$3.3 billion wind investment will add 2,500 MW of clean energy in South Dakota

The prairies and rolling hills of South Dakota will soon become dotted with wind turbines after the approval of eight major wind energy projects that could bring 700 more turbines and an investment of $2.6 billion in the state by the end of 2020.

Two other projects now in the regulatory
approval process would bring 188 more turbines and another $640 million in
investments to the state, bringing the total of new turbines to 888 and the
investment by energy companies to $3.26 billion.

The rapid expansion of wind energy will reach
across the state, with the majority of new turbines targeted for the northeast
corner, but with other projects planned for Hand and Hyde counties in the
center of the state and a 45-turbine project now under construction near Newell
in Butte County in the far northwest.

Just two years ago, despite being home to the third-most-active winds in the nation, South Dakota ranked No. 19 for wind energy production among the 50 states, with 15 wind farms and a total of 584 turbines able to generate 1,014 megawatts of electricity.

New national ranking data is not yet available, but the approved and docketed projects would raise the total of wind farms to 25 and nearly triple the number of wind towers in the state. The electricity production capacity would rise to more than 3,600 megawatts. Though it is variable, one megawatt of electricity can power about 1,000 homes; South Dakota ranks high in the nation for the number of homes, about 300,000, that are powered by wind energy.

Any new energy project is subject to extensive
review and typically draws significant opposition. Most of the new wind farms
approved for construction in South Dakota faced questions by neighbors about
the impacts of 500-foot tall towers, noise and light flicker from rotors that
operate in a 380-foot diameter, and the potential effects on property values
and local birds and wildlife.

Those who support renewable energy and the
economic benefits of new industry, however, are exuberant over the spate of new
wind farms approved for construction. The eight project approvals all came
between June 2018 and July 2019.

“For rural South Dakota, this is an awesome
boom,” said Steven Wegman of the South Dakota Renewable Energy Association. ​“No
one ever spent $300 million in Codington County in a construction season.”

Landowners, local governments and schools will all see significant financial benefits from the projects. One wind farm approved in Clark County, the Crocker Wind Farm, will pay leaseholders $46 million over the next 20 years, according to documents filed by developer Geronimo Energy. That project, which includes up to 120 turbines and an expected investment of $600 million, will also create 10 to 20 full-time jobs, support a ​“community fund” of $1.6 million, and generate $36 million in tax revenues for the state, county, township and local schools in its first two decades of operation.

Many people who travel on Interstate 90 across
South Dakota have undoubtedly obtained an up-close view of the ongoing
expansion of wind energy in the state after a pair of smaller wind farms came
online last year. The Aurora Wind Farm, with nine turbines, began generating
electricity in Aurora County south of the interstate in October 2018.

That same month, the Brule Wind Farm began
generating electricity with nine turbines that are clearly visible south of the
interstate near Kimball. Those projects were the only significant wind farms to
begin operation in South Dakota from January 2016 to October 2018.

Nearly 900 more wind turbines coming to South Dakota

Here is a glance at the eight wind-energy projects that received approval for construction in South Dakota from the Public Utilities Commission between June 2018 and July 2019, along with two others (*) now under consideration. Projects are listed chronologically by approval date and with location county or counties. Most projects have a completion date of sometime in 2020, though some may be completed in late 2019. 

Notes: Information from the South Dakota Public Utilities Commission; project costs may include construction, taxes and landowner payments; megawatt listing is for maximum electricity generation capacity. Projects with an asterisk (*) are now under consideration by the Public Utilities Commission.

Stage is set for wind energy in South Dakota

Several factors have led to the rapid expansion of wind energy projects since then.

Wind energy developers are rushing to bring projects online as quickly as possible to obtain the significant financial benefits of the Renewable Electricity Production Tax Credit for new wind projects. The U.S. Congress has voted to begin phasing out those credits starting in 2020 and ending in 2025. The 10-year tax credit remains a major driver of new wind projects across the United States.

The rush to obtain the full value of those tax
credits has dovetailed with the recent completion of two 345-kilovolt power
lines that created new capacity to move electricity produced in South Dakota
and North Dakota to markets in neighboring states, particularly to the
energy-hungry metroplex of Minneapolis. The two new lines now extend from
Ellendale, N.D., to Brookings, S.D., and can then carry energy on a separate
line to the Twin Cities area.

In advance of those projects, South Dakota
lawmakers in 2015 approved a measure to reduce the state tax on production of
each kilowatt of wind energy by roughly a third.

The other factors driving the wind energy expansion are an increased push by many states to encourage or require further usage of energy from renewable resources, and a dramatic decrease in the cost of harnessing wind energy. In the early 2010s, it cost energy companies about $3,500 to build turbines and machinery to harness a kilowatt of electricity. Due to advancements in design and maturation of the industry, that cost has fallen below $2,000 per kilowatt of capacity, Wegman said.

In recent years, South Dakota lawmakers and officials have tried to lure wind energy companies to the state, where the wind blows at full capacity about 40% of the time, the third-highest rate in the nation. Suddenly, the state has the full attention of energy companies that see South Dakota as a viable place to make money off the wind.

“It’s about time; we’ve been in the wading pool for a long time, and now the tide has come in,” Wegman said. ​“A lot of small towns and counties and townships are going to get an economic boost that they’ve never, ever had since South Dakota became a state.”

Arduous, imperfect approval process

The approval process for new wind farms is arduous and can take years and cost energy companies several million dollars in up-front costs.

Eight major wind projects were approved in a
13-month period by the South Dakota Public Utilities Commission, an incredible
pace for the three-member elected board that reviews and rules on energy-construction
projects and also regulates utility rates.

For regulators, the past 15 months have been a whirlwind of reviewing construction plans and siting documents and sifting through arguments both for and against the projects, said Gary Hanson, chair of the utilities commission.

Hanson said a legislative change last year that
granted regulators nine months instead of six months to consider energy
projects helped the agency but did not totally alleviate the feeling of being
rushed.

“There’s a lot of adjectives to describe it, some
of them good and some of them bad,” Hanson said. ​“It’s been very hectic with
wind development, and to have all those projects on top of each other is like
having five kids in college at the same time.”

Hanson said the commission, the developers and local officials and residents have worked hard to reduce the impacts of the wind farms and turbines.

Several of the approved projects have dozens of
conditions placed upon developers in response to concerns or complaints levied
by local officials and neighbors of the projects. Counties where wind farms
will be built have control over some siting issues, including the critical
matter of setbacks that determine how close towers can be to roads, neighboring
homes or municipal boundaries.

Hanson said the utilities commission tries to develop precedents that can guide developers and locals in how to approach contentious issues. Hanson said no process is perfect and that he understands that some people don’t want a wind tower in their neighborhood. He said the commission is bound to follow state laws and regulations and that if a developer meets all the requirements, the commission is bound to approve a qualifying project.

For example, Hanson said the commission approved the Brule wind farm even though he now feels that the towers are too close to I-90, which he said was a county and not a state decision.

“It’s not always the way we want it,” Hanson
said. ​“We may love something or we may hate something, but in the end we have
to vote based on what the law tells us to do.”

Hanson said the big burst of new wind projects may have subsided. Yet Hanson said he has heard that more projects are in the discussion stage and that he expects the utilities commission may soon place more wind farms on its docket of projects to review.

Wind energy brings economic benefits

There is no guarantee that all of the approved or docketed projects will be built, as some projects can change hands or suffer from capital deficits, but those who know the wind industry believe most South Dakota projects are likely to move forward. Also in question is whether energy firms will use South Dakota contractors and suppliers to support construction and maintenance of the wind farms.

However, the rapid growth in wind energy production is welcome news for the eight South Dakota companies that provide equipment, support and maintenance services to wind energy developers and operators, said Mike Sherman, president of Renew Energy Maintenance in Sioux Falls.

“It definitely benefits our company and creates
opportunities for us to add employees,” Sherman said.

Renew aids in construction of wind energy projects but mostly on a smaller scale than the size of the wind farms coming to South Dakota, Sherman said. But after the South Dakota projects are up and running, Renew may see a financial and employment boost by providing maintenance services.

“We don’t do a lot of new construction work, but
we travel all over North America doing maintenance,” Sherman said. ​“For us,
it’s nice to be finally be able to do work in our home state.”

Renew is often called on to help wind energy companies to perform quality control efforts and reduce continuing costs of operation, Sherman said.

Renew, which now has about 260 employees,
operates from offices on East River Ridge Place just northeast of the
intersection of 26th Street and Interstate 229 in Sioux Falls.

Even with the rush of new wind projects, finding
new employees may be a challenge, however. Like many technology-based firms in
South Dakota, Renew has a hard time recruiting qualified workers. Sherman said
the company has a representative on the advisory board at both Mitchell and
Lake Area technical institutes in its efforts to cultivate its workforce.

“With the economy being good right now, if we
could find the right people, we could hire another 30 to 40 employees today,”
he said.

Sherman said the projects should also provide a
big boost to rural counties across the state.

“It’s absolutely good news and a real big boost
to local economies,” Sherman said. ​“It creates jobs in rural areas and
significant tax benefits that come to the counties though construction and
operations.”

Even though the projects will generate
significant property taxes for several rural counties in South Dakota, not all
local officials are excited about the wind farms.

Deuel County Commission Chair Steve Rhody said
he is reserving judgment on the potential long-term outcomes of the Deuel
Harvest North Wind Farm, which has been approved to build up to 112 turbines in
the eastern side of the county by 2020.

According to filings with the state by developer
Invenergy, the project will cost $400 million to build, create 400 temporary
and 15 permanent jobs, generate $87 million in payments to landowners and
result in $40 million in tax payments to state and local governments over the
30-year life of the project. The company predicts it will pay $23 million in
wages and benefits to local employees during that time.

Deuel Harvest is one of two new wind energy projects that may be partially or fully sited within Deuel County in the coming years.

Rhody said that outside of those who will
receive lease payments, the project was not supported by many residents of the
county, including several who testified against it during public hearings.

“I know that we will make more money,” Rhody
said. ​“But it’s not going to be all good. They’re going to wreck some roads and
it’s going to be really busy until it gets totally built.”

Rhody said he understands that the wind projects
are seen as a benefit to the state, and that state economic officials are
excited about the potential windfalls.

“They’ve been going wild over it, but of course,
they aren’t living underneath them,” Rhody said. ​“Lots of people who are opposed
to them, and I’m kind of reserving judgment,” he said. ​“Time will tell how it
turns out.”

This story was produced by South Dakota News Watch, a nonprofit that covers statewide stories including agriculture, education, public safety and politics.