO-04-756 Renewable Energy

make use of the production tax credit,46 the farmer must have tax liability 

attributable to passive income (e.g., rental income or income from 

businesses in which the farmer participates only as an investor) against 

which to claim the production tax credit. Passive income does not include 

income from the farmer’s active farming business, wage income, or interest 

and dividend income. Unless a farmer materially participates in the 

production of wind power, the production tax credit cannot offset tax 

liability attributable to income from these sources. Since many farmers do 

not have passive income and do not materially participate in wind power 

production, this passive versus nonpassive income distinction limits the 

number of farmers that are able to take advantage of the renewable energy 

production tax credit. Furthermore, even in a case where a farmer 

materially participates in and operates a wind project, the value of the tax 

credit is usually greater than the income tax on the revenue earned by the 

project for wholesale electricity generation as well as from other relevant 

sources, such as revenue from the farming business and wage income 

related to off-farm employment. 

Although an individual farmer may not be able to use the full amount of the 

production tax credit, farmers can benefit from this tax credit in other 

ways. For example, in Rock County, Minnesota, some farmers interested in 

wind power have formed two limited liability companies, pooling their 

individual passive incomes and associated tax liabilities in order to make 

use of the production tax credit. These arrangements have led to the 

establishment of two wind power projects, Minwind I and II. Each 

company has rules similar to a traditional farmer cooperative,47 although 

legally they are not cooperatives.48 Each company sold stock to more than 

30 individuals and required that 85 percent of the shares be owned by 

farmers; the remaining 15 percent of the shares are available to local 

residents and investors. No single person can own more than 15 percent of 

46Internal Revenue Service Publication 925 defines criteria for material participation in a 

trade or business activity. For example, an individual materially participates in a trade or 

business activity if the individual participates more than 500 hours during the tax year. 

47In general, a cooperative is an organization formed for the purpose of producing and 

marketing goods or products owned collectively by members who share in the benefits. 

48Rural electric cooperatives and publicly owned municipal utilities are not eligible for the 

federal production tax credit. However, they may qualify for the federal Renewable Energy 

Production Incentive that provides cash payments based on electricity production from 

renewable sources on a per kWh basis. See 10 C.F.R. part 451 (DOE’s regulations setting out 

its policies and procedures for implementing the incentive program). 
Page 43 GAO-04-756 Renewable Energy

the shares. These projects started operating in late 2002, and each has a 

capacity of 1.9 MW. Furthermore, seven additional Minwind projects (III 

through IX) are under development in Rock County. When complete, these 

projects will have 200 local owners and a combined capacity of 12 MW. 

In addition, some individual farmers in Minnesota have entered into equity 

partnerships with an investor in order to benefit from the production tax 

credit indirectly. In these cases, the investor owns nearly all of the interest 

in the project for the first 10 years, receiving most of the net cash from the 

project and the benefits of the production tax credit and accelerated 

depreciation. After this 10-year period, the ownership switches, or “flips,” 

to the farmer and the farmer receives most of the project income. For 

example, at one wind project we visited in Pipestone County, an equity 

partner owns a 99 percent interest in a 1.5 MW project (two 750 kilowatt 

turbines) for the first 10 years of the project’s operation. The farmer who 

provided the land for the project has the other 1 percent interest. The 

equity partner provided most of the up-front capital needed to establish the 

project, and the project’s assets provide the collateral for the remaining 

required debt. However, the equity partner also reaps most of the profits 

and the benefits of the federal production tax credit. During these first 10 

years, the farmer receives lease payments of about $2,000 per year per 

turbine, plus management service payments of about $30,000 per year, 

based on a percentage of the revenues associated with the electricity 

production. After the 10th year, majority ownership of the project will be 

transferred to the farmer, who will start earning about $120,000 per year 

through the end of the project’s expected lifetime (an additional 10 years or 

more). Thus, beginning with the 11th year, the farmer’s annual income from 

the project will more than triple.

Minnesota Offers 

Renewable Energy Cash 

Payments and Other 

Incentives to Promote 

Landowner-Owned Wind 

Power Projects 

In addition to the federal tax credit, landowners may benefit from state 

incentives. For example, Minnesota offers several incentives to promote 

farmer, rural landowner, and rural business ownership of small wind power 

projects. Federal and industry officials often cited Minnesota as being 

particularly proactive in this regard. Table 3 summarizes these incentives. 
Page 44 GAO-04-756 Renewable Energy

Table 3: Minnesota Initiatives That Promote Small Landowner-Owned Wind Projects 

Source: GAO analysis of information from the Database of State Incentives for Renewable Energy, the Minnesota Public Utilities 

Commission, and other sources. 

a

The renewable energy systems eligible for incentive payments in Minnesota include wind, small 

hydroelectric, and biomass digester technologies.

According to Minnesota and wind industry officials, the most important of 

these incentives is the state’s Renewable Energy Production Incentive 

program. As of December 2003, this program had benefited about 170 

renewable energy projects in the state, including 130 wind power projects 

that are collecting incentive payments and another 43 that have secured 

eligibility but are not yet operational. According to a Windustry official, 

more than one-third of the beneficiaries have been farmers and rural small 

businesses over the life of the program. This official also said that because 

of current difficult fiscal conditions, it is uncertain whether Minnesota will 

expand the program beyond the 200 MW cap to assist additional projects. 

Incentive Description

Renewable Energy Production Incentive Begun in 1997, this incentive provides payments for 10 years of 1.5 cents per kWh of 

electricity generated by new renewable projects such as wind with less than 2 MW 

capacity.a

 Projects must begin generating electricity within 18 months after approval. The 

incentive was available only for the first 200 MW of approved projects. Planned capacity for 

new wind power projects reached the 200 MW goal in November 2003.

Agricultural Improvement Loan Program The state’s Rural Finance Authority provides low-interest loans to farmers for 

improvements or additions to permanent facilities. Beginning in 1995, the installation of 

wind power equipment qualifies as an improvement.

Value-Added Stock Loan Participation 

Program

The state’s Rural Finance Authority provides low-interest loans to farmers to assist them in 

buying into wind generation cooperatives—45 percent of total loan principal up to $24,000. 

The maximum size of an individual project is 1 MW.

Interconnection Standards Law The Minnesota Public Utilities Commission is developing uniform interconnection 

requirements for distributed power generation, including generation from renewable 

sources such as wind power, applicable to all state utilities. These standards will be 

available to all qualifying sources of 40 kilowatt generating capacity or less. The law 

specifies that uniform applications must be developed and that utilities must report annually 

on the number of distributed systems interconnected. 

Standard Power Purchase Agreement In June 2000, Xcel Energy, as part of a state merger stipulation, agreed to work with the 

state and other interested parties to develop a tariff (surcharge) to benefit renewable 

energy systems of up to 2 MW generating capacity. In December 2000, the company 

proposed a wind energy tariff to encourage the development of small wind power projects 

within the company’s service territory. In August 2001, the commission approved the 

company’s proposal to purchase power from a qualifying wind power facility at a price of 

3.3 cents per kWh for a term of up to 20 years. 
Page 45 GAO-04-756 Renewable Energy

USDA Can Do More to 

Promote Wind Power

USDA has not fully utilized all of the farm bill’s renewable energy 

provisions to promote wind power development on farms and in rural 

communities, although it has provided some funding through other 

provisions of the farm bill. In particular, USDA had not issued a regulation 

for loans and loan guarantees under the farm bill’s key wind power 

assistance program—the Renewable Energy Systems and Energy 

Efficiency Improvements Program (Renewable Energy Program). As a 

result, although grants are available, farmers and other applicants cannot 

obtain loans and loan guarantees under this program, which limits the 

ability of the program to promote renewable energy sources. In addition, 

USDA may be missing opportunities to leverage information, resources, 

and expertise available from EPA in implementing the Renewable Energy 

Program and to simplify the program’s application process. 

Farm Bill Provisions 

Promote Renewable 

Energy Systems, 

Including Wind Power, 

but USDA Has Not 

Made Full Use of These 

Provisions 

Among other things, the 2002 farm bill promotes the use of renewable 

energy systems, such as wind turbines, on the nation’s approximately 900 

million acres of farmland and rangeland.49 According to USDA and other 

sources, these farm bill provisions will create economic opportunities in 

rural communities, give farmers a means to earn additional income, 

diversify the nation’s energy production, reduce its dependence on 

imported fossil fuels, and help protect the environment. Table 4 

summarizes information on the farm bill provisions for promoting 

renewable energy systems, including wind power. 

49According to USDA, this farm bill was the first one to include an energy title.
Page 46 GAO-04-756 Renewable Energy

Table 4: Farm Bill Provisions to Further Wind Power’s Growth

 Source: Pub. L. No. 107-171 (2002 farm bill).

During fiscal year 2003 and through August 2004, USDA has made limited 

progress in using the farm bill provisions to further the use of renewable 

energy systems. Table 5 shows the status of USDA’s efforts. As the table 

shows, in several cases these provisions have not been used yet. In other 

cases, the provisions cannot be fully used until USDA has developed 

relevant regulations. USDA officials told us that the newness of these 

provisions—the farm bill was enacted in May 2002—and the lead time 

needed to train its staff, disseminate information to the farm community, 

and develop regulations and publish them in the Federal Register for 

comment, as appropriate, has slowed the agency’s ability to fully use these 

provisions. 

Pub. L. No. 107-

171 Section

Section title or relevant 

program Provisions

2101 (a) (1) (B) Conservation Reserve Program Biomass and wind turbine installations are now allowed on lands retired in this 

program. Turbine installation is subject to USDA approval, taking into account the 

proposed site location, habitat, and purposes of the program, including protection 

of environmentally sensitive land. Installations do not reduce program payments. 

6013 Rural Development Title Extends loans and loan guarantees under the Consolidated Farm and Rural 

Development Act to renewable energy systems, including wind power projects. 

6017 Business and Industry Direct Loan 

and Loan Guarantee Program

Expands program for rural development, and includes farmer/rancher equity 

ownership in wind power projects. Limits range from $25 million to $40 million per 

project. 

6401 (a) (2) Value-Added Agricultural Product 

Market Development Grants

Expands the definition of the term “value-added agricultural product” to include 

farm- and ranch-based renewable energy. Competitive grants are available to 

assist producers with feasibility studies, business plans, marketing strategies, 

and start-up capital. Maximum grant amount is $500,000 per project.

9005 Energy Audit and Renewable 

Energy Development Program

Competitive grants are available for organizations to assist farmers, ranchers, 

and rural small businesses by conducting and promoting energy efficiency audits 

and renewable energy assessments. 

9006 Renewable Energy Systems and 

Energy Efficiency Improvements 

(Renewable Energy Program)

Offers low-interest loans, loan guarantees, and grants to farmers, ranchers, and 

rural small businesses to purchase and install renewable energy systems, 

including wind projects. Grants may fund up to 25 percent of the cost of the 

project. Combined grants and loans or loan guarantees may fund up to 50 

percent of the cost of the project. Provides that $23 million of the funds of the 

Commodity Credit Corporation be made available each year—for fiscal years 

2003 through 2007—for this program. 
Page 47 GAO-04-756 Renewable Energy

Table 5: Status of USDA’s Implementation of Farm Bill Provisions That Support Wind Power’s Growth

Source: The 2002 farm bill and USDA information.

Many stakeholders consider the Renewable Energy Program as the key 

USDA program for promoting renewable energy sources, including wind 

power, on farms, ranches, or other rural lands. The program focuses on 

promoting renewable energy generation and energy efficiency 

improvements and was authorized a total of $115 million—$23 million 

Pub. L. No. 

107-171 Section

Section title or relevant 

program Fiscal year 2003 status

Fiscal year 2004 status, as of 

August 2004

2101 (a) (1) (B) Conservation Reserve 

Program

Farm Service Agency issued policy guidance 

stating that farmers with land enrolled in this 

program may lease this land for renewable 

energy purposes without affecting the 

program payments they receive.

Only a few farmers have contacted 

the agency to discuss the placement 

of wind turbines on land enrolled in 

the program. 

6013 Rural Development Title Definition of “rural development” changed in 

draft interim final rule to include renewable 

energy systems, such as wind power. This 

rule was being reviewed by OMB as of 

August 2004. USDA anticipates its 

publication in the Federal Register by 

December 2004. No wind power systems 

financed. 

No wind power systems financed.

6017 Business and Industry Direct 

Loan and Loan Guarantee 

Program

Program guidelines amended to include 

renewable energy systems, such as wind 

power. No wind power systems financed. 

No wind power systems financed. 

6401 (a) (2) Value-Added Agricultural 

Product Market Development 

Grants

Four wind projects received grant funds 

totaling about $600,000. 

No awards had been made. 

9005 Energy Audit and Renewable 

Energy Development 

Program

Program was not funded. Program was not funded. 

9006 Renewable Energy Systems 

and Energy Efficiency 

Improvements (Renewable 

Energy Program)

$23 million in mandatory funds available. Of 

this amount, $21.7 million in grants offered, 

including about $7.4 million for wind power, 

supporting 35 projects. No loans or loan 

guarantees offered pending USDA’s 

publication of program regulation. The 

budget authority for the remaining $1.3 

million lapsed because the remaining project 

applications lacked technical merit. 

$23 million in discretionary funds 

appropriated by Pub. L. No. 108-199. 

However, this amount was reduced 

by $136,000 due to rescission under 

Div. H. § 168(b) of Pub. L. No. 108-

199. USDA issued a Notice of Funds 

Availability on May 5, 2004, to solicit 

grant proposals. No loans or loan 

guarantees offered pending USDA’s 

publication of program regulation. 
Page 48 GAO-04-756 Renewable Energy

yearly—for fiscal years 2003 through 2007 for its implementation.50 This 

funding can be used for loans, loan guarantees, or grants to farmers, 

ranchers, or rural small businesses.51 Eligible projects include those that 

derive energy from a wind, solar, biomass, or geothermal source.52

Since passage of the farm bill, USDA has undertaken a number of actions to 

begin to implement the Renewable Energy Program. 

• In November 2002, USDA formed a rural energy working group—with 

representatives from several USDA agencies as well as DOE and EPA—

to strengthen interagency relationships and to leverage information, 

resources, and expertise to assist in implementing the Renewable 

Energy Program. This group met again in December 2002 and January 

2003. 

• In November 2002, USDA issued a Federal Register notice announcing a 

public meeting to solicit comments and suggestions from stakeholder 

groups on how to implement the Renewable Energy Program. This 

meeting was held on December 3, 2002.

• In February 2003, the Under Secretary for Rural Development requested 

that all Rural Development State Directors designate a Rural Energy 

Coordinator to, among other things, coordinate the implementation of 

the Renewable Energy Program.

• In April 2003, USDA issued a Notice of Funds Availability (NOFA) in the 

Federal Register inviting applications for grant assistance under the 

Renewable Energy Program for fiscal year 2003. According to this 

notice, $23 million was available for this program. Applications were 

initially due by June 6, 2003. In May 2003, USDA issued another NOFA 

extending the application deadline to June 27, 2003, and clarifying 

information regarding requirements for financial information and utility 

interconnection agreements. 

50USDA is to carry out this program from the funds of the Commodity Credit Corporation, a 

government-owned corporation within USDA.

51A rural small business must operate with 500 or fewer employees and $20 million or less in 

total annual receipts and must be headquartered in a rural area. 

52Projects using energy from these sources to produce hydrogen derived from biomass or 

water are also eligible. 
Page 49 GAO-04-756 Renewable Energy

• In August 2003, USDA signed an Interagency Acquisition Agreement 

with DOE to obtain its assistance in implementing the Renewable 

Energy Program. Among other things, this agreement calls for DOE to 

assist USDA in evaluating the technical aspects of proposals submitted 

for renewable energy projects or energy efficiency improvements. In 

part, this agreement also helps to fulfill the farm bill’s requirement that 

USDA consult with DOE in implementing the Renewable Energy 

Program. USDA’s Rural Development mission area made about $162,000 

available for this purpose.

• In August 2003, USDA signed a contract with MACTEC Federal 

Programs (MACTEC), a consultant, to develop a regulation for the 

program, including proposed and final regulations to be published in the 

Federal Register. USDA’s Rural Development mission area made about 

$317,000 available for this purpose.

• In May 2004, USDA issued a NOFA in the Federal Register inviting 

applications for grant assistance under the Renewable Energy Program 

for fiscal year 2004. According to this notice, $22.8 million is available 

for this program in fiscal year 2004.53 Applications were to be 

postmarked by July 19, 2004. As of August 2, 2004, USDA indicated that 

it received a total of 56 applications for wind projects totaling about 

$10.8 million.54 

In fiscal year 2003, wind power projects represented about one-third of the 

projects selected and grant funds awarded under the Renewable Energy 

Program, or 35 of the 114 grantees selected and $7.4 million of the $21.7 

million awarded. The applicants selected for wind projects included four 

farmers and 31 rural small businesses located in eight states. Table 6 

53USDA’s fiscal year 2004 appropriations act provided $23 million in discretionary funding 

for the Renewable Energy Program—Consolidated Appropriations Act of 2004, Pub. L. No. 

108-199, Div. A, tit. III, 118 Stat. 24 (2004). However, an across-the-board rescission of 0.59 

percent applicable to all discretionary programs reduced the amount of funds available by 

$136,000—Pub. L. No. 108-199, Div. H. § 168(b). Funds appropriated to the Renewable 

Energy Program are considered 1-year money; i.e., the budget authority for any amount not 

obligated by the end of the fiscal year in which the funds were appropriated lapses at the 

end of that year and is no longer available for obligation. 

54After the agency’s initial review, including its consideration of factors such as borrower 

eligibility, project eligibility, and financial need, USDA was still actively considering 48 of 

these 56 applications as of August 2, 2004. However, these applications are subject to further 

review, including analysis of their environmental and technical merit. 
Page 50 GAO-04-756 Renewable Energy

summarizes the grant assistance provided for renewable energy projects, 

including wind power, under the program in fiscal year 2003. 

Table 6: USDA Grant Assistance for Renewable Energy and Energy Efficiency 

Projects in 2003 

Sources: NREL and USDA.

Note: The distinction between large and small wind projects depends on the capacity of the turbines to 

be installed. Small projects include installation of a turbine with a capacity of up to and including 100 

kW and a generator hub height of 120 feet or less. Any turbine above this threshold is considered 

large. 

Notwithstanding the above actions, USDA’s implementation of the 

Renewable Energy Program in fiscal year 2004 remains incomplete. 

Although USDA has issued a NOFA, it will again offer only grants, as was 

done in fiscal year 2003. According to USDA officials and documents, the 

Rural Business-Cooperative Service (RBS)—the USDA agency responsible 

for implementing the program—had planned to issue proposed and final 

versions of the program regulation during fiscal year 2004 and to make 

awards of loans and loan guarantees, as well as grants, during the year 

based on the final regulation. However, RBS was not able to hold to this 

schedule. According to RBS officials, they underestimated the time that 

would be needed to develop and process the regulation. In this regard, they 

cited several factors that have contributed to the time needed. 

Renewable 

technology

Number of 

awards

Agricultural 

producers

Rural small 

businesses

Total amount 

awarded

Biomass—anaerobic 

digester 30 25 5

Biomass—bioenergy 17 11 6

Total biomass 47 36 11 $11,475,535

Wind—large 24 1 23

Wind—small 11 3 8

Total wind power 35 4 31 7,412,118

Geothermal/hybrid

systems 2 0 2 589,762

Solar 6 5 1 725,566

Building/industrial

energy efficiency 24 13 11 1,504,252

Hydrogen 0 0 0 0

Total 114 58 56 $21,707,233
Page 51 GAO-04-756 Renewable Energy

First, these officials said the Office of Management and Budget (OMB) 

designated the regulation as “significant” according to Executive Order 

12866, as amended.55 A regulation designated as significant is subject to 

OMB review. Specifically, the executive order provides that significant 

regulations are subject to review by OMB’s Office of Information and 

Regulatory Affairs. This office may take up to 90 days for its reviews at the 

proposed and final regulation stages before publication of the regulation in 

the Federal Register.

56 In addition, the executive order provides that 

agencies should afford the public a meaningful opportunity to comment on 

any proposed regulation, which in most cases should include a comment 

period of not less than 60 days. 

Second, USDA has opted to apply the Administrative Procedure Act’s 

notice of proposed rule making and public comment requirements in 

certain instances where not required by law. This policy, promulgated by 

former Secretary of Agriculture Clifford Hardin, was published in the 

Federal Register in 1971.57 The policy is known informally as the “Hardin 

memo.” Specifically, this memo provides, in part, that the public 

participation requirements prescribed by the Administrative Procedure 

Act, 5 U.S.C. 553 (b) and (c), will be followed by all agencies of the 

department in rule making relating to public property, loans, grants, 

benefits, or contracts. Thus, while the act does not require notice and 

public comment for regulations related to these matters, USDA’s policy is 

to follow the public participation requirements of the act for these types of 

regulations as well. USDA officials noted that the Hardin memo is 

consistent with the recommendations of the Administrative Conference of 

the United States, and although the memo was promulgated more than 30 

years ago, it remains in effect. 

Third, delays occurred in contracting with MACTEC. This contract was 

signed in August 2003, about 15 months after the farm bill’s enactment 

(May 13, 2002). Specifically, delays occurred with GovWorks, a federal 

contract acquisition and administration office used by USDA to handle the 

55Executive Order No. 12866, Regulatory Planning and Review, 58 Fed. Reg. 51735 (Sept. 

30, 1993).

56OMB may return a proposed regulation to an agency for further consideration.

5736 Fed. Reg. 13804 (July 24, 1971).
Page 52 GAO-04-756 Renewable Energy

contract solicitation and administration.58 According to USDA officials, 

GovWorks took longer than expected to complete the solicitation phase—

including advertising the solicitation and performing the initial evaluation 

of applicants—due to staffing shortages and its responsibilities for other 

major federal contracts. The solicitation produced a number of applicants, 

from which four were selected for interview by RBS staff. USDA officials 

indicated that it took additional time to arrange these interviews. MACTEC 

was selected from among the final four firms.

Fourth, USDA officials noted that the draft proposed program regulation is 

a very large document—over 200 pages. Thus, the time needed for review is 

longer. In early June 2004, USDA officials noted that the draft had been 

under review within USDA since February and was now in final 

departmental clearance. Among other offices, the Rural Development 

mission area, the Office of General Counsel, and the Office of Budget and 

Program Analysis have reviewed the draft. USDA officials noted that as 

much as possible, the draft was reviewed concurrently by relevant offices 

and that the Office of General Counsel assigned one of its attorneys 

virtually full time to review the regulation in order to expedite that office’s 

review. 

Finally, USDA officials described the Renewable Energy Program as a new 

and unique program. These officials said that neither USDA nor DOE had a 

grant or loan program similar to it before its creation in the energy title of 

the farm bill. Thus, USDA did not have an existing program to use as a 

model for developing the program regulation. In addition, these officials 

said that RBS staff were generally not familiar with renewable energy 

technologies and thus needed to reach out to other agencies, such as DOE 

and EPA, to obtain technical assistance. They also noted that consultation 

with DOE is required in section 9006 of the farm bill.

Although USDA officials maintain that the agency’s development in early 

2004 of an emergency pilot program for developing renewable energy 

systems from the use of diseased livestock as a process raw material for 

energy generation was not a source of delay, it may have been a 

contributing factor. This pilot program was announced in a NOFA 

58GovWorks (GovWorks Federal Acquisition Center) is a Franchise Fund established by 

Congress and OMB to offer administrative services for procurement throughout the federal 

government. Organizationally, GovWorks is located in the Department of the Interior’s 

Minerals Management Service.
Page 53 GAO-04-756 Renewable Energy

published in the Federal Register on May 18, 2004. According to the NOFA, 

this program is a further action to support USDA’s efforts to address the 

risks associated with bovine spongiform encephalopathy (BSE), also 

known as mad cow disease. The NOFA states that RBS expects projects to 

be constructed that will produce energy through the destruction of 

diseased cattle. 

Under the pilot program, USDA plans to provide guaranteed loans totaling 

up to $50 million for up to three project proposals. USDA estimates the cost 

of the pilot to be about $3.1 million, needed to fund the credit subsidy 

costs. According to USDA officials, these funds will come from the fiscal 

year 2004 appropriation for the Renewable Energy Program, reducing the 

funds available to make grant awards under this program by an equivalent 

amount. Although it will use funds from the Renewable Energy Program, 

these officials said the pilot program is a distinct 1-year program that will 

not be addressed in the regulation for the Renewable Energy Program. 

Instead, the NOFA indicates that the program regulation for USDA’s 

Business and Industry Loan Guarantee Program is being used as the basis 

for the delivery of the pilot program, with certain provisions of that 

regulation revised to accommodate the pilot’s purpose. For example, 

changes to the guaranteed fee and the percent of guarantee were made to 

provide a further incentive to lenders to participate in the pilot program. 

MACTEC, the same contractor that USDA is using to develop the proposed 

regulation for the Renewable Energy Program, was also used to develop 

the NOFA for the pilot program. The original contract with MACTEC was 

modified for this purpose. Specifically, a contract amendment signed in 

February 2004 provided for additional payments of about $25,000 for this 

purpose, increasing the total value of the contract to about $342,000. 

According to the amendment, MACTEC was to begin work on the NOFA in 

late February 2004. USDA officials indicated that MACTEC had delivered 

the draft proposed program regulation for the Renewable Energy Program 

to USDA for review prior to beginning work on the pilot program, and thus 

the work on the pilot did not delay the work on the proposed program 

regulation. However, progress reports prepared by MACTEC in March and 

April 2004 indicate that there was overlap between the two efforts, 

although the reports do not make clear whether work on the pilot delayed 

progress on the program regulation.
Page 54 GAO-04-756 Renewable Energy

USDA’s Inability to Offer 

Loans and Loan Guarantees 

under the Renewable 

Energy Program Limits This 

Program’s Potential

USDA’s continuing inability to offer loans and loan guarantees under the 

Renewable Energy Program, as specified in the farm bill, limits the agency’s 

ability to achieve a much higher program level. For example, according to 

USDA’s fiscal year 2005 Budget Summary, the Consolidated Appropriations 

Act for 2004 and the administration’s budget proposal for 2005 provide 

sufficient funding for the Renewable Energy Program—about $23 million in 

2004 and about $11 million in 2005—for $200 million in program level each 

year, based on a combination of loans, loan guarantees, and grants.59 This is 

possible because for direct loans and loan guarantees, program funds 

would be needed only for the credit subsidy cost.60 Otherwise, direct loans 

are made from funds borrowed from the U.S. Treasury, and guaranteed 

loans are made by private lending institutions. Thus, a greater number of 

renewable energy projects could be financed. In addition, providing loans 

or loan guarantees in conjunction with grants could provide individual 

recipients with a greater level of assistance. That is, while grants can be 

used to pay up to 25 percent of the eligible project costs, a combination of 

grants and loans or loan guarantees may be used to pay up to 50 percent of 

the eligible costs.61 In addition, loans may be a more cost-effective way to 

provide federal assistance than outright grants, as the funds used for loans 

are repaid by the recipient. 

USDA’s continuing inability to offer loans and loan guarantees under the 

Renewable Energy Program also limits the program’s potential benefits and 

the agency’s ability to achieve one of its performance goals: to increase 

59As discussed, the $23 million appropriated for the Renewable Energy Program in fiscal 

year 2004 was reduced by $136,000 per a rescission, leaving $22.864 million available. Of this 

amount, the emergency pilot program will use an estimated $3.1 million, reducing the funds 

available to make grants under the Renewable Energy Program to about $19.8 million. The 

administration’s budget proposal for fiscal year 2005 includes $10.77 million in discretionary 

funds for the Renewable Energy Program. 

60The credit subsidy cost is the estimated long-term cost to the government of a direct loan 

or loan guarantee, excluding administrative costs. Specifically, it is the present value—over 

the life of the loan or guarantee—of payments by the government minus estimated 

payments to the government. 

61In determining the amount of a grant or loan, section 9006 of the farm bill requires USDA 

to consider, as applicable, (1) the type of renewable energy system to be purchased; (2) the 

estimated quantity of energy to be generated by the system; (3) the expected environmental 

benefits of the system; (4) the extent to which the system will be replicable; (5) the amount 

of energy savings expected to be derived from the activity, as demonstrated by an energy 

audit; (6) the estimated length of time it would take for the energy savings generated by the 

activity to equal the cost of the activity; and (7) other factors, as appropriate. In addition, 

applicants must demonstrate financial need to receive a grant. 
Page 55 GAO-04-756 Renewable Energy

economic opportunity in rural areas. For example, USDA’s fiscal year 2005 

Budget Explanatory Notes indicate that the $21.7 million in grant awards 

made in fiscal year 2003 under the Renewable Energy Program resulted in 

an estimated 736 jobs created or saved and 100 million kWh of electricity 

generated. However, the agency estimates that the addition of loans and 

loan guarantees in fiscal year 2004 would result in (1) a program of about 

$200 million, (2) an estimated 7,169 jobs created or saved, and (3) 888 

million kWh of electricity generated.62 Jobs created or saved and electricity 

generated are identified as key performance measures in the Budget 

Explanatory Notes. 

USDA’s ability to offer loans and loan guarantees is also important because 

of uncertainty regarding the Renewable Energy Program’s future funding. 

Although the program was fully funded in fiscal years 2003 and 2004, the 

administration’s budget proposal for fiscal year 2005 provides only $10.77 

million of the $23 million authorized in the farm bill. If enacted as 

proposed, this level of funding would represent less than 50 percent of the 

resources authorized for the program. Since direct loans and loan 

guarantees require appropriations for only the credit subsidy cost, not their 

full face value, they may result in making more financing available at less 

cost to the government than outright grants. Also, the ability to leverage 

greater amounts of private financing with loan guarantees would take on 

added importance. Many stakeholder organizations, including AWEA, the 

Environmental and Energy Study Institute, the American Council for an 

Energy-Efficient Economy, and the Environmental Law and Policy Center, 

have expressed concerns regarding this proposed cut.

USDA’s Ability to Offer 

Loans and Loan Guarantees 

under the Renewable 

Energy Program in Fiscal 

Year 2005 Is Uncertain and 

Questions Remain

In June 2004, USDA officials indicated that they anticipate publishing the 

final regulation for the Renewable Energy Program in late spring 2005. 

Specifically, documentation related to the agency’s contract with MACTEC 

indicates that the final regulation will be published in the Federal Register

on May 31, 2005. Assuming this schedule is met, only 4 months in fiscal year 

2005 would remain for (1) USDA to issue a notice in the Federal Register 

announcing the availability of funds for loans, loan guarantees, and grants; 

(2) program applicants to prepare project proposals and applications, 

including obtaining professional assistance from an engineer, financial 

adviser, or environmental consultant; and (3) USDA to receive and analyze 

62We did not independently assess the validity of these estimates. 
Page 56 GAO-04-756 Renewable Energy

program applications and to consult with DOE or EPA, as appropriate, 

regarding the technical merit of the proposals. USDA officials 

acknowledged that this would be a very tight schedule, but expressed the 

view that they could offer loans and loan guarantees in fiscal year 2005 if 

this schedule is met.

However, questions remain as to when the proposed and final program 

regulation will be published. The proposed regulation completed final 

departmental clearance on June 23, 2004, and was sent to OMB for review. 

As noted, OMB may take up to 90 days for its review. USDA must then 

make revisions to the proposed regulation to address OMB’s comments 

before its publication in the Federal Register for public comment. USDA 

has already revised its target date for publishing the proposed regulation 

several times—from November 17, 2003, to May 24, 2004, to the fall of 2004. 

Similarly, it has revised its target date to publish the final regulation from 

June 7, 2004, to May 31, 2005. 

USDA officials said that 60 days would be allowed for public comment on 

the proposed regulation after its publication. In addition, they said they 

expect a large volume of comments and that it will take time to review 

these comments and consider revisions to the regulation. These officials 

said they would consider options to speed up the agency’s review, including 

detailing additional staff to assist with this work. Once USDA has 

completed its review of the comments and revised the regulation, as 

appropriate, the agency will submit the final regulation to its internal 

clearance process and then to OMB for review. Regarding its internal 

clearance process, USDA officials said they would consider doing 

concurrent reviews to speed up this process. However, these officials noted 

that RBS lacks the authority or control to compel other offices in USDA to 

expedite their reviews of the program regulation. These officials noted that 

USDA’s Office of Budget and Program Analysis is responsible for 

overseeing the timely completion of this clearance process. Regarding 

OMB’s review, this agency again may take up to 90 days for its review.63

Any unanticipated problems could affect USDA’s current plan to issue the 

proposed regulation by the fall of 2004 and the final regulation by May 31, 

2005. As noted, many delays already have been experienced in developing 

63According to Executive Order 12866, as amended, if there has been no material change in 

the facts and circumstances upon which the regulatory action is based, OMB’s review 

should be completed within 45 days. 
Page 57 GAO-04-756 Renewable Energy

this regulation. Further delays, possibly pushing the publication date for 

the final regulation beyond May 31, 2005, would likely preclude USDA from 

offering loans and loan guarantees in fiscal year 2005, as was the case in 

fiscal years 2003 and 2004. The Renewable Energy Program was authorized 

for 5 years—fiscal years 2003 through 2007. If USDA is unable to offer loans 

and loan guarantees again in fiscal year 2005, only 2 years will remain to 

utilize all of the financial mechanisms provided by the legislation. As noted, 

utilization of these mechanisms would increase the program level and 

benefits. In this regard, eight members of the Senate Agriculture 

Committee sent a letter to USDA in June 2004 noting that a third year 

without a final regulation in place could impede and undermine the full 

potential of the Renewable Energy Program. Accordingly, they urged USDA 

to issue the proposed and final rules as soon as possible. 

Another concern is staffing. RBS’s Processing Branch has lead 

responsibility for implementing the Renewable Energy Program. This 

branch is also responsible for administering five other national grant or 

loan programs.64 According to USDA officials, the branch has been able to 

implement the Renewable Energy Program as a grant program to date 

without the need for additional staff. However, these officials said that 

once USDA starts to offer loans and loan guarantees under the Renewable 

Energy Program, staffing could become an issue. Currently, the branch has 

four program specialists in addition to the Branch Chief. According to the 

Chief, administering a loan program is more complicated than a grant 

program, and therefore a loan program requires more staff resources and 

time. For example, administering a direct loan program requires agency 

resources to handle loan origination, processing, and servicing functions.

USDA Has Taken Some 

Actions to Promote Wind 

Power through Other 

Programs

Aside from its actions to implement specific provisions of the 2002 farm bill 

to promote wind power, USDA has provided additional assistance for this 

purpose under several of its programs. For example:

• From May 1997 through March 2004, USDA provided about $13.3 million 

in grant and loan assistance to 25 rural electric cooperatives or small 

businesses to procure or manufacture small wind turbines for on-farm 

use.

64These programs are the Rural Business Enterprise Grant Program, Rural Business 

Opportunity Grant Program, Intermediary Relending Program, Rural Economic 

Development Loan Program, and Rural Economic Development Grant Program. 
Page 58 GAO-04-756 Renewable Energy

• In 2001, the Animal and Plant Health Inspection Service entered into an 

agreement with a local utility to purchase 25 percent of the electricity 

used at its National Wildlife Research Center in Colorado from windgenerated sources. 

• In fiscal year 2003, USDA provided a $2.5 million grant under its High 

Energy Cost Program to the Alaska Village Electric Cooperative to 

address high energy costs in Chevak, Alaska, an impoverished 

community of about 800 residents. Among other things, the funds will be 

used for a wind generation system. 

• In October 2003, USDA signed a memorandum of understanding with 

the National Rural Electric Cooperative Association to increase the use 

of renewable resources to generate electricity. The agreement provides 

for cooperation in conducting renewable energy technology research 

and for conducting education and outreach to promote the use of 

renewable energy resources, such as biomass, solar, and wind power, in 

rural areas.

• The Agricultural Research Service conducts research and development 

to lower the costs of wind generation for isolated farms, ranches, and 

rural communities that lack access to affordable and reliable electrical 

energy. Currently, the service is conducting research with Sandia 

National Laboratories on lowering the costs of wind turbine blades, 

which account for more than 50 percent of the cost of new wind 

turbines. 

USDA May Have 

Opportunities to Obtain 

Additional Assistance from 

EPA 

In implementing the Renewable Energy Program, USDA may also be 

missing opportunities to obtain further assistance from EPA. USDA’s rural 

energy working group included a representative from EPA’s AgStar 

Program, but this program is focused solely on the production of power 

from the anaerobic digestion of biomass such as livestock manure.65

According to EPA officials, other EPA offices also may be able to offer 

information, resources, and expertise to assist USDA’s implementation of 

the Renewable Energy Program for other renewable sources, including 

wind power. For example, an official in EPA’s Office of Air and Radiation 

said that this office has extensive contacts with the electric power utilities 

65The anaerobic digestion of biomass produces methane gas, which can be used to power a 

generator that produces electricity.
Page 59 GAO-04-756 Renewable Energy

through its Green Power Partnership Program, and could therefore help 

Renewable Energy Program applicants find buyers for the electricity they 

will generate and negotiate related power purchase agreements. In 

addition, this office could help answer applicants’ questions on project site 

selection and permitting for environmental impacts, where applicable.

USDA officials said they recognize that other EPA offices may be able to 

offer assistance and that they would welcome such assistance. However, 

these officials noted that the rural energy working group has not met since 

January 2003, having identified at that time the information, resources, and 

expertise available from the group’s participants to assist USDA’s 

implementation of the Renewable Energy Program. There are no plans for 

the group to meet again. More recently, USDA officials indicated that they 

are considering an interagency acquisition agreement with EPA to obtain 

technical assistance from the AgStar program in reviewing project 

proposals for anaerobic digestion. This agreement would be similar to the 

agreement USDA has with DOE regarding the review of project proposals 

for other renewable energy technologies. According to the Chief of RBS’s 

Processing Branch, he has had discussions with the lead EPA official for 

the AgStar program as to whether other EPA offices should be included in 

this agreement; as of June 2004, USDA officials said this matter was still 

under discussion. 

Stakeholders Are 

Concerned about the 

Complexity and Short Time 

Frames for Submitting 

Applications under the 

Renewable Energy Program 

Various stakeholders have expressed concerns about the complexity and 

short time frames for submitting grant applications under the Renewable 

Energy Program. For example, in the course of our fieldwork during 2003, 

we heard a number of concerns from farmers and others about the 

complexity of this application process and the short time frames for 

completing and submitting applications. The applications must include 

economic feasibility studies, tentative agreements with an electricity buyer, 

financial information demonstrating need under the program, and 

information for completing environmental assessments. USDA officials 

acknowledged some of these concerns and indicated they have been and 

continue to look for ways to simplify the application process. However, 

these officials also cautioned that renewable energy projects are, by their 

nature, legally, technically, and financially complicated ventures, and, 

consequently, it is not surprising that applicants might find the application 

process difficult and need the assistance of an attorney, engineer, or 

financial consultant. 
Page 60 GAO-04-756 Renewable Energy

Regarding the complexity of the application process, USDA officials noted 

they have applied lessons learned from the agency’s experience under the 

fiscal year 2003 grant program to the fiscal year 2004 program. The NOFA 

for the fiscal year 2003 program invited comments from applicants and 

other stakeholder groups. USDA officials said they considered these 

comments and other subsequent comments that have been received from 

various stakeholders over the past year. As a result, the NOFA for the fiscal 

year 2004 grant program is about three times as long as the one for the 

previous year. Among other changes, the 2004 NOFA contains specific 

application guidance for each renewable energy technology covered by the 

program. 

Regarding time frames, USDA initially gave applicants 2 months to submit 

their applications under the fiscal year 2003 grant program. Specifically, 

USDA issued a NOFA in the Federal Register on April 8, 2003, with a 

requirement that applications be postmarked no later than June 6, 2003. 

However, in part because of complaints from applicants and other 

stakeholders regarding the short time frame, USDA issued a subsequent 

notice in the Federal Register on May 19, 2003, to extend the application 

deadline to June 27, 2003.66 As for the fiscal year 2004 program, USDA 

issued the NOFA on May 5, 2004, with a requirement that the applications 

be postmarked no later than 75 calendar days after the date of the 

published notice (July 19, 2004). Although USDA’s issuance of the 2004 

NOFA fell a month later in the fiscal year than the 2003 NOFA’s issuance 

and the time frame allowed under the 2004 NOFA is shorter than that 

allowed under the 2003 NOFA (including the extension), USDA officials 

said they believed the time allowed in 2004 is sufficient. They noted that the 

guidance in the 2004 NOFA is more detailed than the 2003 NOFA. They also 

said that the agency’s rural energy coordinators encouraged potential 

program applicants to begin pulling together information needed for 

environmental assessments even before the 2004 NOFA was published. 

In June 2004, USDA officials also said they expect to receive further 

detailed comments on the application process and other aspects of the 

program when the proposed program regulation is published in the Federal 

Register for comment later in 2004. These officials indicated they would 

use these comments to consider further refinements to the application 

66USDA also issued the subsequent notice to clarify the financial requirements for 

agricultural producers and requirements for utility interconnection agreements and power 

purchase arrangements. 
Page 61 GAO-04-756 Renewable Energy

process. Also in June 2004, we discussed with these officials the potential 

advantages of surveying program applicants, the agency’s rural energy 

coordinators, and other stakeholders, as appropriate, regarding their views 

as to how the application process could be improved and streamlined. We 

suggested that a survey would comprehensively document problems and 

related suggestions to better inform USDA as to the severity or extent of 

the problems cited and whether corrective actions are warranted. USDA 

officials indicated they did not think a survey is needed in addition to the 

comments already received and those expected after publication of the 

proposed regulation. They also noted the rural energy coordinators often 

provide information on problems or concerns related to the application 

process during monthly conference calls with USDA’s Rural Development 

state offices. 

Conclusions USDA has yet to utilize all of the financial mechanisms of the farm bill’s 

Renewable Energy and Energy Efficiency Improvements Program. Among 

other things, USDA has not issued the final program regulation yet that 

would allow it to offer loans and loan guarantees, as well as grants. The 

addition of loans and loan guarantees would allow USDA to achieve a much 

higher level of program activity, potentially increasing the number of 

projects financed and providing benefits such as increased economic 

opportunities in rural areas. Loans may also be a more cost-effective way to 

provide federal assistance than outright grants. In addition, the provision of 

loans or loan guarantees in conjunction with grants would enable USDA to 

offer a greater level of assistance to program applicants. 

While USDA has taken a number of actions to coordinate its efforts to 

implement the program internally and externally, it may be missing 

opportunities to leverage information, resources, and expertise that may be 

available from EPA, such as from EPA’s Office of Air and Radiation. 

Finally, applicants and other stakeholders have raised concerns regarding 

the complexity of the application process for the program, as well as the 

limited time frame provided for submitting these applications. USDA’s 

continued collection and consideration of these concerns may identify 

ways to improve and streamline this process. 

Recommendations To ensure USDA’s timely and effective implementation of the farm bill’s 

Renewable Energy Systems and Energy Efficiency Improvements Program, 
Page 62 GAO-04-756 Renewable Energy

we recommend that the Secretary of Agriculture direct the Rural BusinessCooperative Service to take the following actions:

• Work with other USDA offices, such as the Office of General Counsel 

and the Office of Budget and Program Analysis, to identify possible 

ways to accelerate the development of the program regulation to ensure 

that all of the funding mechanisms required by the farm bill, including 

loans and loan guarantees, be made available as expeditiously as 

possible.

• Work with EPA to identify other EPA offices, such as the Office of Air 

and Radiation, which may be able to offer information, resources, and 

expertise to assist USDA in its implementation of this program.

• Continue to examine ways to simplify, improve, and streamline the 

application process for the program, and as part of that effort, consider 

the views of program applicants, the agency’s rural energy coordinators, 

and other interested stakeholders. 

Agency Comments We provided a draft of this report to USDA for review and comment. We 

received written comments from USDA’s Acting Under Secretary for Rural 

Development, which are reprinted in appendix VI. USDA also provided us 

with suggested technical corrections, which we have incorporated into this 

report, as appropriate. 

USDA agreed with our recommendations and provided information on how 

it planned to implement them. Specifically, the Acting Under Secretary for 

Rural Development stated that the agency is continuing to expedite the 

development of the program regulation, noting that it is in the best interests 

of all parties to expedite the rule making process. This official stated 

further that the agency would work with EPA officials to identify EPA 

offices that could provide USDA with information, resources, or expertise 

to implement the program and that a draft interagency agreement, which it 

planned to execute before the end of the fiscal year, would allow USDA to 

fund specific support activities provided by EPA. Finally, this official stated 

that the agency would continue to examine ways to simplify the program 

application process through consultation with DOE, EPA, and other 

interested stakeholders, including those commenting on the proposed rule 

making during its 60-day comment period.
Page 63 GAO-04-756 Renewable Energy

We also provided a draft of this report to DOE and EPA for review and 

comment. These agencies provided us with suggested technical 

corrections, which we incorporated into the report, as appropriate. 

As agreed with your office, unless you publicly announce its contents 

earlier, we plan no further distribution of this report until 30 days from the 

date of this letter. We will then send copies to interested congressional 

committees; the Secretary of Agriculture; the Secretary of Energy; the 

Administrator, Energy Information Administration; the Director, Office of 

Management and Budget; and other interested parties. We will also make 

copies available to others on request. In addition, the report will be 

available at no charge on GAO’s Web site at http://www.gao.gov. 

If you have any questions about this report, please contact me at (202) 512-

3841. Key contributors to this report are listed in appendix VII. 

Sincerely yours,

Lawrence J. Dyckman

Director, Natural Resources

and Environment 
Page 64 GAO-04-756 Renewable Energy

Appendix I

Objectives, Scope, and Methodology ApApenednxidexiIs

At the request of the Ranking Democratic Member, Senate Committee on 

Agriculture, Nutrition, and Forestry, we agreed to examine (1) the amount 

of wind power generation in relation to all U.S. electricity generation and 

the prospects for wind power’s growth, (2) the contribution of wind power 

generation to farmers’ income and to the economic well-being of rural 

communities in the 10 states with the highest wind power generation 

capacity, (3) the advantages and disadvantages for farmers and rural 

communities of owning a wind power project or leasing their land to a 

commercial wind power developer, and (4) the efforts of the U.S. 

Department of Agriculture (USDA) to promote the development of wind 

power on farms and in rural communities. 

To determine the amount of wind power generation in relation to all U.S. 

electricity generation and the prospects for wind power’s growth, we 

interviewed officials or reviewed the documentation they provided at the 

Department of Energy’s (DOE) Energy Information Administration (EIA), 

Office of Energy Efficiency and Renewable Energy, National Renewable 

Energy Laboratory (NREL), and Wind Powering America program. We also 

interviewed officials or reviewed documentation from the American Wind 

Energy Association (AWEA), Bonneville Power Administration, Edison 

Electric Institute, Electric Power Research Institute, Environmental and 

Energy Study Institute, Interstate Renewable Energy Council, Windustry (a 

rural-based, wind stakeholder organization), Union of Concerned 

Scientists, Energy Foundation, California Wind Energy Collaborative, and 

National Corn Growers Association. From these sources we were able to 

determine the extent of wind power capacity installed in the United States, 

including a state-by-state breakdown, and information on the wind 

potential of various parts of the United States. 

These sources also provided information on prospects for wind power’s 

growth, including factors that may either constrain or promote it. 

Regarding these factors, we also reviewed our own past work, relevant 

publications of the Congressional Budget Office and the Congressional 

Research Service, and applicable laws, regulations, and executive orders. 

Concerning one of these factors—production tax credits—we spoke with 

staff of the Congressional Joint Tax Committee and the Department of 

Treasury, as well as two tax lawyers and a certified public accountant who 

specialize in these tax issues. In addition, we reviewed relevant literature 

addressing the growth potential of wind power and discussed data related 

to these projections with DOE officials. 
Appendix I

Objectives, Scope, and Methodology

Page 65 GAO-04-756 Renewable Energy

We also asked EIA to use its National Energy Modeling System to forecast 

wind power’s growth by 2025 under two scenarios. EIA uses this computerbased model to annually forecast future energy supply, demand, and prices, 

typically over a 20-year period.1

 The model uses assumptions regarding 

economic growth; changes in world energy prices; technology, 

demographic, and other trends; and the possible changes to current laws 

and regulations. In short, the first scenario—EIA’s reference case—

assumed that the authorization for the federal production tax credit would 

expire and not be available after December 2003. The second scenario 

assumed that authorization for the production tax credit would continue 

through December 2010.2

 Other assumptions, including those for 

demographic and other trends, price increases for fossil resources, and 

current laws and regulations, were held constant in modeling these 

scenarios. In addition, EIA assumed that further design and technological 

improvements in turbines—known as the “learning effect”—would occur in 

both scenarios. However, the agency assumed that this effect would be 

greater in the second scenario due to the continued availability of the 

production tax credit. Specifically, the continued availability of this credit 

would lead to greater interest in wind power, spurring further design and 

technological improvements. These improvements would result in more 

efficient and productive turbines, making wind power more competitive 

with fossil fuels. 

To determine the contribution of wind power generation to farmers’ 

income and to the economic well-being of rural communities in the 10 

states with the highest wind power generation capacity, we started with the 

information collected above to identify the relevant states. In particular, we 

used data developed by DOE and AWEA to determine the 10 states with the 

largest amount of wind power generating capacity as of December 2002; 

these states represented about 90 percent of the nation’s wind generating 

capacity at that time.3

 From this list of 10 states, we selected 5 states to 

visit: the 4 states with the largest generating capacity—California, Texas, 

Minnesota, and Iowa—and the state—Colorado—that had the 10th largest 

1

The National Energy Modeling System and EIA forecasts made with this model are 

discussed in Annual Energy Outlook 2004, with Projections to 2025, DOE/EIA-0383(2004), 

January 2004. See also www.eia.doe.gov.

2

EIA assumed that the value of the production tax credit is kept at an inflation-adjusted 1.8 

cents per kWh in year 2002 dollars. 

3

As of December 2002, these 10 states were California, Colorado, Iowa, Kansas, Minnesota, 

Oregon, Texas, Washington, West Virginia, and Wyoming.
Appendix I

Objectives, Scope, and Methodology

Page 66 GAO-04-756 Renewable Energy

capacity. We chose Colorado as a point of contrast—unlike the top four 

states, Colorado had few state programs to promote wind power. For each 

state, we collected information on the number of farms; the types of 

agriculture crops produced; total farm income; farm, ranch, and rural lands 

acreage; wind energy generation sources; and state policies and financial 

and tax incentives designed to encourage wind power development. We 

obtained this information from a variety of sources, including USDA’s Farm 

Services Agency, Economic Research Service, and National Agricultural 

Statistics Service, and state and local taxing authorities. 

In the five states, we then visited nine wind projects in 10 counties to 

obtain information on specific wind power projects.4 In addition, we visited 

two other wind projects during the course of our work, but we did not 

obtain detailed information on these projects. To select the projects visited, 

we compared lists of wind projects for each state; we obtained these lists 

from AWEA, Windustry, and the states of California, Iowa, and Minnesota. 

From these lists we selected a mixture of leased, farmer-owned, and 

community-operated wind projects that also were geographically dispersed 

within a state. In addition to operating projects, we sought information on 

projects that may have failed in the past 5 years; however, federal, state, 

and local officials were unaware of any such failures in these states.

Our work focused on utility-scale wind power projects—projects that 

generate at least 1 megawatt (MW) of electric power (from one or more 

turbines) annually for sale to a local utility. Utility-scale wind power 

accounts for over 90 percent of wind power generation in the United 

States. In addition, we defined “community projects” as those operated by a 

municipal or rural utility or by a school district. At the project locations, we 

generally met with landowners, project owners and investors, state and 

local taxing authorities, community leaders, and electric utility officials. To 

some extent, our work was limited because we did not have access to cost 

and income data of a proprietary nature. In other cases, we were able to 

obtain this information but used it only to develop ranges. 

In addition, we asked NREL to model the economic impact of wind power 

projects on the counties we visited. Specifically, we asked NREL to use its 

Wind Impact Model to assess the employment and income impacts of three 

hypothetical scenarios on the 10 counties included in our visits. The 

4

In some cases, we visited more than one project in a county. In other cases, a project 

straddled two counties. 
Appendix I

Objectives, Scope, and Methodology

Page 67 GAO-04-756 Renewable Energy

scenarios were (1) a 150 MW project that is owned by an out-of-state firm, 

(2) a 40 MW project that is owned by an out-of-state firm, and (3) several 

small projects with total capacity of 40 MW that are owned by county 

residents. This modeling work, including related assumptions, is discussed 

in greater detail in appendix III. 

To determine the advantages and disadvantages for farmers and rural 

communities of owning a wind power project or leasing their land to a 

commercial wind power developer, we interviewed officials or reviewed 

documentation from DOE’s NREL and Wind Powering America program; 

AWEA; the Environmental and Energy Study Institute; the National Wind 

Coordinating Committee; Windustry; the Izaak Walton League of America; 

and the Union of Concerned Scientists. The documentation we reviewed 

covered issues such as wind project economics and development, research, 

technology, site selection, electricity transmission, economic and legal 

constraints, and various federal and state incentives. We also discussed 

these issues with farmers, landowners, wind project investors, state and 

local government officials, including local taxing authorities, and others 

during the course of our site visits. 

To determine USDA’s efforts to promote the development of wind power on 

farms and in rural communities, we interviewed officials or reviewed 

documentation from USDA’s Agricultural Research Service, Economic 

Research Service, Office of Energy Policy and New Uses, Natural 

Resources Conservation Service, Rural Business-Cooperative Service, 

Rural Utilities Service, and Office of General Counsel. In particular, we 

reviewed USDA’s efforts to implement the Renewable Energy Systems and 

Energy Efficiency Improvements Program (Renewable Energy Program) 

provided for in section 9006 of the 2002 Farm Security and Rural 

Investment Act (farm bill). We also spoke with USDA officials and 

reviewed documents they furnished to determine the extent to which 

USDA provided assistance under other rural development loan or grant 

programs for wind project research, planning, or construction. In addition, 

regarding USDA’s implementation of the Renewable Energy Program, we 

discussed USDA’s consultation with DOE and the Environmental 

Protection Agency (EPA) with officials from all three agencies. 

Furthermore, during our site visits in the selected states, we discussed with 

farmers, ranchers, and rural small business officials the financial or 

technical assistance they may have received from USDA or other federal 

agencies in developing their wind power projects. We also discussed with 

them their experiences with the application process for seeking assistance 

under the section 9006 program, including obtaining information on the 
Appendix I

Objectives, Scope, and Methodology

Page 68 GAO-04-756 Renewable Energy

program and completing the application, as well as obtaining information 

and assistance from USDA or other sources on the factors—economic, 

technical, and legal—that need to be considered before embarking on a 

wind project. Finally, we reviewed written comments submitted to USDA in 

response to a December 2002 public meeting to solicit suggestions from 

interested stakeholders about USDA’s implementation of the section 9006 

program. 

Finally, to get a better sense of what the federal government is doing more 

generally to promote wind power generation and how these efforts may be 

coordinated with USDA’s efforts to foster its development on farms and in 

rural communities, we spoke with officials or reviewed documentation 

from DOE, USDA, the Department of Defense, the Department of the 

Interior, and EPA. 

We conducted our review from February 2003 through August 2004 in 

accordance with generally accepted government auditing standards. We 

did not independently verify the data obtained from the sources noted 

above. However, as appropriate, we discussed with these sources the 

measures they take to ensure the accuracy of these data. These measures 

seemed reasonable. Appendix II provides further information on the 

sources used in our work.
Page 69 GAO-04-756 Renewable Energy

Appendix II

Sources for Information on Wind Power 

Generation ApendxiI

Following are the names, addresses, and Web sites for sources of 

information on wind power generation used in our work. 

American Wind Energy Association

122 C Street, NW, Suite 380

Washington, DC 20001

(202) 383-2504

www.awea.org

California Wind Energy Collaborative

University of California, Davis

One Shields Avenue

Davis, CA 95616

(530) 752-7741

www.cwec.ucdavis.edu

Edison Electric Institute

Alliance of Energy Suppliers

701 Pennsylvania Avenue, NW

Washington, DC 20004-2696

(202) 508-5652

www.eei.org/alliance

Electric Power Research Institute

3412 Hillview Avenue

P.O. Box 10412

Palo Alto, CA 94304

(800) 313-3774

www.epri.com

Energy Information Administration

U.S. Department of Energy

Forrestal Building

1000 Independence Avenue, SW

Washington, DC 20585

(202) 586-6582

www.eia.doe.gov
Appendix II

Sources for Information on Wind Power 

Generation

Page 70 GAO-04-756 Renewable Energy

Environmental and Energy Study Institute

122 C Street, NW, Suite 630

Washington, DC 20001

(202) 628-1400

www.eesi.org

Interstate Renewable Energy Council

P.O. Box 1156

Latham, NY 12110-1156

(518) 458-6059

www.irecusa.org

Izaak Walton League of America

Midwest Office

1619 Dayton Avenue, #202

St. Paul, MN 55104

(651) 649-1446

www.iwla.org

Minnesota Department of Commerce

Energy Information Center

121 7th Place East, Suite 200

St. Paul, MN 55101

(800) 657-3710

www.commerce.state.mn.us

National Renewable Energy Laboratory

National Wind Technology Center

1617 Cole Boulevard

Golden, CO 80401

(303) 384-6979

www.nwtc.nrel.gov

National Rural Electric Cooperative Association

4301 Wilson Boulevard

Arlington, VA 22203

(703) 907-5500

www.nreca.org
Appendix II

Sources for Information on Wind Power 

Generation

Page 71 GAO-04-756 Renewable Energy

National Wind Coordinating Committee

1255 23rd Street, NW

Washington, DC 20037

(888) 764-WIND

www.nationalwind.org

Union of Concerned Scientists

Energy Program

2 Brattle Square

Cambridge, MA 02238

(617) 547-5552

www.ucs@ucsusa.org

Utility Wind Interest Group

2111 Wilson Boulevard, Suite 323

Arlington, VA 22201-3001

(703) 351-4492, ext. 121

www.uwig.org

U.S. Department of Agriculture

Agricultural Research Service

Conservation and Production Research Laboratory

P.O. Drawer 10

2300 Experiment Station Rd.

Bushland, TX 79012 

(806) 356-5734

www.cprl.ars.usda.gov

U.S. Department of Agriculture

Rural Business-Cooperative Service

Renewable Energy and Energy Efficiency Program

1400 Independence Avenue, SW

Washington, DC 20250

(202) 720-1497

www.rurdev.usda.gov/rbs/farmbill/index.html
Appendix II

Sources for Information on Wind Power 

Generation

Page 72 GAO-04-756 Renewable Energy

U.S. Department of Energy

Wind Energy Program

Forrestal Building

1000 Independence Ave., SW

Washington, DC 20585

(202) 586-5348

www.eren.doe.gov/wind

Windustry

2105 First Avenue

S. Minneapolis, MN 55404

(612) 870-3461

www.windustry.org
Page 73 GAO-04-756 Renewable Energy

Appendix III

Results of NREL Modeling on Potential 

Economic Impacts of Wind Power on Rural 

Communities ApendxiI

We asked NREL to model the economic impact of wind power projects on 

the counties we visited during our review. This appendix describes the 

model used for the analysis, including the key data inputs and parameters. 

It also describes the model results. 

NREL has retained the services of MRG & Associates, a consulting firm 

(the firm) that specializes in energy economic analysis. The firm developed 

the Wind Impact Model (the model) to assess the impact of wind power 

investments on employment, earnings, and economic output at the state 

and local levels. Economic output as defined in the model is a measure of 

economic activity (value of production) on the state or local level that is 

similar to the measure of the gross domestic product on the national level. 

For simplicity, this appendix refers to economic output as “income.”

We asked NREL to assess the employment and income impacts of three 

hypothetical scenarios on 11 counties in the five states we visited. The 

scenarios are: (1) a 150 MW project that is owned by an out-of-state firm, 

(2) a 40 MW project that is owned by an out-of-state firm; and (3) several 

small projects totaling 40 MW of capacity that are owned by county 

residents. Table 7 lists the 11 counties for which the firm conducted the 

analysis. We selected these counties because we determined that the NREL 

analysis would be an appropriate complement to our visits. We also 

believed that our visits would give us some general sense of the economic 

conditions of the counties, helping us judge the differences in assumptions 

regarding the counties in NREL’s modeling. 
Appendix III

Results of NREL Modeling on Potential 

Economic Impacts of Wind Power on Rural 

Communities

Page 74 GAO-04-756 Renewable Energy

Table 7: Counties Included in NREL’s Economic Analysis 

Source: GAO.

a

We did not visit the Southwest Mesa project, but it is close to Indian Mesa, and we discussed it with 

the common owner, FPL Wind.

The Wind Impact Model The model provides a tool that can be used by wind power developers, 

decision makers, and others to identify the local economic impacts 

associated with constructing and operating wind power projects. The 

model, based on a spreadsheet, emulates, on a small scale, the basic 

function of an input-output model. It relies on input-output multipliers that, 

in this case, estimate how much a dollar of expenditures injected into an 

economy will generate in total employment or income. Employment and 

income multipliers for a given sector of a state’s or a county’s economy 

depend on the spending patterns and the specific economic structure of the 

jurisdiction in question. The source of the multipliers used in the model is 

Minnesota IMPLAN Group Inc., whose databases and modeling system are 

used by many government agencies, academic institutions, and other 

researchers worldwide for economic impact modeling and analyses.

Input-output models are used to trace supply linkages in the economy. For 

example, an input-output model of wind power would show how 

investments in wind turbines benefit turbine manufacturers as well as 

fabricated metal industries and others businesses supplying inputs to those 

manufacturers. An input-output analysis of local benefits generated by 

wind power project expenditures would depend upon how much of those 

expenditures are spent locally and the structure of the local economy. 

State County Wind project visited

California Alameda Altamont Pass

California Solano High Winds

Colorado Weld Ponnequin

Iowa Buena Vista Storm Lake 

Iowa Cherokee Storm Lake 

Iowa Dickinson Spirit Lake

Minnesota Pipestone Woodstock, Kas Brothers

Minnesota Rock Minwind I and II

Texas Pecos Indian Mesa

Texas Upton Southwest Mesaa

Texas Crocket Southwest Mesaa
Appendix III

Results of NREL Modeling on Potential 

Economic Impacts of Wind Power on Rural 

Communities

Page 75 GAO-04-756 Renewable Energy

Different levels of expenditures support varying levels of employment, 

income, and output, consistent with the spending pattern and local 

economic structure.

“Inputs” into the model include cost data for a given wind power project 

and parameters that characterize the particular state- or county-level 

economy being analyzed. Multipliers are used on the input data to calculate 

the “outputs,” which are the estimated employment and income impacts of 

the project.

The model is designed to examine economic impact on the state or county 

levels, and it does so separately for the “construction period” and 

“operating years” of a wind power project. Construction phase impacts are 

reported as a 1-year equivalent of the incremental change to state or county 

employment, earnings, and income attributable to a new project. For 

example, if a project results in full-time employment of 200 workers for 6 

months, the model will “see” this effect as 100 full-time jobs added for 1 

year. On the other hand, a model output of 25 jobs for the operating years 

of a project means that this project is expected to employ (directly at the 

plant and indirectly) 25 full-time equivalent workers annually over its 

lifetime. 

The model divides a state or county economy into 14 sectors.1 For each 

sector, the model has three sets of employment, earnings, and income 

multipliers. One set is for direct effects, another for indirect effects, and a 

third for induced effects. In the case of a 150 MW wind power project, for 

example, the construction period direct employment effect includes the onsite jobs of the contractors and crews hired to build the project and jobs at 

the manufacturing plants that produce the turbines. In the operating years, 

the direct employment effect includes all of the workers who are employed 

directly by the project (field technicians, administrative staff, and project 

managers) as well as employment directly supported by expenditures for 

goods and services used by the plant. The indirect employment effect 

includes employment that results because suppliers of goods and services 

to the project also procure goods and services from others. The contractor 

who builds the project, for example, procures goods and services from 

1

These sectors are agriculture; construction; electrical equipment; fabricated metals; 

finance, insurance, and real estate; government; machinery; mining; other manufacturing; 

professional services; other services; retail trade; transportation, communication and public 

utilities; and wholesale trade.
Appendix III

Results of NREL Modeling on Potential 

Economic Impacts of Wind Power on Rural 

Communities

Page 76 GAO-04-756 Renewable Energy

bankers, accountants, suppliers of construction and other materials, and 

others. Finally, the induced employment effects refer to the change in 

employment that occurs due to the spending of those persons directly and 

indirectly generating income associated with the project. Direct, indirect, 

and induced income effects follow the same logic.

Model Inputs A major portion of the required “inputs” into the model are cost data, 

including the following:

• construction costs—for materials and labor, for example;

• equipment costs for such things as turbines, rotors, and towers;

• other construction period costs, such as for interconnection to the 

electric grid, engineering services, land easements, and permitting;

• annual operating and maintenance costs, including payroll of direct 

employees, material, and various services; and

• financing and lease costs and taxes. 

Other inputs include estimates of “local share value” for certain dollar 

expenditures and labor. For example, a 10 percent local share value for 

construction material expenditures for Pecos County, Texas, means that, 

for a wind project being built in this county, the model assumes that only 10 

percent of the value of project expenditures on construction materials 

accrues to local vendors. The relatively low number means that Pecos 

County has a limited economy and much of the construction material 

needed for the project would have to be obtained from outside the 

county—possibly from neighboring urban centers, such as the cities of 

Midland-Odessa and Lubbock, or from out-of-state locations. Similarly, for 

Pecos County, the model assumes that only 10 percent of the labor used for 

laying the foundations for the project’s turbines would be hired locally. In 

contrast, the corresponding percentages for Alameda County, California—a 

county with a much larger population and larger and more diversified 

economic base—would be 90 percent for the local share of construction 

material expenditures and 100 percent for the local share of labor used for 

foundation work.
Appendix III

Results of NREL Modeling on Potential 

Economic Impacts of Wind Power on Rural 

Communities

Page 77 GAO-04-756 Renewable Energy

The Interaction between 

Local Share Values and 

Multipliers

The local share values and multipliers used in the model determine how an 

expenditure of a particular type translates into employment and income 

impacts on a county’s economy. The interaction between the model inputs 

may be partly illustrated by comparing Rock County, Minnesota, with Weld 

County, Colorado.

• For Rock County, the model assumes the local share value for 

construction expenditures is 4 percent. The model also uses a direct 

employment multiplier of 10.1 jobs for every $1 million spent on 

construction in the county. 

• For Weld County, the model assumes the local share value for total 

construction expenditures is 76 percent, and the direct employment 

multiplier is 8.3 jobs for every $1 million spent on construction in the 

county.

The differences in the local share values and multipliers for these two 

counties are attributable to the differing population and economic 

characteristics of these counties. Rock County is rural, with a small 

population and economic base, and thus the project developer must obtain 

much of the construction material, equipment, and labor needed from 

outside the county. In contrast, Weld County has a much larger population 

and economic base capable of fulfilling more of the developer’s material 

and labor needs. 

On the other hand, the direct construction employment multiplier for Rock 

County, at 10.1 jobs per million dollars of expenditure, is somewhat higher 

than the corresponding multiplier of 8.3 for Weld County, reflecting a more 

labor-intensive local economy in the former. 

The difference in local share values and employment multipliers for Rock 

County, Minnesota, and Weld County, Colorado, results in bigger 

employment impacts of a wind power project in the latter. For example, the 

model assumes that the construction of a 150 MW project will cost about 

$15 million in each county.2

 However, in the case of Rock County, only 

about $600,000 of this amount will be spent within the county, while the 

corresponding local share for Weld County will be $11.5 million. 

Consequently, according to the model results, the $15 million construction 

2

The model assumes uniform costs across the United States.
Appendix III

Results of NREL Modeling on Potential 

Economic Impacts of Wind Power on Rural 

Communities

Page 78 GAO-04-756 Renewable Energy

project results in direct construction phase employment for Rock County 

of only 16 jobs compared with 141 jobs for Weld County.

Model Results We have not summarized all model results—to do so would involve 

publishing 33 large tables. However, those we do include are illustrative of 

the results we found. Overall, the model results showed that employment 

and income impacts

• tend to be greater for counties that are more highly populated and have 

a larger economic base, and 

• are considerably greater for projects that are locally owned than for 

projects that are owned by out-of-area firms. 

As discussed, the model estimates economic impacts for the construction 

period separately from impacts during the years of the project’s operation. 

Tables 8 and 9 summarize the model’s estimates of economic impacts for 

the construction period, while tables 10 through 12 summarize the 

estimates for the years of operation. Estimates for the construction period 

are 1-year impacts. 

Construction Period Impacts Table 8 shows the economic impacts of constructing a 150 MW wind power 

project owned by an out-of-area energy company (a company 

headquartered outside the county). Table 9 depicts the impacts of 

constructing a 40 MW project owned by an out-of-area company. As 

depicted in these tables, the economic impacts during the construction 

period are bigger for counties that have a larger population and economic 

base. For example, the impacts of constructing a 150 MW project on Weld 

County, Colorado, would include the creation of the equivalent of 349 fulltime jobs for 1 year. Weld County has a population of over 200,000. In 

contrast, the construction of a 150 MW project in Pecos County, Texas, 

would create the equivalent of only 36 full-time jobs for 1 year in the 

county. Pecos County has a much smaller population—about 16,000 

people—and economic base. Thus, most of the labor and professional staff 

resources needed to construct the project would be hired from outside the 

county.
Appendix III

Results of NREL Modeling on Potential 

Economic Impacts of Wind Power on Rural 

Communities

Page 79 GAO-04-756 Renewable Energy

Table 8: Economic Impacts during Construction Period of 150 MW Wind Power Project Owned by Out-of-Area Energy Company

Source: NREL.

Note: Totals are subject to rounding. 

Model results

Direct impacts Indirect impacts Induced impacts

Total impacts 

(direct, indirect, 

induced)

2003

population

(thousands)

2003 

personal 

income 

(billions) Jobs

Income 

(millions) Jobs

Income 

(millions) Jobs

Income 

(millions) Jobs

Income

(millions)

Alameda, 

Calif. 1,501 $60.52 130 $19.09 76 $10.99 108 $12.67 314 $42.75

Solano, Calif. 420 11.71 139 19.09 78 10.62 105 10.64 321 40.35

Weld, Colo. 211 4.68 141 17.47 91 12.48 117 10.82 349 40.77

Buena Vista, 

Iowa 20 0.52 23 1.95 11 1.44 13 1.15 47 4.54

Cherokee,

Iowa 13 0.33 17 1.28 6 0.67 10 0.83 33 2.78

Dickinson, 

Iowa 17 0.53 23 1.95 7 0.48 10 0.65 40 3.09

Pipestone, 

Minn. 10 0.28 18 1.28 3 0.23 7 0.41 28 1.92

Rock, Minn. 10 0.25 16 1.28 4 0.50 6 0.52 27 2.30

Crockett, Tex. 4 0.07 14 1.28 3 0.22 4 0.27 21 1.76

Pecos, Tex. 16 0.24 24 1.95 4 0.30 8 0.53 36 2.77

Upton, Tex. 3 $0.06 18 $1.28 1 $0.13 2 $0.17 22 $1.57
Appendix III

Results of NREL Modeling on Potential 

Economic Impacts of Wind Power on Rural 

Communities

Page 80 GAO-04-756 Renewable Energy

Table 9: Economic Impacts during Construction Period of 40 MW Wind Power Project Owned by Out-of-Area Energy Company

Source: NREL.

Note: Totals are subject to rounding. 

Operations Period Impacts Tables 10, 11, and 12 provide annual estimates of the economic impacts 

during the operations period of various size projects. Table 10 shows the 

impacts of a 150 MW project owned by an out-of-area energy company. 

Table 11 depicts the impacts of 40 MW project owned by an out-of-area 

company. Table 12 shows the combined impacts of 20 small projects—each 

2 MW—that are locally owned. Together, these 20 projects would constitute 

40 MW of generating capacity. A comparison of tables 11 and 12 shows that 

local ownership can generate significantly higher economic impacts for a 

county. For example, a single 40 MW project built in Pipestone County, 

Minnesota, would generate about $650,000 in new income for the county 

annually. In contrast, 20 locally owned projects that are 2 MW each (40 MW 

total) would generate about $3.3 million annually in the same county. 

Model results

Direct impacts Indirect impacts Induced impacts

Total impacts 

(direct, indirect, 

induced)

2003

population

(thousands)

2003 

personal 

income 

(billions) Jobs

Income 

(millions) Jobs

Income 

(millions) Jobs

Income 

(millions) Jobs

Income

(millions)

Alameda, 

Calif. 1,501 $60.52 35 $5.09 20 $2.93 29 $3.38 84 $11.40

Solano, 

Calif. 420 11.71 37 5.09 21 2.83 28 2.84 86 10.76

Weld, Colo. 211 4.68 42 5.09 27 3.54 34 3.19 103 11.81

Buena Vista, 

Iowa 20 0.52 6 0.52 3 0.38 3 0.31 13 1.21

Cherokee,

Iowa 13 0.33 4 0.34 2 0.18 3 0.22 9 0.74

Dickinson, 

Iowa 17 0.53 6 0.52 2 0.13 3 0.17 11 0.82

Pipestone, 

Minn. 10 0.28 5 0.34 1 0.06 2 0.11 7 0.51

Rock, Minn. 10 0.25 4 0.34 1 0.13 2 0.14 7 0.61

Crockett, 

Tex. 4 0.07 4 0.34 1 0.06 1 0.07 6 0.47

Pecos, Tex. 16 0.24 6 0.52 1 0.08 2 0.14 10 0.74

Upton, Tex. 3 $0.06 5 $0.34 0 $0.03 1 $0.04 6 $0.42
Appendix III

Results of NREL Modeling on Potential 

Economic Impacts of Wind Power on Rural 

Communities

Page 81 GAO-04-756 Renewable Energy

Table 10: Economic Impacts during Operations Period of 150 MW Wind Power Project Owned by Out-of-Area Energy Company

Source: NREL.

Note: Totals are subject to rounding.

Model results

Direct impacts Indirect impacts Induced impacts

Total impacts 

(direct, indirect, 

induced)

2003

population

(thousands)

2003 

personal 

income 

(billions) Jobs

Income 

(millions) Jobs

Income 

(millions) Jobs

Income 

(millions) Jobs

Income

(millions)

Alameda, 

Calif. 1,501 $60.52 37 $2.00 6 $0.94 21 $2.49 65 $5.43

Solano, 

Calif. 420 11.71 37 2.00 6 0.78 20 2.05 64 4.83

Weld, Colo. 211 4.68 40 2.00 8 0.99 29 2.67 76 5.66

Buena Vista, 

Iowa 20 0.52 33 1.67 9 1.15 44 3.91 86 6.74

Cherokee,

Iowa 13 0.33 33 1.61 9 1.02 51 4.08 93 6.71

Dickinson, 

Iowa 17 0.53 34 1.67 9 0.77 39 2.57 81 5.01

Pipestone, 

Minn. 10 0.28 33 1.61 4 0.36 7 0.45 45 2.42

Rock, Minn. 10 0.25 32 1.61 5 0.57 7 0.61 45 2.79

Crockett, 

Tex. 4 0.07 32 1.61 8 1.00 19 1.20 60 3.82

Pecos, Tex. 16 0.24 32 1.67 4 0.47 30 1.98 67 4.12

Upton, Tex. 3 $0.06 33 $1.61 2 $0.30 12 $0.83 47 $2.75
Appendix III

Results of NREL Modeling on Potential 

Economic Impacts of Wind Power on Rural 

Communities

Page 82 GAO-04-756 Renewable Energy

Table 11: Economic Impacts during Operations Period of 40 MW Wind Power Project Owned by Out-of-Area Energy Company

Source: NREL.

Note: Totals are subject to rounding.

Model results

Direct impacts Indirect impacts Induced impacts

Total impacts 

(direct, indirect, 

induced

2003

population

(thousands)

2003 

personal 

income 

(billions) Jobs

Income 

(millions) Jobs

Income 

(millions) Jobs

Income 

(millions) Jobs

Income

(millions)

Alameda, 

Calif. 1,501 $60.52 10 $0.53 2 $0.25 6 $0.67 17 $1.45

Solano, 

Calif. 420 11.71 10 0.53 2 0.21 5 0.55 17 1.29

Weld, Colo. 211 4.68 11 0.53 2 0.26 8 0.71 20 1.51

Buena Vista, 

Iowa 20 0.52 9 0.45 2 0.31 12 1.04 23 1.80

Cherokee,

Iowa 13 0.33 9 0.43 3 0.27 13 1.09 25 1.79

Dickinson, 

Iowa 17 0.53 9 0.45 2 0.21 10 0.69 22 1.34

Pipestone, 

Minn. 10 0.28 9 0.43 1 0.10 2 0.12 12 0.65

Rock, Minn. 10 0.25 9 0.43 1 0.15 2 0.16 12 0.75

Crockett, 

Tex. 4 0.07 9 1.35 2 0.27 5 0.32 16 1.94

Pecos, Tex. 16 0.24 9 0.45 1 0.12 8 0.53 18 1.10

Upton, Tex. 3 $0.06 9 $0.43 1 $0.08 3 $0.22 13 $0.73
Appendix III

Results of NREL Modeling on Potential 

Economic Impacts of Wind Power on Rural 

Communities

Page 83 GAO-04-756 Renewable Energy

Table 12: Economic Impacts during Operations Period of 20 Locally Owned Wind Power Projects, Each with a 2 MW Capacity 

Source: NREL.

Note: Totals are subject to rounding.

Caveats to and Reliability of 

the Modeling Effort

We did not expect a high level of accuracy in the model results because 

data sources on costs and expenditures are limited, in part because 

companies may consider these data to be proprietary. Rather, we expected 

the model’s analysis to illustrate the differences between counties that have 

different economic structures. The cost data and assumptions for local 

share values seemed reasonable and consistent with what we found during 

our visits regarding economic conditions in these counties. The model’s 

results also generally conform to what we found during our visits, 

especially for employment effects.

Model results

Direct impacts Indirect impacts Induced impacts

Total impacts 

(direct, indirect, 

induced)

2003

population

(thousands)

2003 

personal 

income 

(billions) Jobs

Income 

(millions) Jobs

Income 

(millions) Jobs

Income 

(millions) Jobs

Income

(millions)

Alameda, 

Calif. 1,501 $60.52 21 $2.47 6 $0.86 11 $1.34 38 $4.68

Solano, 

Calif. 420 11.71 18 2.47 6 0.74 10 1.03 34 4.23

Weld, Colo. 211 4.68 23 2.47 7 0.94 15 1.42 46 4.83

Buena 

Vista, Iowa 20 0.52 22 2.34 8 0.94 18 1.61 48 4.88

Cherokee,

Iowa 13 0.33 23 2.34 8 0.89 20 1.63 52 4.85

Dickinson, 

Iowa 17 0.53 24 2.34 8 0.72 16 1.06 48 4.12

Pipestone, 

Minn. 10 0.28 24 2.34 6 0.54 7 0.42 36 3.29

Rock, Minn. 10 0.25 23 2.34 7 0.73 8 0.65 38 3.71

Crockett, 

Tex. 4 0.07 23 2.34 5 0.58 9 0.55 37 3.47

Pecos, Tex. 16 0.24 22 2.34 5 0.49 12 0.80 39 3.63

Upton, Tex. 3 $0.06 25 $2.34 3 $0.28 5 $0.34 32 $2.96
Page 84 GAO-04-756 Renewable Energy

Appendix IV

Summary of Visits to Wind Power Projects in 

Five States ApendxiIV

This appendix summarizes key information for the nine wind power 

projects we visited in 10 counties in five states (California, Colorado, Iowa, 

Minnesota, and Texas). At each site, we discussed the planning, 

development, construction, and operation of the project with landowners, 

project developers and owners, and local government officials. 

Projects in California

Altamont Pass

Figure 9: Horizontal Axis Wind Turbines, Altamont Pass, California

Source: GAO.
Appendix IV

Summary of Visits to Wind Power Projects in 

Five States

Page 85 GAO-04-756 Renewable Energy

Figure 10: Vertical Axis Wind Turbines, Altamont Pass, California

Source: GAO.

Project location: 

Alameda and Contra Costa Counties, 

California

Project owners and locations: 

FPL Energy (Florida), Global Renewable 

Energy Partners (Denmark), and several 

other partners

Year operations started: 

1983 through 1990

Number of turbines:

2,526

Total installed generation capacity:

268.7 MW

Annual generation estimate:

392.2 million kWh

Power purchaser:

Pacific Gas & Electric (PG&E) 

Number of landowners:

43

Six wind power projects are located in Altamont Pass, near Livermore, California. 

Collectively, these projects are among the oldest and largest utility-scale wind power 

projects worldwide (based on installed generating capacity). The projects have been 

controversial because of associated bird deaths, particularly for golden eagles. Eagles 

present in Altamont Pass may be attracted to the perches offered by the latticework 

towers used for older turbines. This project was also among the last in the United States 

to use vertical axis turbines. This technology has largely fallen into disuse in favor of 

modern, horizontal-axis turbines mounted on towers to access better winds available at 

heights of 100 feet or more. In June 2004, an FPL Energy official said that the vertical 

axis turbines have been decommissioned and are being removed. (These turbines were 

operative at the time of our site visit in August 2003.) 

The projects are located on about 100 square miles of mostly agricultural land used for 

cattle grazing. 

The projects pay a total of about $280,000 in property taxes annually to Alameda and 

Contra Costa Counties. Although important, these property taxes are not a significant 

source of revenue for these counties. For example, Alameda County reported about 

$215 million in property tax revenues for the tax year ending 2002. Furthermore, the 

property taxes assessed for these projects have fallen considerably as the value of the 

projects has declined with depreciation. 

In general, the Altamont projects were not eligible for the federal production tax credit 

because they began operation before this tax credit was initially authorized in legislation. 

However, because the power purchase contracts for the projects were negotiated under 

favorable conditions in the 1980s, the projects sell power to the local utility at rates higher 

than the range of 2 to 3.5 cents per kWh that has been common for wind power projects 

in recent years.

Overall, the projects employ 53.7 full-time equivalent employees.
Appendix IV

Summary of Visits to Wind Power Projects in 

Five States

Page 86 GAO-04-756 Renewable Energy

High Winds Energy Center, 

Solano County

Figure 11: Wind Turbines, Solano County, California

Source: GAO.

Project location: 

Solano County, California

Project owners and locations: 

FPL Energy (Florida)

Year started operating: 

Phase I: August 2003

Phase II: December 2003

Number of turbines:

Phase I: 81

Phase II: 9

Total installed generation capacity:

162 MW

The High Winds Energy Center project is located in the Montezuma Hills region of Solano 

County. This region has average annual wind speed of between 18 and 20 miles per 

hour. The project is the largest single wind farm in California. 

The project extends over approximately 6,500 acres of agricultural land. However, project 

facilities, such as the turbines, substations, and access roads, occupy only about 60 acres 

of the total leased. The project has no effect on the primary uses of the land; crops are 

grown and cattle are grazed right up to the base of the turbines. The project owner 

estimates that it will pay about $21.5 million in lease payments to the landowners over 

the life of the project (25 years). 

Because the project only began operating in late 2003, actual data on property taxes paid 

are unavailable. However, the project owner estimates that the project will pay 

approximately $1.8 million in direct property taxes to Solano County in 2004. It will also 
Appendix IV

Summary of Visits to Wind Power Projects in 

Five States

Page 87 GAO-04-756 Renewable Energy

Annual generation estimate:

480 million kWh 

Power Purchaser:

PPM Energy Inc. 

Number of landowners:

8

pay approximately $70,000 in property taxes for the landowners in 

2004. Furthermore, the project owner estimates that the project will 

pay about $24 million in property taxes over the life of the project. 

The project will employ 6 to 8 full-time equivalent employees. 

During its construction, the project generated about 250 

construction-related jobs. 
Appendix IV

Summary of Visits to Wind Power Projects in 

Five States

Page 88 GAO-04-756 Renewable Energy

Projects in Colorado

Ponnequin Wind Farm

Figure 12: Wind Turbines, Weld County, Colorado

Source: GAO.

Project location: 

Weld County, Colorado

Project owners and locations:

Xcel Energy (Colorado) and Energy 

Unlimited/Ponnequin Acquisitions 

(Pennsylvania)

Year started operating: 

Phase I: 1998

Phases II-IV: 1999

Phases V-VI: 2001 

The Ponnequin wind farm is the first utility-scale wind power project in Colorado. A key 

factor in the development of wind power in Colorado, including the Ponnequin wind farm, 

is the Windsource® program offered by Xcel Energy, the state’s largest electric utility. 

This program offers customers the option of signing up for 100 kWh blocks of electric 

power produced by wind power or other renewable sources at a premium of $2.50 per 

block over regular rates.

About half—23 of 44—of the Ponnequin turbines are located on 942 acres of land 

belonging to the state of Colorado. According to the state land board, Colorado received 

$40,763 from this project for the use of the land in 2003.a

 The remaining turbines are 

located on 420 acres of a privately owned cattle ranch. According to the ranch owner, the 

lease income from the turbines is significant and constitutes a much larger share of the 

ranch’s total income than the earnings from cattle production. Xcel Energy, which owns 

37 of the 44 turbines, indicated that it paid about $100,000 for the two land leases and 

related rights-of-way in 2001. 
Appendix IV

Summary of Visits to Wind Power Projects in 

Five States

Page 89 GAO-04-756 Renewable Energy

a

The state receives $1.50 per acre for the 942 acres leased to the project. The lease is for a period of 

52 years. The state also receives an annual payment per MW of installed capacity. Per the lease 

agreement, every 5 years the state has the option to adjust the latter payment for inflation, based on 

the producer price index for commercial electric power. For example, in 2003—5 years after phase I of 

the project began operations—the state increased the payment to $2,475 per MW, about 13 percent 

higher than the year before.

Number of turbines: 44

Total installed generation capacity:

31.65 MW

Annual generation estimate:

71 million kWh

Power purchaser:

Xcel Energy

Number of landowners: 2

Weld County officials told us that the property taxes paid by the Ponnequin project do 

not constitute a significant share of the county’s total property taxes. For 2003, the 

project’s property taxes were about $53,000; the county’s total property taxes 

collected in 2002 were almost $200 million.

The project employs 2.33 full-time equivalent employees for maintenance and 

operations. 
Appendix IV

Summary of Visits to Wind Power Projects in 

Five States

Page 90 GAO-04-756 Renewable Energy

Projects in Iowa

Spirit Lake Community 

School District

Figure 13: Wind Turbine, Dickinson County, Iowa

Source: GAO.

Project location: 

Spirit Lake, Dickinson County, Iowa

Project owners and locations:

Spirit Lake Community School District (Iowa) 

Year started operating: 

Phase I: July 1993

Phase II: October 2001

The Spirit Lake Community School District was one of the first school districts in the 

nation to own a wind power project. The project consists of two turbines, a 250 kW 

turbine constructed in 1993 and a 750 kW turbine constructed in 2001. The school 

district justified the project based on its estimated savings in electricity costs. 

The turbines supply most of the electricity needed for school facilities in the district, 

including school buildings, a maintenance facility, and the lights for baseball and football 

fields. A local utility purchases electricity generated by the turbines that exceeds the 

school district’s needs. Although the turbines generate more electricity than the district 

uses in some months, the school district is a net user of the utility-provided electricity on 

an annual basis. 
Appendix IV

Summary of Visits to Wind Power Projects in 

Five States

Page 91 GAO-04-756 Renewable Energy

Number of turbines:

2

Total installed capacity:

1 MW

Annual generation estimate:

2.1 million kWh

Power Purchaser:

Alliant Energy

Number of landowners:

1

A DOE grant and a low-interest loan from the Iowa Department of Natural 

Resources financed the first turbine. A combination of low-interest and no-interest 

loans obtained through the Iowa Department of Natural Resources and the Iowa 

Energy Center, respectively, financed construction of the second turbine. School 

district funds normally budgeted for electrical fees are used to pay the principal and 

interest on the loans. 

The turbines are located on school district property; thus no lease payments are 

involved. In addition, because the turbines are owned by a local government entity, 

no property taxes are levied or collected. The school district also does not qualify 

for the federal production tax credit.
Appendix IV

Summary of Visits to Wind Power Projects in 

Five States

Page 92 GAO-04-756 Renewable Energy

Storm Lake

Figure 14: Wind Turbines, Buena Vista County, Iowa

Source: GAO.

Project location: 

Buena Vista and Cherokee Counties, Iowa.

Project Owners and locations:

GE Wind (California), Edison Capital 

(California), and Waverly Light and Power 

(Iowa)

Year started operating: 

1999

The Storm Lake I and II projects are located in Buena Vista and Cherokee Counties, 

Iowa. These projects benefited from Iowa’s renewable portfolio standard (RPS), which 

served as an impetus to wind power development in the state. This standard required 

the state’s two major utilities to generate, on average, 105 MW of electric power from 

renewable energy sources each year, starting in 1992. The projects also benefited from 

a partial property tax abatement offered by Buena Vista and Cherokee Counties, 

including a full abatement for the first year of operation. Thereafter, property taxes are 

assessed, gradually increasing to 30 percent of the taxable value of the projects by the 

beginning of the seventh year of operation. 
Appendix IV

Summary of Visits to Wind Power Projects in 

Five States

Page 93 GAO-04-756 Renewable Energy

Number of turbines:

259

Total installed generation capacity:

194.25 MW

Annual generation estimate:

490 million kWh

Power purchaser:

Alliant Energy and MidAmerican Energy

Number of landowners:

65

The Storm Lake projects paid a total of about $500,000 in property taxes to Buena 

Vista and Cherokee Counties and associated local jurisdictions in the tax year ending 

2004. Buena Vista collected the majority of these taxes ($451,000) because most of 

the Storm Lake turbines (232 of 259) are located in that county. According to Buena 

Vista officials, this tax income is particularly important for the school district in the town 

of Alta, located near the projects, providing about 16 percent of the school district’s 

property tax revenues.

The Storm Lake projects employ about 23 people for operations and maintenance.
Appendix IV

Summary of Visits to Wind Power Projects in 

Five States

Page 94 GAO-04-756 Renewable Energy

Projects in Minnesota

Kas Farms, Minnesota

Figure 15: Wind Turbines, Pipestone County, Minnesota

Source: GAO.

Project location:

Pipestone County, Minnesota

Project owners and location:

Richard and Roger Kas (Minnesota)

Year started operating:

December 2001

Number of turbines:

2

The Kas brothers wind project was the first farmer-owned, commercial-scale wind power 

project in the United States. The turbines are located on agricultural land used for crop 

production. The brothers did much of the construction work themselves, reducing their 

construction costs below the national average of $1 million per MW of installed capacity. A 

local bank financed the project.

In order to take full advantage of the federal production tax credit, the Kas brothers—who 

did not qualify for full use of the credit—found an equity investor who could use the credit. 

Under this arrangement, the investor owns most of the equity interest in the project for the 

period of time (10 years) that the production tax credit is available. After this period, the 

Kas brothers will have majority ownership. Because the project has less than 2 MW of 

capacity, it also qualified for Minnesota’s renewable production incentive payment of 1.5 

cents for each kWh of electricity it produces for the first 10 years of the project’s 

operations. 
Appendix IV

Summary of Visits to Wind Power Projects in 

Five States

Page 95 GAO-04-756 Renewable Energy

Total installed generation capacity:

1.5 MW

Annual generation estimate:

4.5 million kWh

Power purchaser: 

Xcel Energy

Number of landowners:

1
Appendix IV

Summary of Visits to Wind Power Projects in 

Five States

Page 96 GAO-04-756 Renewable Energy

Minwind I and II, Minnesota

Figure 16: Wind Turbine, Rock County, Minnesota

Source: GAO.

Project location:

Rock County, Minnesota

Project owners and locations:

Minwind I and II (Minnesota)

Year started operating:

October 2002

Minwind I and II are limited liability companies that function in a manner similar to farmer 

cooperatives.a

 Minwind I has 32 shareholders and Minwind II has 34. Farmers must own 

85 percent of the company shares; the remaining 15 percent of the shares are available to 

local residents and investors. Each share gives the owner one vote in the company, and 

no single person can own more than 15 percent of the shares.
Appendix IV

Summary of Visits to Wind Power Projects in 

Five States

Page 97 GAO-04-756 Renewable Energy

a

In general, a cooperative is an organization formed for the purpose of producing and marketing goods 

or products owned collectively by members who share in the benefits.

Number of turbines:

Minwind I: 2 turbines

Minwind II: 2 turbines

Total installed generation capacity:

3.8 MW

Annual generation estimate:

11.1 million kWh

Power purchaser:

Alliant Energy

Number of landowners:

1

Through Minwind I and II, the shareholders are able to pool their incomes and tax 

liabilities to take advantage of the federal production tax credit. This tax provision 

provides a credit for electricity generated by renewable energy sources such as wind 

turbines—about 1.8 cents per kWh during 2003. In addition, the projects benefit from

Minnesota’s renewable production incentive. This incentive is available to renewable 

energy projects up to 2 MW of capacity, offering a payment of 1.5 cents per kWh of power 

produced for the first 10 years of a project’s operation.

According to Minwind I and II officials, the impetus behind the projects was to bring 

economic development to Rock County by emphasizing local ownership, providing 

farmers with a return on their investment, and using local businesses and contractors to 

construct and operate the projects. As of April 2004, seven additional Minwind projects 

are being constructed in Rock County. In total, these projects will have 200 local owners 

and have a combined capacity of nearly 12 MW. 
Appendix IV

Summary of Visits to Wind Power Projects in 

Five States

Page 98 GAO-04-756 Renewable Energy

Woodstock Wind Energy 

Project

Figure 17: Wind Turbines, Pipestone County, Minnesota

Source: GAO.

Project location: 

Woodstock, Pipestone County, Minnesota

Project owners and locations: 

DanMar Associates (Minnesota) and 

Edison International (California)

Year operations started: 

1999

Number of turbines:

17

Total installed generation capacity:

10.2 MW 

The Woodstock Project employs an innovative funding arrangement. DanMar Associates 

partnered with a large corporate investor, Edison International, so that this company 

could take advantage of the federal production tax credit. Specifically, Edison 

International provided the majority of the equity capital for the project in return for being 

able to take advantage of the tax credit during the project’s first 10 years of operation. At 

the end of this period, Edison International will transfer majority ownership of the project 

to DanMar Associates. With the assistance of DanMar Associates, other wind power 

projects in Minnesota have used a similar funding arrangement, also known as the 

“equity flip.” 

The Woodstock project turbines are located on a soybean and cattle farm. The 

landowners receive an annual cash payment per turbine. According to the landowners, 

this payment is a significant supplement to their farm income. 
Appendix IV

Summary of Visits to Wind Power Projects in 

Five States

Page 99 GAO-04-756 Renewable Energy

Annual generation estimate:

29 million kWh

Power purchaser:

Xcel Energy

Number of landowners:

1

In 2001, Woodstock paid about $15,000 in property taxes to 

Pipestone County. DanMar Associates has 4 employees, but its 

work supports other business interests as well as the 

management and operation of the Woodstock Project.
Appendix IV

Summary of Visits to Wind Power Projects in 

Five States

Page 100 GAO-04-756 Renewable Energy

Projects in Texas

Indian Mesa Wind Energy 

Project

Figure 18: Wind Turbines, Pecos County, Texas

Source: GAO.

Project location: 

Pecos County, Texas

Project owners and locations: 

FPL Energy (Florida)

Year started operating: 

May 2001

Number of turbines:

125

The Indian Mesa wind farm is located in West Texas, an area with strong, sustained wind 

resources. 

The project is located on 34,000 acres situated on a mesa. One of the four landowners of 

this acreage is the University of Texas. About 7,000 of these acres are leased for the 

project. The uses of the land include grazing livestock—primarily sheep—and hunting. 

The project does not limit these uses.
Appendix IV

Summary of Visits to Wind Power Projects in 

Five States

Page 101 GAO-04-756 Renewable Energy

a

Because one of the four landowners was a county commissioner, property taxes were assessed for 

this landowner’s parcel to avoid the appearance of a conflict of interest.

Total installed capacity:

82.5 MW

Annual generation estimate:

250 million kWh

Power Purchaser:

Lower Colorado River Authority and Texas 

Utilities Company

Number of landowners:

4

As an incentive for locating the project in Pecos County, the county provided the project 

with a full property tax abatement for 5 years.a

 In return, the project owner (at that time) 

agreed to donate funds in an amount equivalent to about 10 percent of the abated taxes 

to a regional technical training center. The owner also agreed to hire and use local 

companies and labor for the construction of the project, to the extent possible. In addition, 

the project paid about $930,000 in local school district taxes in 2003.

The project owner currently employs 43 people to operate and maintain the four wind 

projects the company owns in the area, including the Indian Mesa project. In the future, 

the owner plans to hire 4 additional people after the warranty and maintenance 

agreement with the turbine manufacturer expires. 
Page 102 GAO-04-756 Renewable Energy

Appendix V

The Wind Project Development Process ApendxiV

A

The wind project development process

Site selection Land agreements Wind assessment Environmental 

review

Evidence of 

significant wind

Preferably 

privately owned 

remote land

Economic modeling

Reasonable 

road access

Receptive 

community

Few 

environmental 

concerns

Proximity to 

transmission 

lines

Term:

expected life of 

the turbine

Compensation:

percentage of 

revenues

Rights: 

wind rights ingress/ 

egress rights, 

transmission rights

Assignable

financing 

requirement

Indemnification

Reclamation 

provision

Corollary data:

military installations, 

commercial airports

Collect hourly 

wind speed and 

direction data

Install 

meteorological 

tower

Cursory review for endangered 

species

Avian studies

Minimum one year 

of data

Quality report by 

recognized 

meteorologist

Output projections 

for several turbine 

designs

Obtain key data

Turbines, blades, electronics, and 

tower costs

Output projections

Balance of plant costs

Finance assumption

Raptors

Migratory birds

Review with interested parties

Local 

Audubon

Federal 

authorities

Local 

stakeholders

State 

authorities

Prepare, conduct, and report 

studies as required

Foundation

Collection

system

Erection

Padmount 

transformer

Cables

Substation

Communication and control 

system

Taxes

Operations and maintenance estimates

Sales

Incomes

Visual studies

Photo simulation:

Multiple views and distances

Review with local 

authorities

Historical and archaeological review

Prepare, conduct, and 

report studies as required

Wetlands review

Review with interested 

parties

Depreciation schedule

Property

Tax credits

Equity rate of 

return

Debt rate and 

term

Debt/equity ratio

Coverage 

ratios
Appendix V

The Wind Project Development Process

Page 103 GAO-04-756 Renewable Energy

A

Capacity 

limitation

Load flow 

analysis

System 

protection

Voltage controls

Power curve

output 

projections

Capital cost:

turbine, tower, 

blades, and 

electronics

Construction 

financing

Warranties:

equipment and 

maintenance

Turn-key 

construction cost: 

padmounts, 

interconnection and 

erection

Fixed cost per 

turbine per year

Fixed price per 

kWh produced

Penalties for 

nonperformance

Availability 

warranties

Turn-key contract

Excavation

Tower 

assembly and 

erection

Interconnection 

to utility

Trenching

Concrete

Cabling

Commissioning

Local, state, 

federal

Private land

Public land

Land use permit

Building permit

Source of equity:

rate of return 16-

18%

Term of debt

Source of debt:

market rates

Assignable 

documents

Third party due 

diligence

Power purchase 

agreement

Term

Kilowatt price:

real or nominal 

levalized

Facility sales 

agreement

Turn-key price

complete wind 

power facility

Permitting Sales agreements Financing Turbine 

procurement

Operations and 

maintenance

Construction 

contracting

Interconnection 

studies

Credit 

worthy buyer

Foundation 

assembly

Turbine 

installation

Source: Distributed Generation Systems Inc.
Page 104 GAO-04-756 Renewable Energy

Appendix VI

Comments from the U.S. Department of 

Agriculture ApendxiVI
Appendix VI

Comments from the U.S. Department of 

Agriculture

Page 105 GAO-04-756 Renewable Energy
Page 106 GAO-04-756 Renewable Energy

Appendix VII

GAO Contacts and Staff Acknowledgments ApendxiVI

GAO Contacts Lawrence J. Dyckman, (202) 512-3841

James R. Jones Jr., (202) 512-9839

Staff 

Acknowledgments

In addition to the individuals named above, Jacqueline Cook, Philip Farah, 

William Roach, and Carol Herrnstadt Shulman made key contributions to 

this report. Important contributions were also made by Carol Bray, Oliver 

Easterwood, Richard Kasdan, and Lynn Musser.

We also wish to give special recognition to our dear friend and colleague, 

Patricia Gleason, who passed away during the course of our work. Pat’s 

distinguished career with GAO was characterized by her strong desire to 

make government programs more effective and efficient. Furthermore, her 

courage, humor, and determination to keep working even as her health 

declined were an inspiration to her co-workers who held her in the highest 

esteem and miss her greatly. 
Page 107 GAO-04-756 Renewable Energy

Related GAO Products

Federal Energy Management: Facility and Vehicle Energy Efficiency 

Issues. GAO-03-545T. Washington, D.C.: March 12, 2003. 

Air Pollution: Meeting Future Electricity Demand Will Increase 

Emissions of Some Harmful Substances. GAO-03-49. Washington, D.C.: 

October 30, 2002.

Natural Gas: Analysis of Changes in Market Price. GAO-03-46. 

Washington, D.C.: December 18, 2002. 

Restructured Electricity Markets: Three States’ Experiences in Adding 

Generating Capacity. GAO-02-427. Washington, D.C.: May 24, 2002. 

Renewable Energy: DOE’s Funding and Markets for Wind Energy and 

Solar Cell Technologies. GAO/RCED-99-130. Washington, D.C.: May 14, 

1999.

Department of Energy: Solar and Renewable Resources Technologies 

Program. GAO/RCED-97-188. Washington, D.C.: July 11, 1997.

Energy Security: Evaluating U.S. Vulnerability to Oil Supply 

Disruptions and Options for Mitigating Their Effects. GAO/RCED-97-6. 

Washington, D.C.: December 12, 1996.

Federal Research: Changes in Electricity-Related R&D Funding. 

GAO/RCED-96-203. Washington, D.C.: August 16, 1996. 

Energy Research: Opportunities Exist to Recover Federal Investment in 

Technology Development Projects. GAO/RCED-96-141. Washington, D.C.: 

June 26, 1996.

Electricity Supply: Consideration of Environmental Costs in Selecting 

Fuel Sources. GAO/RCED-95-187. Washington, D.C.: May 19, 1995. 

Electricity Supply: Efforts Under Way to Develop Solar and Wind Energy. 

GAO/RCED-93-118. Washington, D.C.: April 16, 1993. 

(360307)
GAO’s Mission The Government Accountability Office, the audit, evaluation and 

investigative arm of Congress, exists to support Congress in meeting its 

constitutional responsibilities and to help improve the performance and 

accountability of the federal government for the American people. GAO 

examines the use of public funds; evaluates federal programs and policies; 

and provides analyses, recommendations, and other assistance to help 

Congress make informed oversight, policy, and funding decisions. GAO’s 

commitment to good government is reflected in its core values of 

accountability, integrity, and reliability.

Obtaining Copies of 

GAO Reports and 

Testimony

The fastest and easiest way to obtain copies of GAO documents at no cost 

is through GAO’s Web site (www.gao.gov). Each weekday, GAO posts 

newly released reports, testimony, and correspondence on its Web site. To 

have GAO e-mail you a list of newly posted products every afternoon, go to 

www.gao.gov and select “Subscribe to Updates.”

Order by Mail or Phone The first copy of each printed report is free. Additional copies are $2 each. 

A check or money order should be made out to the Superintendent of 

Documents. GAO also accepts VISA and Mastercard. Orders for 100 or 

more copies mailed to a single address are discounted 25 percent. Orders 

should be sent to:

U.S. Government Accountability Office

441 G Street NW, Room LM

Washington, D.C. 20548

To order by Phone: Voice: (202) 512-6000 

TDD: (202) 512-2537 

Fax: (202) 512-6061

To Report Fraud, 

Waste, and Abuse in 

Federal Programs

Contact:

Web site: www.gao.gov/fraudnet/fraudnet.htm

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470

Congressional 

Relations

Gloria Jarmon, Managing Director, JarmonG@gao.gov (202) 512-4400

U.S. Government Accountability Office, 441 G Street NW, Room 7125 

Washington, D.C. 20548

Public Affairs Jeff Nelligan, Managing Director, NelliganJ@gao.gov (202) 512-4800

U.S. Government Accountability Office, 441 G Street NW, Room 7149 

Washington, D.C. 20548
United States

Government Accountability Office

Washington, D.C. 20548-0001

Official Business

Penalty for Private Use $300

Address Service Requested

Presorted Standard

Postage & Fees Paid

GAO

Permit No. GI00