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Each Illinois wind job costs taxpayers $8 million

September 7, 2011

By Carolyn K. Gerwin

A study of enterprise zone reports obtained from the Illinois Department of Economic Opportunity (Illinois DECO) reveals that under Section 1603 of the federal stimulus bill, the federal government is offering developers about $8 million for every wind job reported.

Wind farm companies claim they create jobs in the areas where wind projects are built.  Their academic counterparts (often funded by the wind industry [See, e.g., http://renewableenergy.illinoisstate.edu] ) produce scholarly reports claiming that wind brings a vast economic boom to the economy.  [http://renewableenergy.illinoisstate.edu]  The federal government has developed a special computer program called the Job and Economic Development Impact model, commonly referred to as JEDI.  [http://www.windpoweringamerica.gov/filter_detail.asp?itemid=707].  Using the JEDI model, wind companies input data about a given project and the model kicks out estimates of the number of jobs stimulated.  In other cases, the method of calculating the jobs created is not explained.  For example, Iberdrola Renewables has claimed that its Streator Cayuga Ridge South project in Livingston County, Illinois “created and supported 1,523 jobs.”  [http://www.iberdrolarenewables.us/rel_10.10.14.html]  That level of economic development would be explosive in a county of only 39,000 residents, many of whom work in neighboring counties.  Such claims rarely, if ever, are tested after a project has been completed.

According to the Renewable Energy Center of Illinois State University, every major Illinois wind farm has applied for and received “enterprise zone” status, which allows the wind company to avoid paying state sales and use taxes on purchases that support a project built in an economically distressed area.  [http://renewableenergy.illinoisstate.edu/wind/publications/2011%20FINAL%20Economic%20Impact%20Report.pdf, p. 14.]  In return, the communities expect to get economic development they would not otherwise see.  To further stimulate the wind industry, Illinois recently extended the sales tax exemption to all new large wind farms regardless of whether the project area was actually economically distressed.  [Id.]

To monitor the impact of these enterprise zones, Illinois DECO requires the local administrator of each zone to file quarterly reports, including the total amount of investment and the number of jobs created and retained as a result of such projects.  [http://www.commerce.state.il.us/NR/rdonlyres/5F180547-E845-4D69-A37C-2BE43AAD3597/0/EZAnnRept_09.pdf, p.11]  To assess the impact of wind projects in Illinois, installations of four or more turbines built from 2007 through 2010 were identified based on information published on the website of the Illinois Wind Energy Association.   [http://maps.google.com/maps/ms?ie=UTF8&hl=en&msa=0&msid=102713907268110874068.00046247a98a6f3a2b29b&ll=40.971604,-89.351807&spn=2.488469,6.855469&z=7&source=embed]  Under the Freedom of Information Act, enterprise zone reports for the period 2007 through 2010 for each county where a wind farm had been built were requested.  After much delay, Illinois DECO denied the request.  The denial was appealed to Illinois Attorney General’s Office of the Public Access Counselor, which makes non-binding determinations in such cases.  The Public Access Counselor directed Illinois DECO to grant the request and after local administrators rejected DECO’s invitation to oppose disclosure, Illinois DECO turned over the reports.

The reports disclosed detailed information about Illinois wind farm projects and job creation.  Illinois does not follow the federal JEDI model’s policy of counting all jobs associated with a project rather than actually created by the project.  The enterprise zone report form expressly states that “ ‘Jobs Created’ means the number of jobs for which persons are hired or are expected to be hired within 1 year as a result of the new investments, not including construction jobs or spinoff jobs that may be created.” (emphasis original).  Thus, zone administrators must report the number of primary jobs created or retained as a direct result of the investment.

Secondary jobs are created by virtually all economic activity.  Instead of granting subsidies to a private company, the government could just apply the funds directly to infrastructure repairs or other economic development, thereby avoiding the inefficiency of administering a grant program where taxpayer funds are given to a private company in hopes that some of the funds will be returned to the local community.  Alternatively, the government could let taxpayers spend their money as they see fit, thereby stimulating the economy while allowing the workers to buy what they believe brings the highest value for their hard-earned money.

Defining, identifying and counting such spinoff jobs would be difficult and time-consuming.  Eliminating them from the reports avoids speculation as to the actual impact achieved.

In the reports, a part-time job is not equivalent to a full time job; jobs must be reported in terms of “full time equivalents.”  In other words, if a project created ten half-time jobs, they would be reported as five full-time-equivalent jobs.

The reports show that wind farms create very few local jobs.  Of the 15 wind farms reported on the IWEA website, only eight wind farm projects appear in the reports.  Those eight projects total $1.95 billion in project costs.  The reports show that these projects, as a group, created a total of 61 to75 jobs.  A table summarizing the data is attached.

The reports include a column entitled “Current Employees.”  Most of the time this column was left blank, but for four wind projects, the administrator reported that the wind company had zero current employees.  None of the administrators reported any “current employees” for a wind farm.

Compared to other projects that appear in these reports, the wind industry’s ability to create jobs is anemic.  For example:

• Wheel Worx (a railcar wheel manufacturer) created 50 new jobs in the Pekin area;

• Culver’s of Ottawa (a frozen custard restaurant) reportedly created 60 jobs; and

• Starbucks (a coffee shop) in LaSalle County was credited with creating 25 jobs.

A single project, the new Menards hardware store in the city of Washington, Illinois, created 75 jobs, as many jobs as all the reported wind energy jobs in the State of Illinois put together.

Eight of the 16 wind projects were not listed in the Illinois DECO reports.  Illinois DECO has not published a comprehensive list of Enterprise Zone projects so it is possible that ISU’s data is incorrect and some wind farms are not in the program.  In other cases, however, it is unclear why the project is not reported.  For example, Iberdrola Renewables obtained Enterprise Zone status for its Streator Cayuga Ridge South project in Livingston County, which was completed in 2010, but there is not a single reference to the project in the local administrator’s reports.

The reports show that wind jobs come at an enormous cost to American taxpayers.  Under Section 1603 of American Recovery and Reinvestment Act of 2009 (the “2009 Stimulus”), the federal government currently offers a rebate of 30% of the capital cost of a wind farm.  Over $6 billion has been awarded to wind developers so far.  [http://www.treasury.gov/initiatives/recovery/Documents/Overview.pdf]  A court has ruled that payment is not discretionary; any wind developer that meets the criteria must be paid, even if the government does not like the project’s financing or future prospects.  [http://www.troutmansanders.com/court-rejects-treasury-challenge-to-section-1603-cost-basis-02-08-2011]  Given the current budget deficit, the federal government will be forced to borrow the money to pay off the wind developers, most of which are subsidiaries of foreign corporations.

Based on the data reported to Illinois DECO, taxpayers are paying the mostly foreign-owned wind companies $7.8 million to $9.6 million for each temporary primary job created.

Only one of the wind farms in the Enterprise Zone reports was also listed on the Treasury Department’s website as actually having received a Section 1603 grant.  [http://www.treasury.gov/initiatives/recovery/Pages/1603.aspx].  Other wind projects may have been sold and renamed, making it difficult to track where the money went.   However, the  EcoGrove Wind Farm received over $67 million in Section 1603 stimulus money, but created only 8 jobs, costing taxpayers more than $8 million per job.

In addition, wind companies may opt for other federal subsidies.  Presumably they would do so only if those subsidies offered more payback than the Section 1603 rebate.  For example, the 2009 stimulus also provides loan guarantees for renewable energy companies.  [https://lpo.energy.gov/?page_id=41]  Under this program, the federal government guarantees up to 80% of bank loans to wind companies.  With government backing readily available, lenders that provide capital to wind companies have far less incentive to scrutinize the risk.  A year after President Obama touted solar panel maker Solyndra as a paragon of green investment, the company went bankrupt, leaving taxpayers liable for over $500 million in loan guarantees.  [http://www.washingtonpost.com/politics/solyndra-solar-company-fails-after-getting-controversial-federal-loan-guarantees/2011/08/31/gIQAB8IRsJ_story.html; http://www.therightscoop.com/obama-touts-solyndra-a-year-later-they-fold/]

The Section 1603 grant program is expected to end this year but wind industry supporters have been calling for new forms of subsidies to replace the grant program.  For example, costs associated with giant new transmission lines needed only for wind are likely to be paid for by all utilities and their customers “to upgrade the grid.”  Approximately $20 billion in transmission costs required to transmit wind from Midwestern wind farms to more populated areas would be passed on to Midwestern utility customers under rules proposed by the Federal Energy Regulatory Commission.  [http://online.wsj.com/article/SB10001424052970204527804576043893513811886.html]

The wind industry receives a wide variety of subsidies and incentives.  [http://www.dsireusa.org]  Of these, the most important is the Renewable Portfolio Standard.  Like 32 other states, Illinois has imposed a Renewable Portfolio Standard (RPS) on Illinois utilities. [http://www.epa.gov/chp/state-policy/renewable_fs.html]  The RPS forces utilities to buy a certain amount of wind energy or renewable energy credits.  The Obama Administration has proposed adoption of a national RPS to force further reductions in carbon emissions from American utilities.  [http://www.cbsnews.com/stories/2009/01/09/tech/livinggreen/main4710584.shtml].  However, a recent study of actual emissions of four major power distribution systems found that adding wind energy to the grid did not significantly reduce carbon emissions.  [http://www.forbes.com/2011/07/19/wind-energy-carbon.html]

President Obama is expected to ask for more stimulus funding for green jobs in his address to the Joint Session of Congress Thursday, Sept. 8.

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