trending Market Intelligence /marketintelligence/en/news-insights/trending/WDrrAH2joStLEQyVTq5BaA2 content esgSubNav
In This List

How Wyoming went from leader to laggard in wind energy


US utility commissioners: Who they are and how they impact regulation


Q&A: Datacenters: Energy Hogs or Sustainability Helpers?


Insight Weekly: US stock performance; banks' M&A risk; COVID-19 vaccine makers' earnings


Insight Weekly: LNG exports surge; investors unfazed by inflation; neobanks drive VC funding

How Wyoming went from leader to laggard in wind energy

SNL Image

Wyoming's powerful, reliable winds give it high potential for wind generation capacity.
Source: Associated Press

Once a leader in wind power in the West, Wyoming has fallen behind its neighbors, due partly to a unique tax structure that impedes wind farm development.

Wyoming, the nation's largest producer of coal for power generation, charges a $1/MWh tax on wind-energy output. Some are moving to increase the tax to $5/MWh; others predict that the effort will fail and say Wyoming's decadelong slump in wind development is coming to an end.

Increasing the tax burden five-fold would make wind farms in Wyoming the highest-taxed in the West, according to a new University of Wyoming study of state taxation policies. New Mexico is the lowest-cost state for wind farm development of the Western states covered by the report, followed by Montana, Colorado and Wyoming.

Based on data from the National Renewable Energy Laboratory, Wyoming’s potential for wind power generation capacity ranks among the highest in the nation. A decade ago, the state was ahead of the pack in terms of wind power development, with wind farms contributing more to its total generating capacity in 2009 than in any of the other three states. But since Wyoming imposed the per-megawatt-hour wind tax in 2012, wind farm development boomed in the other three states, while it ground nearly to a halt in Wyoming, S&P Global Market Intelligence data shows.

From 2009 to 2018, the cumulative installed wind capacity in Montana increased 415%, to 783 MW; in Colorado, it increased 205%, to 3,700 MW; and in New Mexico, it increased 204%, to 1,815 MW. Wyoming's cumulative installed wind capacity in the same period increased only 28%, to 1,490 MW.

Nationwide, cumulative installed wind capacity rose 280% in that period, according to the American Wind Energy Association.

Paul Martin, president of Colorado-based Intermountain Wind LLC, has been developing wind farms in Wyoming since 2007, when "there were a lot of companies working in Wyoming trying to get projects across the line." Following the tax increase, wind companies abandoned the state, he said. In addition, the lack of a robust transmission network across the sprawling state has slowed the development of wind power, developers say.

"To put it in a nutshell, you've got great wind, but you've got these transmission issues and then the tax structure," Martin said.

SNL Image

Future prospects

Obstacles notwithstanding, some are optimistic that Wyoming's reliable wind resource, as well as the development of transmission networks, will attract more wind developers to the state. Berkshire Hathaway Energy subsidiary PacifiCorp has been pursuing the Gateway West transmission project, which will consist of 1,000 miles of high-voltage transmission lines in Idaho and Wyoming, for more than 10 years. First proposed in 2008, Gateway West is expected to come online in 2024.

The Anschutz Corp., through its subsidiary Power Company of Wyoming, is developing the Chokecherry and Sierra Madre Wind Energy Project, a $5 billion, 1,000-turbine wind farm with at least 3,000 MW of nameplate capacity. TransWest Express LLC, another Anschutz subsidiary, is also seeking regulatory approval for its $3 billion TransWest Express Transmission Project, a 730-mile line that would bring wind-powered electricity to the cities of the Southwest.

Construction on the transmission project is estimated to begin in 2020, said Kara Choquette, spokeswoman for the Anschutz companies. Construction on the wind farm began in 2016, she said, and some of the turbines are expected to come online in 2023.

When the company began seeking regulatory approval for the Chokecherry and Sierra Madre wind farm before 2009, it expected a tax liability of about $377 million over the 20-year operating life, Choquette said. With the $1/MWh tax, as well as the repeal of a sales tax exemption, the company now estimates its state tax burden will reach $846 million.

That makes it difficult to sell electricity to customers in ultracompetitive Western markets, such as California, she said.

SNL Image

Tax structure

Only four Western states tax new wind development, in absolute terms, more heavily than Wyoming, and Wyoming is the only one that taxes on a per-megawatt-hour basis, rather than a percentage of revenues. The University of Wyoming study says the current tax not only slows development, but also results in the state collecting less long-term, reliable tax revenue than if it relied on taxes assessed on a percentage basis. The two University of Wyoming economists who authored the study, Benjamin Cook and Robert Godby, conclude that charging the fixed per-megawatt-hour tax increases a wind farm's tax liability in a declining-cost environment; under a fixed per-megawatt-hour tax, as the price of electricity falls, tax rates rise, the study notes.

New Mexico's laws allowing counties to float industrial revenue bonds help spur wind farm development, the study says. Counties in New Mexico can also negotiate tax payments with developers.

"Industrial revenue bonds really lower the costs of financing in the state, but they also lower tax costs because the county is a half-owner of the project, and a county is tax-exempt," Godby said in an interview.

SNL Image

Political winds

Even as developers look to promote Wyoming's wind potential, opponents are trying to dramatically increase taxes on the industry. A political action committee formed in February seeks to finance an effort to gather signatures for a ballot initiative that would increase the tax on wind production to $5/MWh. Lawmakers failed to pass similar proposals in 2017, 2018 and 2019.

Joe Quiroz, chairman of the committee, which is named Wind Wyoming's Way, said in an interview that committee officials want to create an equitable playing field for wind energy and resource extraction industries in Wyoming, as well as protect the state's scenery and wildlife. Wyoming is the biggest exporter of coal in the nation, and coal interests have long held political sway in the state. Wind Wyoming's Way is not funded by the fossil fuel industry, according to Quiroz, who said it's just beginning to court potential donors.

The committee's task of collecting more than 30,000 signatures across the state is an unusually high bar to put a proposal on the ballot, compared to other states' requirements, noted Lawrence Wolfe, a Cheyenne energy and natural resources attorney who has worked with legislators on bills affecting wind power development in the state. But political ambivalence about wind power has helped stall development for nearly a decade in the state, he said.

"A lot of that is just the politics of a fossil-fuel state," he said. "But I think it's fair to say Wyoming has missed out on a lot of opportunities."