Small Wind Energy Policy Making in the States: Lessons for a Shifting Energy Landscape

Thesis

Presented in Partial Fulfillment of the Requirements for the Degree Master of Science in the Graduate School of The Ohio State University

Joshua George Wiener, M.P.A.

Graduate Program in Environment & Natural Resources

The Ohio State University

2009

Thesis Committee:

Tom Koontz, Advisor

Jeremy Bruskotter

Anand Desai

Earl Epstein

Andrew Keeler

Joshua Wiener

2009

Abstract

A key component of climate change policy is the promotion of alternative energy sources. Among renewable energy technologies wind energy represents an important source of alternative energy with a minimal carbon footprint. While utility-scale wind farms have garnered much attention, a more widely dispersed energy resource is “small wind” – installations capable of generating small quantities of electricity in distributed

(close to the end-user) rather than centralized form. With less visibility and smaller potential gain for large utilities, small wind technologies provide an interesting study in state environmental policy adoption. This research looks at the status of state small wind policies across the United States, and it tests the applicability of two policy adoption models to explain variability in state small wind policies: (1) internal determinants and

(2) regional policy diffusion. Primary data were collected using an online survey instrument distributed to state energy officials across the country, and the results were analyzed using both statistical and qualitative techniques. Additionally, case studies were performed for three states – Oregon, Ohio, and Oklahoma – to provide greater contextual understanding to the survey instrument results and to illustrate the unique circumstances determining small wind policy adoption at the state level.

The findings from the survey analysis suggested that the internal determinants model was better suited to explain state adoption of small wind policies than the regional

ii policy diffusion model, although variables from both models were deemed important. In particular, six primary factors were found to be connected to the development of state small wind policies: a state’s historical commitment to environmental protection and policy innovations; citizen ideology; economic wealth and development; retail price of electricity; degree of legislative professionalism; and interstate competition related to leadership on environmental and energy issues. The case study analyses examined these variables in greater depth, exploring the level of impact of each variable in different circumstances as well as the manner in which these variables interact with each other to influence state small wind policy adoption. Furthermore, the case studies revealed that other variables might be important under specific conditions, highlighting the strength of fossil fuel energy industries in Oklahoma and the value of small wind’s perceived economic development potential in Ohio. The case studies also assessed the practical effect that different policies have on the small wind market, revealing that financial incentives combined with effective public outreach programs were perceived to have the greatest positive impact on small wind adoption in these three states.

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Acknowledgments

This document could not have completed without the help of numerous people, and I would briefly like to highlight the key individuals who made this project possible.

First, a sincere thank you goes out to my advisor, Tom Koontz, for the countless hours he spent working with me to develop my research topic and methodology, as well as all of the steps that were required to move forward from that point to this final document. His guidance was invaluable throughout this long process, and his kindness and support helped me navigate through the difficult points to reach this destination. Similarly, my committee members contributed important insights and suggestions throughout the research process, and I thank each of you for your dedication to my work and your assistance over the past year. In addition, I am thankful for the funding support I received from the Ohio Agricultural Research and Development Center (OARDC),

School of Environment and Natural Resources, John Glenn School of Public Affairs, and

GradRoots to further my education and research while attending The Ohio State

University.

This research also would not have succeeded without the willingness of countless individuals to give up their time to complete my survey and speak with me about my research. Due to promises of confidentiality I cannot mention any individuals by name,

iv but I thank you all for taking time out of your busy schedules to assist a graduate student interested in developing a clean energy future. Dozens of individuals in Oregon, Ohio, and Oklahoma shared their thoughts, experiences, and insights about small wind energy with me, and this research effort was strengthened as a result of your contributions.

Similarly, I also must thank Greg Payne from the Ohio Department of Development for spending time with me on the development of the survey instrument to ensure that the questions I asked would successfully address the topics I wished to cover.

Finally, a big thank you goes out to my parents for their constant love, support, and encouragement throughout it all. They instilled in me at a young age a deep thirst for knowledge and a general inquisitiveness about how the world works, and they have never wavered in their support for my endeavors. No research project can ever be completed without the support of family, and I also thank Bob, Sally, Jenny, and Julie for creating a new family for me in Ohio that I could turn to at any time. Most importantly though, my biggest thank you is reserved for Lauren and Petey. I don’t think I could have done this without you, and your patience, understanding, and support throughout this process has been nothing short of incredible. Thank you for always believing in me and for never failing to bring a smile to my face when I needed it most.

Vita

June 2004………………………… B.A. History, University of California Los Angeles

2004………… Field Organizer, Democratic National Committee Coordinated Campaign

2005…………………………………… New Accounts Representative, Los Padres Bank

2005-2006…………………………….. Personal Banking Specialist, Ohio Savings Bank

2007………………... ORCAS Summer Fellow, Oak Ridge Center for Advanced Studies

2007-2008…………………….Recipient of the OARDC Director’s Associateship Award

2008…………………... Analyst Intern, United States Government Accountability Office

2008-2009……………... Public Affairs Intern, Franklin County Board of Commissioners

June 2009…………………………………………….. M.P.A., The Ohio State University

June 2009……………... Recipient of the Outstanding Policy/Management Paper Award, The John Glenn School of Public Affairs, The Ohio State University

June 2009…………….. Recipient of the Mary E. Katchmar Outstanding Service Award, The John Glenn School of Public Affairs, The Ohio State University

Field of Study

Major Field: Environment & Natural Resources

Specialization: Environmental Social Sciences

Table of Contents

Abstract…………………………………………………………………………………... ii

Acknowledgments………………………………………………………………………. iv

Vita………………………………………………………………………………………. vi

List of Tables…………………………………………………………………………..... ix

List of Figures……………………………………………………………………………. x

Chapter 1: Introduction…………..……………………………………………………… 1

Chapter 2: Survey Instrument………….………………………………………………. 12

Chapter 3: Case Studies…………...…………………………………………………… 63

Chapter 4: Case Study Policy Tool Results…….…………………………………….. 116

Chapter 5: Conclusion…..…………………………………………………………….. 136

References……………………………………………………………………………... 146

Appendix A: State Small Wind Policy Survey Instrument…………………………… 153

vii Appendix B: Complete Correlation Matrix…………………………………………… 176

Appendix C: Sample Oregon Interview Protocol…………………………………….. 178

Appendix D: Sample Ohio Interview Protocol……………………………………….. 181

Appendix E: Sample Oklahoma Interview Protocol………………………………….. 184

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List of Tables

Table 1. Policy Tools Framework……………………………………………………… 31

Table 2. Policy Tool Usage in Small Wind States……………………………………... 39

Table 3. State Usage of Tools From the Policy Instrument Groupings………………... 40

Table 4. Pearson Product-Moment Correlation Analysis Results……………………... 44

Table 5. Influential Factors Related to Policymakers’ Support for Small Wind………. 47

Table 6. Small Wind Policy Adoption Variables………………………………………. 60

Table 7. Current Small Wind Policies in the Case Study States……………………….. 92

Table 8. Impact of Policy Adoption Variables by State……………………………… 108

Table 9. Policy Tool Impact…………………………………………………………... 129

Table 10. Complete Correlation Matrix………………………………………………. 176

List of Figures

Figure 1. Small Wind Policy Map……………………………………………………... 37

Chapter 1: Introduction

Growing concerns about global climate change, the safety and security of

America’s energy supply, and the economic hardship caused by high gasoline prices have brought energy-related issues to the forefront of contemporary public discourse.

Confronting these complex challenges will require diverse multi-faceted solutions within the public and private sectors, along with a willingness to move away from the current

“business as usual” practices that helped to create the existing situation. Although the political will and financial means for confronting these issues may be diminished in the face of the current national economic crisis, economic circumstances do not lessen the need to adapt the nation’s energy system to meet these difficult demands.

Distributed energy generation (DG) represents one technology-based approach that satisfies these requirements by altering the conventional energy production system.

In particular, DG technologies generate energy close to where it is consumed (U.S.

Department of Energy, 2007; Clark and Isherwood, 2004). This represents a significant shift away from traditional energy production practices, which have focused on building large fossil fuel based generating plants in remote locations, closer to fuel sources, and then transmitting the power over high-voltage transmission lines to the eventual end- users (Chowdhury and Tseng, 2007). The most commonly cited examples of DG technologies covered in academic literature are microturbines, fuel cells, combined heat

1 and power, photovoltaics (solar), small hydro units, and small wind turbines (Tsikalakis and Hatziargyriou, 2007; Chowdhury and Tseng, 2007).

Rather than examining the entire spectrum of distributed generation technologies, the focus of this study will center upon small wind energy technologies. Very little academic research has looked at this aspect of distributed generation, and this analysis will begin by providing background information about small wind power and explaining why this technology is important. In order to adhere to conventional practice, this study will define “small wind” as wind-powered electric turbines with a maximum capacity of

100 kilowatts (kW) designed to produce electricity for local use (AWEA, 2009a). Small wind energy refers to wind turbines that are located on the distribution side of the electric grid and provide power directly to homes, farms, and businesses. Unlike utility-scale wind facilities, small wind turbines can be effective in areas beyond the central plains, coastal locations, or mountain ridges, making them a valuable alternative option for communities or individuals that are interested in renewable energy but are unable to utilize other technologies. According to the National Renewable Energy Laboratory, at least 48 of the 50 states in the country have some areas of land with a strong enough wind resource for small wind turbines to be effective (NREL, 2005). Interestingly, small wind also constitutes a unique economic advantage for the United States as it represents the only renewable energy industry segment that the United States still dominates in technology, manufacturing, and world market share (U.S. Department of Energy, 2007).

The vast majority of industrial and academic interest in wind power has looked at utility-scale wind generation projects. Although these projects and the information they have produced are not directly analogous to small wind energy, for contextual purposes it

2 is important to look at the current role of wind power as a whole in the nation’s energy system. Wind energy is the fastest growing renewable electricity resource in the United

States, and small wind technologies benefit from the general renewed interest in wind power that has developed in recent years (Menz, 2005). Furthermore, wind energy now makes up 5 percent of the total renewable energy consumption in the United States

(compared to 1 percent for solar energy), and has experienced a blistering 5-year average annual growth rate of 29 percent (Energy Information Administration, 2008).

Although small wind energy represents only a small fraction of the entire wind energy industry, the small wind market has experienced considerable growth in recent years as well. This growth was highlighted by a 78 percent increase in the installed capacity of small wind technologies in 2008 over what had been installed in 2007

(AWEA, 2009a). According to the American Wind Energy Association (AWEA)

(2009a), the cumulative installed capacity of small wind energy by the end of 2008 had reached 80 MW and yearly sales surpassed 10,000 units in the United States. Although the small wind market refers to turbines with rated capacities as large as 100 kW, smaller residential systems in the 1-10 kW range represent the largest segment of the market

(AWEA, 2009a). The year 2008 marked a potential turning point in the future trajectory of the small wind market due to the introduction of a new 30 percent federal investment tax credit slated to be available through 2016. Based on the prior experience of the solar photovoltaic industry with a similar federal tax credit, it is expected that this new federal small wind tax incentive will enhance the growth of small wind technologies in the coming years (AWEA, 2009a).

3 In addition to the recently enacted federal tax credit for small wind, many state governments have implemented a wide variety of innovative policies and incentive programs to encourage their citizens and businesses to adopt these technologies.

However, in spite of the public expenditures and environmental importance associated with these initiatives, little academic research has been conducted to evaluate these state efforts, and as a result very little is known about the small wind energy policy environment at the state level. Although many different levels of actors are involved in small wind energy – federal government, state governments, local governments, and individual citizens – this study will focus exclusively on the role of state governments within the small wind universe. In light of the dearth of scholarly knowledge about this topic, this research marks one of the first projects to look exclusively at small wind power.

The following section will briefly review the existing literature about the benefits of distributed energy generation before summarizing the scholarly theories about policy adoption that form the theoretical foundation for this analysis. The discussion contained in this chapter will be brief, but these topics will be examined in much greater detail in

Chapters 2 and 3. Next, the fundamental research questions being addressed in this study will be presented, and this introductory chapter will conclude with a brief overview of the methodology and approach that was utilized to address these key questions.

4 Literature Review

Advantages of Distributed Generation

A review of the existing literature reveals a wide variety of recognized benefits associated with distributed generation technologies such as small wind. For example, many authors emphasize the ability of DG technologies to produce electric power more efficiently and potentially at reduced costs compared to traditional generation techniques

(Pepermans et al., 2005; Sovacool, 2007; Stovall et al., 2005). Central plant based energy generation techniques result in significant energy losses during the transmission and distribution process, but locating DG resources near the end-users of the generated energy reduces virtually all of these losses. Furthermore, DG technologies using renewable energy resources (such as small wind power) help the United States reduce its dependence on foreign energy sources (Spiegel et al., 1998; Sovacool, 2007). This advantage is complemented by a general sense of independence from utilities and energy imports that distributed generation users have been found to experience (Hughes and

Bell, 2006). States have also been identified as specific benefactors of the benefits produced by DG clean energy production, particularly related to the ability of small wind and other DG technologies to relieve pressure on the power grid and improve local economic and job development opportunities (U.S. Department of Energy, 2007; Byrne et al, 2007).

Many scholars have also highlighted the environmental benefits associated with distributed generation. In particular, concerns about greenhouse gas emissions related to

5 global climate change have brought renewed focus to the emissions reductions that result from producing electricity through distributed generation (Pepermans et al., 2005;

Sovacool, 2007; Stovall et al., 2005). Although Pepermans et al. argue that environmental concerns are more of a driving force behind DG in Europe rather than the

United States, other authors suggest that emissions reductions may soon increase in importance to potential customers in the United States. In particular, Tsikalakis and

Hatziargyriou (2007) explain that technologies that reduce greenhouse gas emissions will play a critical role in any future emissions trading markets. While future climate change policies in the United States are still uncertain, it is feasible that these policies could spark increased demand for distributed energy generation, especially if they introduce a national greenhouse gas cap-and-trade system.

Policy Adoption Theoretical Background

In order to analyze the policy adoption process that states have undertaken to develop small wind policies this study seeks to utilize and build upon two existing theories of state-level policy adoption: the internal determinants model and the regional policy diffusion model. These theoretical models identify key variables that are believed to impact the policy adoption process, and complementing these general theories are several more specific factors that scholars have indicated are particularly important to the development and adoption of state environmental policies. All of these different elements were considered in this study in the effort to accurately analyze the forces and circumstances believed to influence state support for small wind energy.

6 At its core, the internal determinants model explains policy adoption as resulting from various state attributes and factors that are primarily responsible for determining a state’s policy preferences. These key characteristics may differ for different types of policies, but previous researchers have identified numerous variables that have been shown to specifically impact state environmental policy adoption. Alongside other factors that are believed to influence energy and climate change policies at the state level, these conventional environmental policy variables will form the basis for much of the analysis conducted in this study. Most notably, previous literature suggests that the following internal factors and characteristics are expected to impact state adoption of policies related to subjects such as small wind energy:

. Citizen ideology (Ringquist and Garand, 1999; Matisoff, 2008; Lester, 1995)

. Legislative professionalism (Ringquist, 1993; Lester, 1995)

. Level of personal wealth in a state (Ringquist, 1993; Lester, 1995; Matisoff, 2008)

. Interest group strength (Bacot and Dawes, 1997; Potoski and Woods, 2002)

. A state’s historic commitment to environmental protection and environmental policy innovation (Lester, 1995; Koontz, 2002)

. Severity of the pollution problem in a state (Lester, 1995; Bacot and Dawes, 1997; Potoski and Woods, 2002)

. Price of electricity (Byrne et al., 2007)

. Perception of the economic development potential associated with renewable energy (Byrne et al., 2007)

. Quality of a state’s wind resource (Menz and Vachon, 2006)

7 In addition to examining the significance of each of these variables related to small wind policy adoption, this study will also consider the policy adoption factors identified in the regional policy diffusion model. This model differs from the internal determinants model by contending that state policy innovation and adoption occurs primarily as a result of a state’s relationship with its neighboring states. Prior research in this field suggests that states share and borrow policy ideas from each other, aiming to learn from the experiences of their regional neighbors in order to develop successful legislative programs (Matisoff, 2008). In particular, regional policy diffusion scholars have identified two primary variables that are believed to facilitate this diffusion process: interstate competition and the participation of state officials in regional policy networks or communities (Sabatier, 1988; Ingle et al., 2007; Walker, 1981).

All of the policy adoption variables identified in this section will be discussed in much greater detail in the literature reviews contained in Chapters 2 and 3, and their significance related to small wind policies will be assessed throughout the remainder of this study.

Research Questions

This study will investigate four primary research questions regarding the small wind policy adoption process. First, the analysis presented in Chapter 2 will be guided by the following research questions:

RQ 1) What is the current status of state small wind energy policies in the United States?

8 RQ 2) Which variables explain the development of state small wind policies, and how well do the internal determinants model and the regional policy diffusion model explain the variance in small wind energy policies across states?

Chapter 3 will then expand upon these topics by using case study analyses of three small wind states to address the related question:

RQ 3) What factors explain the variation in support for small wind energy between different state governments throughout the country, and how do these factors interact in order to produce a particular arrangement of policies in each state?

Finally, Chapter 4 concludes the analytical portion of this study by taking more of an applied policy approach to examine the following question:

RQ 4) Which policy tools are perceived to be effective for increasing the adoption of small wind energy technologies?

The approach taken to answer these research questions is discussed below.

Methodology

This project explored the diffusion and expansion of small wind energy technologies by focusing on the role of state governments within this development and diffusion process. Although there are also important local government responsibilities regarding zoning for small wind systems, local government activities were not a focus of this study. In particular, this research was guided by the key questions presented above, and two approaches were taken to examine different elements of state small wind policy

9 adoption and implementation. State support for small wind energy served as the primary dependent variable in this analysis, and it was measured using the number and variety of policy tools adopted by a state in support of small wind. Although it would be ideal to corroborate this measure with the actual levels of adoption of small wind turbines in each state, unfortunately data about the number of systems or the installed capacity per state is not available.

Rather than try to promote small wind as a technology that states should support, the aim of this study is to understand why some states have elected to promote small wind and to examine the process through which this support materialized. Small wind energy does present some drawbacks – particularly related to cost-effectiveness in some locations – that may dissuade states from wanting to spend time and money promoting this technology. In recognition of both the positive and negative attributes of small wind, this study does not attempt to place a value judgment on state decisions regarding whether to actively support small wind systems. Instead, this research focuses exclusively on examining the process that was followed to produce the policy decisions, as well as to consider the perceived effectiveness of the policies that have been implemented.

The remainder of this study contains three core analytical chapters followed by a brief concluding chapter designed to summarize the results of this research. A survey instrument was created and distributed to state energy officials to collect information about current small wind policies around the country in order to answer RQ 1 and RQ 2.

The results of this survey instrument are presented and analyzed in Chapter 2, and several key variables are identified as being correlated with state adoption of small wind policies.

10 Chapter 3 builds upon these findings by presenting the results from case studies that were performed in Oregon, Ohio, and Oklahoma to examine in-depth how these variables interact with each other as well as how they influence the small wind policy adoption process under different sets of circumstances (RQ 3). In addition to investigating the policy adoption process, a secondary focus of this study is to assess the effectiveness of the different policy tools that states have adopted in support of small wind energy.

Chapter 4 addresses this topic by using data collected through the case study analyses in

Oregon, Ohio, and Oklahoma to answer RQ 4 in these specific cases.

The core chapters are structured as semi-independent pieces of work written in journal format that each focus on different aspects of this broad study. As a result, most chapters include separate literature review, methodology, results, and discussion sections.

In consideration of this format, further details about the methodology used for each of these chapters are provided in the methodology sections contained in Chapters 2 and 3.

When considered as a whole, it is hoped that this comprehensive research project will create a foundation from which further analyses of small wind energy can be conducted, as well as provide practical knowledge to help states improve the effectiveness of their small wind policies.

Chapter 2: Survey Instrument

Introduction

The market for small wind energy in the United States has grown at an incredible rate in recent years, highlighted by a remarkable 78 percent increase in the installed capacity of small wind turbines during 2008 over what had been installed in 2007

(AWEA, 2009a). State policies that have been adopted in support of small wind energy have been key to this growth, while at the same time increasing public interest in the technology has helped to spur many states to develop or expand their small wind programs. However, in spite of this rapid rate of growth small wind energy remains somewhat of a small niche market that has largely been overlooked in academic research about renewable energy. In particular, states play a key role in driving the growth in the industry, and it has become apparent that policies in support of small wind vary widely between states and have evolved frequently in recent years. The American Wind Energy

Association (2009a) describes state policy and incentive programs as “fragmented and constantly changing across regions and even communities,” but yet there has not been any academic analysis about what is driving these policy changes or the impact they are having.

12 Most prior research related to wind energy has focused on large wind farms that are incorporated into the operations of electric utilities and are designed to produce power for thousands of people while significantly reducing greenhouse gas emissions. In contrast, the primary recipients of the benefits of small wind energy (e.g., a secure electricity supply and cheaper electric bills) are a small number of individual home or business owners, whereas the society at large receives only the diffuse benefit of slightly reduced greenhouse gas emissions from these systems. With so few interests benefiting directly from small wind it may seem surprising that many states have chosen to expend their financial and material resources to support this technology instead of focusing on other issues that are likely to impact a greater number of constituents. These circumstances surrounding state small wind policies make for an interesting study of the policy adoption process related to distributed renewable energy technologies, and the primary goal of this analysis is to better understand the forces driving states to support small wind energy.

At their core, most state small wind policies aim to change the behavior of individual citizens and businesses to encourage them to install small wind systems. This study examines the development and evolution of these policies, but does not directly address individual behavior as it relates to small wind energy. Nevertheless, it is important to recognize that the factors driving state actions may differ from the motivations prompting individuals to adopt small wind systems. Local governments and the federal government also play a role in the small wind marketplace and may be influenced by separate unique factors and considerations, but similar to individual consumers these actors will not be directly covered in this research.

13 The focus of this chapter is to begin to address state small wind policy adoption using data collected through an online questionnaire distributed to the leading small wind energy policy official in each state throughout the country. A variety of statistical, computational, and qualitative techniques will be used to analyze these results, and an assessment of the key variables and factors that influence the state small wind policy adoption process will be presented. These issues will then be examined in greater detail in the cases of three small wind states (Oregon, Ohio, and Oklahoma) in the next chapter.

Before examining the results of the survey instrument this chapter begins with a review of the existing academic literature in the areas of small wind energy, policy tool frameworks, and theoretical models that have been developed to explain state environmental policy adoption. Building upon this discussion, the primary research questions addressed in this chapter are then presented, followed by an explanation of the methodology that was followed during the development of the survey instrument and the analysis of its results. The chapter concludes with an examination of these results and a discussion about the key findings uncovered throughout this analysis in order to lay the foundation for the case studies contained in the next chapter.

Literature Review

In recent years the United States has seen renewable energy emerge as a key component of contemporary political and social discourse. Acting in response to multiple concerns – including rising energy costs, global climate change, and the desire to reduce America’s dependence on foreign energy sources – numerous policymakers

14 have determined that promoting renewable energy is a worthwhile goal for their states and communities to pursue (Byrne et al., 2007). Although this view is not universally shared, policymakers have, to varying degrees, successfully translated this support for renewable energy into tangible policies and programs designed to stimulate alternative energy development in states throughout the country. Small wind energy represents only a minor segment of the growing renewable energy market; but, it too has experienced the benefits of this push in the form of greater public support at the state and national levels contributing to high rates of growth.

Prior research and experience has shown that government support and subsidization of renewable energy is essential in order for the industry to be capable of expanding its role within the domestic power market. In particular, renewable energy has struggled to increase its market share partially due to its historical lack of cost competitiveness with traditional fossil fuel generation sources (Menz and Vachon, 2006).

As a result, market forces alone have generally not been sufficient to significantly alter conventional power generation techniques based on fossil fuel consumption. It is generally accepted that the development of renewable energy markets is heavily influenced by the relative price of electricity produced from renewable sources compared to fossil fuel sources (Menz, 2005). Retail rates for electricity produced from alternative sources have typically been more expensive than rates for electricity produced from conventional sources, creating a cost imbalance that has favored fossil fuel based power generation. Similar to other renewable technologies, small wind energy has suffered from this lack of cost competitiveness due to the large upfront investment required to install a turbine in order to produce long-term savings on energy bills.

15 However, advocates for renewable energy argue that this comparison is not appropriate due to the external costs associated with fossil fuel generation that are not reflected in its market prices (Menz, 2005). For example, fossil fuel generation produces negative environmental externalities (e.g., emissions of greenhouse gases believed to be responsible for global climate change), detrimental health impacts (e.g., poor air quality), and threats to national security arising from America’s dependence on foreign energy sources. These externalities represent costs associated with conventional electricity generation that are not borne by consumers, resulting in artificially low fossil fuel energy prices. Wind energy also contains some negative externalities (e.g., impacts on avian wildlife and obstruction of views), but previous studies have concluded that power generated with fossil fuels produce higher external costs than electricity obtained from wind energy (Sundqvist and Soderholm, 2002). As a result, the failure of current energy markets to properly account for all of these external costs has effectively created incentives for utility companies and individual consumers to use fossil fuel energy sources as opposed to renewable energy sources such as small wind.

In response to these concerns, governments have increasingly begun to take various actions in order to level the playing field for renewable energy technologies and reduce their competitive disadvantage. State governments have been particularly active in regard to small wind energy, and states across the country have adopted a wide variety of policies and programs to help promote this technology. Common policy instruments being used in support of small wind energy are financial incentives, net metering, public benefit funds, Renewable Portfolio Standards (RPS), and various programs to educate the public about small wind. The remainder of this chapter will analyze these policy

16 instruments as they relate to small wind energy in much greater detail, but the following subsection will briefly examine the frequently cited benefits and motivations for using these tools in support of renewable energy. Following from this discussion, the literature review will continue with an exploration of theoretical frameworks that have been designed for the analysis of policy tools, before concluding with a look at two theoretical models that are frequently used to explain policy adoption at the state level.

Key State Policy Instruments Affecting Renewable Energy

A crucial element for determining the extent and effectiveness of a state’s support for small wind is the particular mixture of policy tools that the state has selected to use to promote small wind technologies. Policy tools (or instruments) are the mechanisms chosen by a state government to translate its policy goals (in this case greater adoption and installation of small wind energy technologies) into concrete actions that achieve the desired policy purposes (McDonnell and Elmore, 1987; Schneider and Ingram, 1990).

Governments use a wide variety of policy instruments to accomplish policy goals, with each policy tool offering a unique way to produce the desired end-result. The following general discussion explores some of the most commonly cited policy tools that are used in support of renewable energy, and an examination of how these instruments have been applied in the case of small wind energy will be included later in this chapter.

Financial incentives are designed to help stimulate private investment in renewable energy by helping these technologies overcome the financial barriers described

17 above in order to achieve greater price parity with conventional energy generation sources (Menz and Vachon, 2006). Examples of financial incentives include tax credits, grants, and low-interest loans. Whereas financial incentives involve the use of governmental funds, net metering refers to a policy that some states have implemented requiring utilities to compensate customers for the power they generate using distributed generation technologies such as small wind and solar (Byrne et al., 2007). Net metering policies vary widely between states and do not always include small wind systems, but in general the goal of these policies is to improve the financial feasibility and reliability of grid-connected distributed generation systems.

Many states that have elected to offer financial incentives for renewable energy finance these programs through a Public Benefit Fund. Public Benefit Funds consist of revenues that are raised through a surcharge on the bills of electricity customers and are sometimes referred to as an indirect tax (Vachon and Menz, 2006). Typically the money from these funds is then disbursed through various programs designed to support renewable energy development and energy efficiency. Renewable Portfolio Standards

(RPS) set a requirement for a specified percentage of a state’s electricity usage to come from qualified renewable sources by an established date (Vachon and Menz, 2006). RPS have been adopted by dozens of states across the country, and are designed to force utilities, industry, and the public to increasingly support and invest in renewable energy development within the state. Finally, many states have launched various efforts designed to educate the public about renewable energy and raise awareness about the opportunities surrounding these technologies.

Policy Tools Framework

Due to the multi-dimensional nature of policy instruments, scholars have highlighted the importance of classifying policy tools under a theoretical framework for the purpose of analysis. Previous research has produced a variety of policy frameworks, often building from Lowi’s (1964) influential classification of instruments into four main policy types (distributive, redistributive, regulatory, and constituent) based on the concentration of costs and benefits and the resulting pattern of participation. In contrast,

McDonnell and Elmore (1987) emphasize the behavioral characteristics of policy instruments and their expected effects in their grouping of policy tools into four generic classes. They define mandates as rules governing the actions of agencies or other target populations; inducements as tools that provide money to agencies or individuals in order to encourage certain desired activities; capacity-building as tools that provide money for investment in material, intellectual, or human resources; and system-changing tools as instruments that transfer authority among entities in order to alter the existing policy implementation and delivery system. Similarly, Schneider and Ingram (1990) developed a related framework of policy tool categories based on underlying behavioral assumptions about how the policy tools are designed to achieve a desired outcome. In particular, they elected to categorize policy instruments as: authority tools, incentive tools, capacity tools, symbolic and hortatory tools, and learning tools.

This study incorporates elements of the preceding theoretical frameworks to develop a classification system for use in the following analysis of state-level small wind

19 energy policies. In particular, McDonnell and Elmore’s framework serves as the primary foundation from which small wind policy instruments are classified for this research.

The framework used throughout this study designates four unique classes of policy instruments that are commonly utilized by state governments in support of small wind energy. Under this approach, small wind policy tools are labeled as mandates, inducements, capacity building tools, or system-changing incentive tools. This classification system and the method in which it is applied in this analysis will be examined in greater depth in the Methodology section of this chapter.

Policy Adoption Theoretical Background

Previous research has identified two primary theoretical models to explain policy adoption at the state level. In particular, the internal determinants model and the regional policy diffusion model each highlight numerous variables that have been found to contribute to state policy adoption in a wide variety of circumstances. This analysis will explore many of the central variables contained in these models in order to determine which factors influence the creation of state policies in support of small wind energy.

Variables contained in the traditional models will be adjusted as necessary in order to reflect some of the crucial state characteristics that prior studies have identified as being particularly important to the development and adoption of state environmental policies.

Prior research about the central tenets of each of these models is summarized and discussed in the following subsections.

20 Internal Determinants Model

According to the internal determinants model, policy adoption occurs as a function of various key state attributes. While the particular influential state characteristics may vary depending upon the type of policy being considered, previous studies have identified a wide battery of state factors that have been shown to impact environmental policy at the state level. This analysis will primarily focus on these conventional environmental policy variables, along with additional factors that have been singled out for their importance to energy or climate change policies.

For example, numerous studies have shown that the level of economic development and personal wealth in a state is an important factor that helps to determine the extent of the state’s support for pro-environment policies (Ringquist, 1993; Lester,

1995; Matisoff, 2008). In particular, prior research has indicated that wealthier states are more likely to adopt environmentally friendly policies. Similarly, researchers have also identified the political ideology of the state’s population as a significant variable behind state environmental support. For instance, Matisoff (2008) found that states with more politically liberal populations are more likely to adopt policies to combat climate change

(such as supporting renewable energy technologies).

Additionally, several researchers have found that the strength of interest groups in the state often impacts policy adoption (Bacot and Dawes, 1997; Potoski and Woods,

2002). In the case of small wind energy policy, the primary interest groups to consider are energy and environmental groups, as well as groups representing a state’s utility sector or energy resource industries (e.g., coal, oil, and natural gas). Furthermore, it is

21 also important to consider a state’s capacity to implement new policies and its ability to respond to any energy or climate change concerns that may exist. Scholars have noted two primary elements of capacity, and each has the potential to impact state adoption of small wind policies. First, the political capacity of a state is believed to be an important variable for environmental policy adoption. Political capacity is often measured through legislative professionalism, and previous studies suggest that “professional” legislatures tend to be more likely to support policies to protect the environment than unprofessional legislatures (Ringquist, 1993; Lester, 1995). Second, bureaucratic capacity refers to the ability of the state government to mobilize and implement a particular policy program.

This variable can be assessed using budgetary figures or the number of employees in a state’s energy office or environmental protection agency, and it is generally believed that greater bureaucratic capacity levels are beneficial for the adoption and implementation of environmental policies (Lester, 1995; Bacot and Dawes, 1997).

Several internal state characteristics unique to environmental policy adoption have been identified as well, including a state’s historic commitment to environmental protection and environmental policy innovations (Lester, 1995). For example, using

Lester’s classification of this variable, Koontz (2002) found that state commitment to environmental protection was significant in explaining which state agencies have adopted ecosystem management approaches to managing public forests. In addition, numerous scholars have identified the severity of the pollution problem in a state as an important variable influencing environmental policy adoption. According to this theory, states with more severe pollution problems have been shown to adopt more environmentally friendly pollution policies (Lester, 1995; Bacot and Dawes, 1997; Potoski and Woods, 2002).

22 Furthermore, the unique nature of electricity and renewable energy technologies such as wind energy requires researchers to consider a few additional variables when analyzing policies associated with these technologies. In particular, previous studies have indicated that the price paid for electricity within a state is likely to influence the level of state support for alternative energy resources (Byrne et al., 2007). For example, states with higher electricity prices may be more inclined to support renewable energy in the hope that this will eventually lower retail electricity prices for citizens. Many policymakers also view renewable energy as a tool for economic growth, and the impact of this potential may play a role in a state’s energy policy decisions. Evidence suggests that a state’s perception of renewable energy’s contribution to job creation and economic development may influence its level of support for policies and programs designed to promote these technologies (Byrne et al., 2007).

Finally, the physical characteristics of the wind resource itself may impact wind energy policy adoption at the state level. Unlike several other energy resources, wind is highly variable geographically and cannot be transported (like coal or natural gas) to areas that do not naturally possess a good wind resource (Menz and Vachon, 2006). As a result, it is expected that the quality of the wind resource within a state will likely impact small wind policy regimes, with greater state support being associated with stronger wind resources.

23 Regional Policy Diffusion Model

In contrast, the regional policy diffusion model asserts that policy innovation and adoption occurs largely as a result of a state’s relationship with its neighboring states.

According to this model, states look towards their geographic and regional neighbors for policy ideas, and then apply the lessons learned from the experiences of other states to their own internal policy designs as part of the effort to develop successful legislative programs (Matisoff, 2008). Prior research in the fields of education and law, among other policy arenas, has shown that policies often spread between states that share borders or among states from a particular region (Ingle et al., 2007; Canon and Baum, 1981), however less is known about whether these patterns hold for the small wind policy arena.

In particular, this theoretical model suggests that states share and borrow policy ideas more with neighboring states than with states located farther away (Matisoff, 2008).

Regional policy diffusion scholars have identified two primary variables that are believed to facilitate this diffusion process, and both variables will be examined in this study of small wind energy. First, numerous researchers have highlighted interstate competition as one of the primary policy diffusion mechanisms (Sabatier, 1988; Ingle et al., 2007). In the case of small wind energy, competition might occur over jobs related to the wind industry (e.g., manufacturing, installation, and maintenance positions) and over the public perception of a state as an energy or environmental leader.

The second key variable contained in the regional policy diffusion literature focuses on the participation of state officials in regional policy networks or communities

(Walker, 1981; Sabatier, 1988). These networks can be formal or informal, and it is

24 hypothesized that they give policymakers the opportunity to share new policy ideas with their colleagues in neighboring states in order to help facilitate the spread of innovative policy options. For example, Ingle et al. (2007) found that policy networks such as professional associations played a central role in the diffusion of higher education merit aid programs in the Southeast. A large number of regional and national networks related to energy policy exist across the country, and it appears plausible that these may play a role in state energy policy adoption as well. The remainder of this analysis will investigate this possibility further for small wind energy policy regimes.

Research Questions

Due to the lack of prior research on small wind energy it is uncertain which variables account for the development and adoption of state small wind policies, or even if these two primary policy adoption models adequately explain the variance in state support for small wind energy. In order to address this concern and the general lack of knowledge about small wind energy, two fundamental research questions guide this portion of the study:

RQ 1) What is the current status of state small wind energy policies in the United States?

RQ 2) Which variables explain the development of state small wind policies, and how well do the internal determinants model and the regional policy diffusion model explain the variance in small wind energy policies across states?

25 The following section outlines the approach taken to evaluate these questions and explains the process by which data about state small wind policies was collected and analyzed for this study.

Methodology

Analyzing the fundamental research questions outlined in the previous section required access to data about current small wind policies and programs. As one of the first studies to investigate small wind energy policies in depth, this project was not able to rely on existing data for its analysis. Instead it was determined that a full accounting of the status of state small wind policies and the forces behind these policy regimes could best be achieved by directly contacting state officials involved with renewable energy policies in order to collect the required data and information. In particular, primary data collection for this phase of the research project was achieved through an original survey instrument that was created using the fifty American states as the units of analysis.

Specifically, an online questionnaire was created and distributed to key state energy officials in order to collect data about the unique small wind policy environment in each state. The survey instrument was designed to serve two primary purposes. First, the questionnaire collected general information about the current status of small wind energy policies that could be analyzed to assess the policy environment surrounding this technology. Second, the questionnaire also collected more detailed information related to the development of these policies and the factors that influenced their creation. Analysis

26 of the survey data was then performed using a variety of statistical and computational techniques in order to determine key findings and results.

This section continues with a discussion about the development and distribution process for the online questionnaire, before expanding upon the creation of the policy tools framework that was previously mentioned in the literature review section of this chapter. Following this discussion, the section concludes with a detailed look at the process by which policy adoption variables were evaluated and survey data was analyzed in order to answer the research questions being addressed in this phase of the research project.

Questionnaire development and distribution

The survey instrument distributed to state energy officials consisted of 26 questions and was administered using the website SurveyMonkey.com (see Appendix A).

The questionnaire was constructed based on the recommendations and findings of

Dillman (2000) and other survey research scholars, and the development of individual items was guided by the information needs associated with the policy adoption variables described in the literature review. After the researchers constructed an initial array of potential survey items, an energy official from the State of Ohio and two Ohio State

University faculty members experienced in environmental policy reviewed the questions and the survey design. The questionnaire content and design was revised based upon the suggestions of these experts and then prepared for final distribution to the state energy officials.

27 Survey respondents were selected based upon their knowledge of their state’s wind energy policies and incentives. In particular, this study sought to identify the top small wind expert in each state’s energy office and then request this person’s participation in the survey. Two primary methods were used in order to identify these expert officials. First, many state energy office websites identify their contact person for small wind energy, and in these cases this person was contacted directly and asked to participate in the study. For states that did not display this information online, the researcher called the state’s energy office and asked to speak with the official who was most familiar with the state’s small wind energy policies in order to request that person’s participation in this research.

Policy tools framework development

Using the central elements of the policy frameworks (particularly McDonnell and

Elmore’s classification) described in this chapter’s literature review as a foundation, this study divides small wind policy instruments into four primary classes: mandates, inducements, capacity building tools, and system changing incentive tools.

State governments currently use eleven primary policy tools to support small wind, and the following discussion examines how these instruments are categorized according to the four classes of the policy tool framework outlined above. The eleven individual policy tool options are believed to constitute all of the major elements of the small wind policy tool universe, and they were identified using Bird et al. (2005), AWEA

(2008), and the Database of State Incentives for Renewables & Efficiency (2009) online

28 resource. A description of the four types of policy instruments and the classification of each of the eleven primary policy tools is contained below and summarized in Table 1.1

Mandates refer to policies that require a particular action from a targeted entity.

This type of policy tool is not commonly used to promote small wind energy, and the only widely adopted policy tool example is a Renewable Portfolio Standard (RPS). A

RPS generally establishes a requirement that a state must generate a specified percentage of its electricity from renewable sources by a certain date. Small wind energy can be categorized as a permissible renewable source, and thus is one option that policymakers and utilities can consider when trying to figure out the best way to fulfill their state’s RPS requirements. As a result, it is reasonable to expect that establishing a RPS will have the effect of encouraging greater support for small wind energy within the states that have adopted these mandates. However, it is important to note that a RPS generally does not require a state to use small wind energy, but rather just includes this technology amidst a bundle of acceptable renewable energy technologies from which policymakers can select to support. Further, a RPS does not represent a mandate on individual behavior, but rather mandates that a state and the utilities operating within the state must meet certain requirements. There is no guarantee that adopting a RPS will lead to greater small wind usage in a state, but in most cases implementing a RPS will increase the potential benefits

1 It is important to note that a Public Benefit Fund (also referred to as a System Benefits Fund) is a policy tool that bundles together multiple policy tool types and therefore it is not classified as belonging to one of the four groups. In particular, Public Benefit Funds include a mandate that requires electricity consumers to contribute a small percentage of every bill payment to this fund. Subsequently, states generally use the money in these funds to pay for renewable energy financial incentives (inducements) or capacity building programs. 29 for state governments and utility companies associated with promoting small wind energy.

Inducements are tools that encourage consumers to adopt and install small wind energy technologies by providing a variety of financial incentives designed to reduce the costs associated with acquiring these systems. Examples of these policy tools include tax exemptions or deductions, tax credits, grants, consumer subsidies or rebates, and loans with zero, below market, or low fixed-interest rates.

Capacity building tools include policies or programs that provide money for investment in material, intellectual, or human resources that are expected to increase the eventual adoption of small wind energy technologies. For small wind energy, capacity building tools consist of policies promoting knowledge transfer or public outreach, policies promoting research in renewable energy technologies, and programs to loan wind measurement equipment to interested consumers.

The final set of policy tools are system changing incentive tools, which redistribute authority over the energy generation and selling process and provide financial incentives to consumers to sell excess electricity generated by small wind turbines back to the power grid. Net metering represents the only example of this type of policy tool, and by providing compensation for small-scale electricity generation this policy instrument forces utilities to become energy buyers while allowing private consumers to assume the role of an energy seller.

Type of Policy Tool Policy Instruments Categorized Within Each Policy Tool Type

1) Tax Credits 2) Grants (designed to lower upfront capital and installation costs) Inducements 3) Tax exemptions, deductions, abatements, or reductions 4) Loans with zero, below market, or low fixed-interest rate 5) Consumer subsidies or rebates

System Changing Incentive Tools 1) Net Metering

1) Policies promoting knowledge transfer or public outreach Capacity Building Tools 2) Policies promoting research in renewable energy technologies 3) Program to loan wind measurement equipment to interested consumers

Mandates 1) Renewable Portfolio Standard

Table 1 – Policy Tools Framework

Data Analysis

The primary dependent variable used in this analysis is the selection of policy instruments employed by each state to support the adoption and installation of small wind technologies. This variable is measured in two ways, with the first simply being the total number of small wind policies (maximum eleven) in a particular state. This information was obtained through the survey instrument in a question that asked respondents to

31 confirm which small wind policies are currently used by their state government. The second measure of the small wind policy dependent variable is the number of policy tool types (up to a maximum of four based on the framework described previously) currently being used by a state government in support of small wind energy. This information was also acquired through the questionnaire when respondents were asked to identify which of the eleven policy tools are being used by their state to promote small wind energy.

Data and information about the independent variables were obtained through various sources, including the online survey instrument. Descriptions of the data used to evaluate each of the independent variables addressed in this analysis are included below:

Citizen ideology – This key variable was evaluated using the influential citizen ideology measure developed by Berry et al. (1998) with the updated data set they released in 2007. The measure constructed by Berry et al. calculates an annual score for the ideology of each state’s citizenry, ranging from zero (most conservative) to 100 (most liberal). In order to account for election year politics or other anomalies, this study uses the average of a state’s citizen ideology score from the ten most recent years of data

(1997-2006) in its analysis.

Legislative professionalism – The impact of this variable on small wind policies was measured using the legislative professionalism index developed by Peverill Squire in

1992 and recently updated (Squire, 2007). This measure rates state legislative professionalism on a scale of zero (least professional) to one (most professional), and for the purpose of this study the most recent scores (based on 2003 data) were used in the analysis.

32 Commitment to environmental protection – Two separate measures were used to assess the importance of this variable, beginning with the Green Index ranking system created by Hall and Kerr (1991) and presented by James Lester in 1995. Although this ranking system is comprehensive, it is not clear whether the results it presents remain accurate in 2009. In order to ensure that this variable is accurately measured, this study will also consider the League of Conservation Voters (LCV) National Environmental

Scorecard (2008) rankings of each state’s Congressional delegation’s voting record on important environmental legislation. In theory, representatives will reflect the policy preferences of their constituents, and combining LCV’s rankings with the Green Index ranking system will allow a comprehensive measure of each state’s commitment to environmental protection to be included in this analysis.

General environmental policy innovativeness – Evaluation of this variable followed the technique outlined by Lester (1995) using the Green Policy Initiatives ranking system developed by Hall and Kerr (1991). This system looked at the status of fifty state environmental policies that were considered to be innovative in regard to policy formulation at the time of publication in 1991. In particular, Hall and Kerr (1991) considered policies in the areas of hazardous waste, congressional environmental leadership, air quality, water pollution, energy use, community health, and wildlife in their analysis.

Economic wealth and development – This variable was assessed using per-capita real GDP data about the states obtained from the Bureau of Economic Analysis (2008).

Pollution severity – Two separate measures were used to evaluate this variable.

In particular, data about state emissions of criteria air pollutants were obtained from the

33 online resource Scorecard.org (2009), and information about each state’s carbon dioxide emissions intensity was acquired from a Congressional Research Service report containing data from 2003 (Ramseur, 2007).

Environmental and renewable energy interest group impact – The involvement of these interest groups in the development of a state’s small wind program was measured using a question on the survey instrument that asked respondents to identify if these groups had advocated in support of small wind energy. The second phase of this research project discussed in the following chapter explores this variable in further depth by analyzing the perceived importance and strength of these groups and their impact on policy outcomes in the case study examples.

Relative strength of conventional energy resource industries – The strength of the energy resource industries was evaluated using two primary measures. First, the total fossil fuel based energy production of each state was assessed by combining the total annual coal, crude oil, and natural gas production within each state, measured in British thermal units (Btu). This figure was obtained from the Energy Information

Administration and was based on data from 2006 (EIA, 2008b). While this measure depicts the relative strength of these industries between different states, it may not completely reflect the role and importance of these industries within a particular state due to differences in state population size and geographic area. In order to account for this possibility and ensure that this variable is analyzed appropriately, a second measure is also used that focuses on the number of jobs associated with these industries in each state.

In particular, 2008 employment data from the Bureau of Labor Statistics (2009) was examined to determine the number of jobs (per 1000) in each state in the “Natural

34 resources and mining” industries as a measure of the importance of these industries to a state’s economy.2

Interstate competition – The importance of this variable was measured using multiple items on the questionnaire. First, respondents were asked to rate the importance of “competition with neighboring states for jobs associated with wind energy” for generating support for small wind energy among policymakers in their state. Second, respondents were asked to rank their level of agreement with a statement about their state’s desire to be perceived by the public as a stronger environmental supporter compared to other states.

Participation in energy policy networks – This variable was also evaluated using data from the questionnaire. In particular, respondents were asked to identify if they participate in any formal or informal energy policy networks and to state the frequency of their discussions about small wind energy policies within these networks over the past year.

Perception of small wind’s economic development potential – This variable will be examined in the next chapter containing small wind policy case studies.

Price of electricity – Data about average retail electricity prices in the states

(current as of January 2009) were obtained from the Energy Information Administration

(2009).

2 The category “Natural resources and mining” includes all coal, natural gas, and crude oil jobs, but it is important to note that the figure also includes jobs related to logging within its numbers. As a result, this measure is not a perfect representation of the strength of energy resource industries, but it is a very close approximation that can also be used to evaluate the impact of this variable. 35 Quality of the wind resource – The impact of the quality of each state’s wind resource was evaluated using the estimates of state wind energy potential produced by the

Pacific Northwest Laboratory (Elliott et al., 1991).

The significance of all of these variables in determining state-level small wind policies was assessed through a variety of statistical, computational, and qualitative techniques. In particular, a preliminary analysis of the questionnaire response data was conducted using basic calculations to search for patterns and relationships between the policy adoption variables and the small wind policy regimes established in the states.

Following this initial analysis, Pearson’s Product-Moment Correlation Analysis was used

(when appropriate) to assess the statistical significance of these observed relationships.

The results of these efforts are presented in the following section.

Results

General Small Wind Findings

State small wind policies serve as the dependent variable in this study and were collected and evaluated based upon the online questionnaire responses provided by the top small wind energy officials in each state. Officials from 44 states (out of 50 total) completed the survey, producing a response rate of 88 percent. According to these small wind energy officials, 37 of the 44 states (84 percent) have at least one policy or incentive in place to support small wind energy. For the remainder of this analysis, states that have policies or incentives to support small wind energy will be referred to as “small

36 wind states.” Figure 1 illustrates the geographic distribution of states with policies to support small wind. States shaded blue have at least one small wind policy or incentive, while states shaded red do not have any of these policies and states colored white are those states that did not complete the survey instrument.

Figure 1 – Small Wind Policy Map3

The survey instrument also collected additional data about state small wind programs that helps to provide context about the current small wind policy environment in states throughout the country. Important elements of this information are provided here in order to expand the general understanding and knowledge about state small wind

3 This map was created using the website: http://monarch.tamu.edu/~maps2/us.htm#top and developed from data contained in this study’s survey responses. 37 energy policies. For example, the 37 small wind states have implemented an average of

4.88 different policy tools apiece (out of the eleven different tools mentioned in the literature review). This figure suggests that many states are using a variety of approaches to try to expand small wind energy adoption rather than simply relying on one policy instrument. Net metering is the most commonly used policy tool to support small wind energy cited by respondents, and Table 2 displays the frequency of usage of each of the policy tools within the small wind states.

Policy Tool (and policy tool type) Percentage of states supporting small wind energy that use the policy tool

Net Metering (System Changing Incentive) 82%

Policies promoting knowledge transfer or 68% public outreach (Capacity Building)

Renewable Portfolio Standard (Mandate) 47%

Tax Credits (Inducement) 47%

Policies promoting research in renewable 47% energy technologies (Capacity Building)

Program to loan wind measurement 38% equipment to interested consumers (Capacity Building)

Grants (designed to lower upfront capital and 38% installation costs) (Inducement)

Tax exemptions, deductions, abatements, or 38% reductions (Inducement)

Loans with zero, below market, or low fixed- 29% interest rates (Inducement)

Public Benefit Funds (Hybrid) 29%

Consumer subsidies or rebates (Inducement) 24%

Source: Survey responses.

Table 2 – Policy Tool Usage in Small Wind States

39 As described previously, for the purpose of analysis this study will utilize a policy tool framework that separates these instruments into four groups – mandates, inducements, capacity building tools, and system changing incentive tools. Table 3 displays the percentage of small wind states using at least one policy instrument from each of the four classifications.

Policy Tool Percentage of small wind states using at least one instrument from the policy tool group

Inducements 85%

System Changing Incentive Tools 82% Capacity Building Tools 82% Mandates 47%

Source: Survey responses.

Table 3 - State Usage of Tools From the Policy Instrument Groupings

In order to measure the complexity of each state’s approach to supporting small wind energy, the small wind states are evaluated based upon how many of the four types of policy tools they use. Grouping states in this manner reveals that 35 percent of the states use policy tools from all four types, 29 percent use policy tools from three of the types, 32 percent of the states use policy instruments from two of the types, and 3 percent of the states were found to be using policy tools from only of the four groupings. For the remainder of this analysis, states using policy tools from three or four of the groups will be referred to as having “complex small wind policies,” and states using policy tools

40 from only one or two of the groups will be referred to as having “straightforward small wind policies.” This characterization is not meant to suggest that having a greater number of small wind policies is inherently better than having fewer policies (for example, one well-targeted policy could potentially be more effective than three poorly run programs). Nevertheless, while not judging the effectiveness of a state’s small wind policy system by the number of policies or policy tool types that have been adopted, this measure is used to gauge, albeit imperfectly, a state’s level of support and commitment to small wind energy. Additionally, as discussed earlier a Public Benefit Fund is a hybrid policy tool that is not included in the four policy tool types. However, it is interesting to note that all of the states that use a Public Benefit Fund to support small wind energy are states that fall into the complex small wind policies category.

Survey respondents were also asked to rate the perceived effectiveness of each of the policy tools used in their state to support small wind energy. Compiling the results of these responses reveals that system changing incentive tools (net metering) were rated as the type of policy tool that has had the greatest success encouraging businesses and consumers to adopt and install small wind technologies. Inducements were rated second in terms of their ability to encourage greater adoption of small wind technologies.

Mandates and capacity building tools were both viewed as having some success in promoting greater usage of small wind technologies, albeit to a lesser degree than inducements and net metering.

It is important to recognize that one common element shared between inducements and net metering is that both types of policy tools involve some sort of direct financial benefit to consumers that install small wind energy. These results suggest

41 that financial incentives in the form of grants, subsidies, or tax benefits have been more successful at expanding small wind energy technologies than capacity building programs alone. Furthermore, it appears that giving private consumers the ability to produce and sell energy back to the grid is an essential element of successful small wind programs. In addition to the financial benefits associated with net metering, this policy tool alters the conventional power structure by allowing private consumers to become energy producers that are capable of generating electricity to sell back to the grid (albeit on a small scale).

Policy adoption explanatory variables

According to the existing literature about environmental policy adoption, it is expected that state adoption of policies to support small wind energy would be influenced by the series of variables and factors discussed in the literature review. In order to analyze the impact of independent variables on the development of state small wind policies, this study utilizes various statistical, computational, and qualitative techniques to analyze the survey data as well as information gathered through other outside sources.

When appropriate, Pearson’s Product-Moment Correlation Analysis was used to determine which independent variables were statistically correlated with measures of state small wind policies. Two different measures of this dependent variable (state small wind policies) were included in the statistical analyses for each independent variable.

First, the independent variables were analyzed against the total number of policy tools used by each state to determine if there was a correlation, followed by a similar analysis with the number of policy tool types currently being used by each state. The results of

42 these statistical analyses are presented in Table 4 on the next page, arranged with the most closely correlated variables at the top and those with the weakest relationships on the bottom.4

4 The complete correlation matrix, including all of the independent variables, is presented in Appendix B. 43 Independent Dependent Variable Measures Variables Number of Policy Tool Number of Policy Toolsb Typesa Correlation Significance Correlation Significance Coefficient Coefficient

Commitment to Environmental 0.608 0.000 0.581 0.000 Protection (Green Index) * Commitment to Environmental 0.503 0.01 0.550 0.000 Protection (LCV Scorecard) *

Environmental Policy 0.490 0.001 0.532 0.000 Innovativeness *

Citizen Ideology * 0.448 0.003 0.503 0.001

Wealth ** 0.391 0.012 0.353 0.024

Price of Electricity *** 0.326 0.038 0.252 0.111

Legislative 0.314 0.046 0.351 0.024 Professionalism **

Table 4 - Pearson Product-Moment Correlation Analysis Results

* Correlation is significant at the 0.01 level ** Correlation is significant at the 0.05 level *** Correlation is significant at the 0.05 level for only one of the dependent variable measures a Between 0 and 4 b Between 0 and 11

Note: The results of several variables were omitted from the table because the variables were not found to be correlated with either of the state small wind policy measures at the 0.05 level of statistical significance. These variables include: coal production, crude oil production, 44 natural gas production, total fossil fuel production, number of energy resource jobs, air pollution, carbon dioxide emissions intensity, quality of the wind resource, and the frequency of discussions about small wind energy in outside networks or associations as cited by the survey respondents.

Table 4 illustrates that several of the key variables identified in the literature as being significant factors in determining state environmental policy appear to also be relevant in the case of state small wind policies. As would be expected, the results show that a state’s general commitment to environmental protection, its historic support for innovative environmental policies, and the political ideology of its citizenry all seem to be at least moderately correlated with the state’s small wind policy regime. In particular, these results suggest that greater levels of environmental commitment and innovativeness, as well as having a more liberal citizenry seem to coincide with both a greater number of small wind policies and a greater diversity of small wind policy types.

This relationship is also evident in the mean citizen ideology rankings for the different types of small wind states. For example, complex small wind states had an average citizen ideology ranking of 53.69 (on a scale of 0-100, with 0 being conservative and 100 being liberal), whereas straightforward small wind states had an average ranking of 41.95 and states with no small wind policies had an average score of 40.03.

Furthermore, respondents from states with complex small wind policies were more likely to view their state government as a “leader in the energy policy realm” compared to respondents from states with straightforward small wind policies or those with no small wind policies. The survey instrument also asked respondents to rate their agreement with the statement “the government in my state is a leader in the energy policy realm” on a scale of 1 (Strongly Disagree) to 5 (Strongly Agree). The average response

45 of officials from complex small wind states equated to agreement with this statement

(mean = 3.91), while respondents from states with straightforward small wind policies expressed neutrality (mean = 3.0), and officials from states with no small wind policies tended to disagree with this sentiment (mean = 2). These results provide further evidence that states that are perceived to take the lead on energy issues in general have also assumed leadership roles on small wind energy and are more likely to have developed complex small wind policy regimes.

Table 4 also reveals that a state’s relative wealth, the professionalism of its legislature, and the price its residents pay for electricity all appear to be weakly correlated with the state’s expressed level of policy support for small wind. For instance, similar to the citizen ideology variable, additional analysis of the survey data and these results suggest that there may be a connection between a small wind state’s level of economic wealth and the complexity of its small wind policy program. In particular, states with more complex small wind policy systems were found to have an average per-capita real

GDP of $38,334, which stands in contrast to states with straightforward small wind policies that show a considerably lower average per-capita real GDP of $33,999. The average per-capita real GDP in states with no small wind policies is lower still, bottoming out at $33,563.

Complimenting the correlation analysis were additional results from the survey instrument that were analyzed using more straightforward quantitative techniques. For example, survey respondents were asked to rank the importance of ten key factors in developing support for small wind energy among policymakers in their state. Table 5 presents the mean rating of each factor obtained from the questionnaire responses. These

46 results provide further evidence that state environmental standing as well as the price of electricity are key components influencing state policymakers’ level of support for small wind energy, and suggest that the potential for small wind policies to create jobs is also important to consider. Further discussion about the significance of the results in Table 5 is included in the following section.

Mean Rating of Importance in Generating Determining Factor Support for Small Wind Among Policymakers

Desire for state to be viewed as an 2.01 environmental leader Price of electricity 2.01

Job creation 1.94

Concern about climate change 1.66 Desire to empower citizens to be in control of 1.63 their energy supply Interstate job competition 1.44 Concerns about pollution levels 1.39 Natural gas prices 1.25 Lack of federal incentives 1.09 Price of gasoline 0.87

Table 5. Influential Factors Related to Policymakers’ Support for Small Wind

Source: Survey results, Question 15 – “In your opinion, how important are/were the following factors in generating support for small wind energy technologies among policymakers in your state?” Note – The importance of each factor is measured based on the following scale: 3 = Very Important; 2 = Moderately Important; 1 = A Little Important; 0 = Not Important

47 In contrast to the variables discussed previously in this section, the correlation analysis also found that several of the expected influential factors do not appear to be correlated with the presence or complexity of state small wind policies. These factors include the strength of a state’s conventional energy resource industries; a state’s air pollution levels and carbon dioxide emissions intensity; the quality of the wind resource in a state; and the participation of state energy officials in discussions about small wind policies at energy conferences or meetings. While these results suggest that these factors are not significant influences on the level of state support for small wind energy across the nation, it is reasonable to expect that there may be specific instances where some of these factors still play an important role.

Although the results of this analysis are significant, it is important to note that they do not directly suggest anything about the level of impact that these various factors have on state small wind policies. While the correlation analysis reveals which characteristics and factors appear to be associated with positive state support for small wind energy, it cannot make claims of any causal relationships. The second phase of this research project focuses on three case studies of small wind states that were conducted in order to investigate how these significant variables impact the small wind policymaking process, and the results of these studies are presented in the next chapter.

The following section will examine in greater detail what the results of the analysis in this chapter suggest about each of the independent variables, as well as discuss the significance of these findings and what they reveal about state energy policymaking as it relates to small wind energy.

48 Discussion

The results presented in Table 4 and Table 5 suggest that the picture painted by scholars regarding general environmental policy adoption may only partially apply in regard to small wind energy. While many of the key variables believed to influence state environmental policy adoption appear to influence the development of state small wind policies as well, other conventional environmental policy adoption factors do not seem to play an important role in the case of small wind. The statistical analysis discussed previously provides valuable insights into which variables are correlated with state support for small wind, but further evaluation of their role in the policy development process requires examining the unique contextual factors and influences that exist within states. Some aspects of this task can be addressed using the survey instrument data and are considered below, whereas other elements are best covered through the in-depth case studies contained in the next chapter of this study. For the purpose of analysis the remainder of the discussion in this chapter separates the key policy adoption variables according to the theoretical models established by previous researchers.

Summary of Findings Related to the Key Variables in the Internal Determinants Model

Commitment to Environmental Protection and Policy Innovations

Established theory holds that states that have historically expressed commitment to environmental protection and environmental policy innovations are more likely to

49 adopt additional policies beneficial to the environment (Lester, 1995; Koontz, 2002).

Small wind represents an environmentally friendly method of energy production that does not produce greenhouse gas emissions, and as a result it is expected that states committed to environmental protection are more likely to adopt expansive policies in support of small wind. The results from the survey strongly support this belief, and conducting Pearson’s Product-Moment Correlation Analyses found these variables to be most closely correlated with state small wind policies out of all of the factors being studied.

Citizen Ideology

Theory suggests that states with more liberal populations are more likely to support environmental policies such as those used to promote small wind, and analyzing the results of the survey appears to affirm the validity of this claim (Matisoff, 2008). The correlation analysis revealed that citizen liberalism is moderately correlated with both measures of state small wind policies. Furthermore, examining the survey data with the citizen ideology ranking produced by Berry et al. (1998) confirmed that complex small wind policies have been produced by states with more liberal populations than the states with straightforward policies or those with no small wind policies.

50 Economic wealth and development

Previous research has shown that states with greater levels of wealth and economic development are more likely to adopt environmentally friendly policies

(Ringquist, 1993; Lester, 1995; Matisoff, 2008). The results of the correlation analysis presented in the prior section somewhat supported this connection in the case of small wind policies, revealing a weak-moderate correlation between a state’s level of personal wealth and the development of its small wind policy system. Further analysis of the survey data suggests a possible correlation between a state’s level of wealth and the complexity of its small wind program. In particular, wealthier states that elect to support small wind appear to be more likely to develop a complex system of policies than small wind states with fewer economic resources.

Price of electricity

Another variable that was investigated in order to determine its impact on state small wind policies was the price that consumers pay for electricity in each state. Since small wind turbines offset the need to purchase energy from the public power grid, it was expected that higher energy prices in a state would likely lead to more policies in support of small wind as a means to help consumers reduce their power bills. Upon analyzing the data, the results suggest that the price of electricity is likely an important variable impacting the support for small wind energy among policymakers. Although the correlation analysis revealed only a weak correlation between a state’s energy prices and

51 its small wind policy arrangement, respondents from small wind states rated the price of electricity as “Moderately Important” in generating policymaker support for small wind energy (see Table 5). This result suggests that policymakers view electricity prices as a noteworthy component in their deliberations about energy policy, even if it does not end up being the determining factor for which policies are adopted.

Legislative professionalism

Existing theory suggests that states with more “professional” legislatures tend to be more supportive of policies to protect the environment than states with less professional legislatures (Ringquist, 1993; Lester, 1995). Assuming that this theory holds true in the case of small wind it is expected that support for small wind policies and programs will increase as states’ legislative professionalism scores increase. The statistical analysis confirmed this general relationship to some degree, although the correlation between the two variables appears to be relatively weak and it is not exactly clear from this data how important legislature professionalism is to the development of state small wind policies.

Pollution Severity

A key factor identified in many previous studies of state environmental policy drivers is the severity of the pollution problem in a state. According to this theory, states with more severe pollution problems will be more likely to adopt policies designed to

52 protect the environment and address pollution concerns (Lester, 1995; Bacot and Dawes,

1997; Potoski and Woods, 2002). Since generating clean energy through small wind systems has the potential to address both local air pollution and climate change issues, the pollution severity variable was evaluated using two measures – state emissions of Clean

Air Act criteria air pollutants and state carbon dioxide emissions intensity rankings. Both measures were included in the Pearson’s correlation analysis, but the results revealed that neither measure shows a statistically significant correlation between pollution severity and the measures of state small wind policies. Interpreting these results suggests that the variability in small wind policies is not connected to the severity of air pollution or climate change emissions in a state.

However, this lack of a statistical correlation between observed pollution or emissions levels and small wind policies does not necessarily mean that these environmental problems go unnoticed by the policymakers responsible for determining a state’s support for small wind. For instance, on average, survey respondents rated concerns about climate change and harmful pollution levels as being between “A Little” and “Moderately” important motivations for generating support for small wind energy among policymakers (see Table 5). These results suggest that policymakers recognize the potential for small wind energy to help ameliorate environmental problems such as pollution and climate change, but that this benefit of small wind energy is not the primary factor motivating most policymakers to support this technology.

53 Environmental and energy interest group impact

The questionnaire results do not provide conclusive evidence to determine if environmental or energy interest groups are successful at influencing small wind energy policies and incentives. This topic will be investigated further in the next chapter focused on state small wind case studies. However, it is interesting to note that approximately 92 percent of respondents from small wind energy states identified energy or environmental groups as having advocated for small wind in their state. This finding does not reflect anything about the strength of these groups or the impact of their advocacy, but it does reveal that small wind states appear to contain interest groups that are actively pursuing the government’s support for small wind energy.

Strength of conventional energy resource industries

States with strong conventional energy resource industries (e.g. coal, natural gas, and crude oil) are expected to be less supportive of policies that could potentially be perceived as threatening these industries that are important to the state’s economy. Small wind energy reduces the need for electricity to be produced from traditional fossil fuel sources, and as a result it would be conceivable for states with strong conventional energy resource industries to be less supportive of small wind energy in their policies.

However, the correlation analysis revealed no statistically significant relationship between a state’s total fossil fuel based energy production and its establishment of small wind policies and programs. Similarly, no statistically significant correlation was found

54 between the number of conventional energy industry jobs in a state and the extent of the state’s policy support for small wind. Although these results appear to minimize the role of this variable in the development of state small wind policies, it must also be noted that they do not rule out the potential for this variable to play an important role in some states.

In particular, the discussion in the next chapter about the case study examination of

Oklahoma’s small wind policies will elaborate on the impact that these traditional industries continue to have on energy policy development in that state.

Quality of the wind resource

When examining something highly variable such as wind, one concern is that variations in wind policies may be a result of the unequal distribution of wind resources across the country rather than due to any of the other theoretical variables discussed in this analysis. However, the results of this study suggest that the general quality of the wind resource in a state does not commonly have a significant impact on a government’s decision to adopt policies in support of small wind. In particular, the quality of the wind resource was shown to not be correlated with state small wind policies according to the

Pearson coefficients. This result suggests two probable conclusions that are important to consider in this analysis. First, possessing a strong wind resource does not automatically equate to policymakers supporting small wind energy in a state, nor does the lack of an excellent wind resource inherently translate into minimal support for small wind energy.

Second, the lack of support for small wind energy policies in some states cannot be

55 blamed on the quality of the wind resource alone, and instead likely results from a combination of the other factors examined in this study.

Summary of Findings Related to the Key Variables in the Regional Policy Diffusion Model

Interstate competition

The questionnaire results suggest that while job creation is somewhat of an important motivation driving policymakers to support small wind energy, the perception of competing with other states for these jobs is not viewed as being particularly significant. For example, respondents from small wind states rated the potential for wind energy to create jobs as being slightly less than “Moderately Important” in generating support for small wind energy among policymakers (see Table 5). This variable received the third highest score out of the list of ten common factors that are believed to impact policymaker support. In contrast, interstate job competition received the sixth highest rating based on its ability to impact policymaker support for small wind, and was scored one-half of a point lower than job creation on the three point scale measuring motivating factors.

Conversely, the results also indicate that policymakers are influenced to some degree by competition with other states over the public’s perception of environmental leadership. While public perception may not be as tangible as job creation, policymakers appear to feel strongly that it is important for their state to be viewed as a leader in the energy and environmental policy realms. In fact, survey respondents identified this

56 desire to be an environmental leader as being tied for the highest ranked factor perceived to be motivating policymakers to support small wind energy (see Table 5). This finding does not mean that the desire to be a leader in the energy or environmental realm is the driving force behind every state’s small wind policies, but it does suggest that, on average, this desire is at least a “Moderately Important” factor influencing the support for small wind among policymakers. Based on these results, it appears that policymakers in these states may believe that supporting small wind energy is one approach they can take to help secure this desired positive public perception.

Participation in energy policy networks

Previous studies of the regional policy diffusion model have emphasized the importance of state officials participating in regional policy networks or associations in which they can share policy ideas with outside colleagues and learn about policies from neighboring states (Walker, 1981; Sabatier, 1988). The survey instrument asked respondents to quantify the frequency of their discussions about small wind energy in these types of groups over the past year, and then used this data as a proxy measure of network participation to assess the correlation between this variable and state small wind policies. The results did not reveal a statistically significant correlation between the variables, suggesting that network participation may not play a large role in the dissemination and development of state small wind policies.

However, it is important to note that this analysis was based on the number of conversations reported by the individual respondent alone and thus did not include

57 conversations conducted by other officials in the state, which could potentially lead to inaccurate results. Furthermore, the survey instrument did not ask about the impact of these discussions, and therefore it remains possible that the true significance of these conversations could be based more on the quality of the talks rather than how frequently they occurred. As a result of these limitations it is difficult to make a final determination about the role of this variable through the survey results alone, and this topic will continue to be addressed in the following chapter focused on case studies.

Influence of outside states

Regional policy diffusion theory suggests that policy diffusion largely occurs geographically between neighboring states that learn from each other’s policy experiences in order to adapt new policies to their specific internal needs and circumstances (Matisoff, 2008). A total of 74 percent of the questionnaire respondents from small wind states confirmed that their state had looked to outside states for guidance when creating their own small wind energy policies and incentives. This figure seems to support the regional policy diffusion notion that states learn from each other and that a particular state’s course of action is partially influenced by its relationships with outside states.

However, in contrast to the emphasis of the model on states that are within close geographic proximity to each other, the results of this study suggest that geographic proximity may not be the primary factor influencing interstate learning and policy transfers related to small wind energy. For example, of the respondents that identified

58 which outside states their own state had looked to for guidance, only 50 percent named states that shared a contiguous border with their own state. Conversely, 90 percent of the respondents acknowledged that their state had looked at states with no shared border for guidance about small wind.5 Although it is difficult to draw firm conclusions from these numbers, these results suggest that states are frequently focusing their attention outside of their local geographic area for insights and guidance regarding how to design policies and incentives to support small wind energy.

Conclusion

The results discussed in this chapter indicate that the policy situation surrounding small wind energy is unique and that additional investigation is needed in order to develop a better understanding of the small wind policy environment in the fifty

American states. Small wind energy policy adoption appears to be influenced by a hybrid mixture of variables drawn from the literature, although there is also evidence that some standard policy adoption variables do not seem to impact small wind policies as may have been expected. Table 6 summarizes which policy adoption variables have been identified in this analysis as likely being correlated to some degree with either the presence of small wind policies in a state or the complexity of a state’s small wind policy arrangement.

5 It is important to note that these particular findings are based on a small sample size due to only 32 percent of the respondents from eligible small wind states identifying the particular states they had looked to for guidance. 59

Relevant Policy Adoption Variables Associated Policy Adoption Model

1) Commitment to environmental Internal Determinants protection and policy innovations

2) Citizen ideology Internal Determinants

3) Economic wealth and development Internal Determinants

4) Price of electricity Internal Determinants

5) Legislative professionalism Internal Determinants

6) Interstate competition (related to leadership on environmental and Policy Diffusion energy issues)

Table 6 - Small Wind Policy Adoption Variables

Overall, state support for small wind energy has been found to be widespread, albeit highly variable, throughout the country. When examined through the lenses of the two theoretical models of policy adoption, the available evidence convincingly points towards internal determining factors as playing the key role in the development, variety, and evolution of state small wind policies. Traditional policy diffusion between states may be a small driver within this process, but the results of this national survey do not support the notion that regional diffusion pressures are leading states to support small wind energy. If anything, the results seem to indicate that while state officials may look to other state governments for policy examples and guidance, more often than not these

60 officials look far beyond their borders to the leading states in this field rather than trying to emulate what their regional neighbors are doing.

As is the case with any survey instrument there are limitations to the conclusions that can be drawn from this data which are important to acknowledge. In particular, by relying on only one person per state to document the situation surrounding small wind energy, the questionnaire results for any particular state are at risk of being subject to that respondent’s biases. Furthermore, it is difficult to guarantee that the respondent’s answers to the more subjective questions represent a true and accurate reflection of the situation that exists in that state. Unfortunately this limitation was difficult to avoid due to the relatively small size of most state’s small wind programs and the fact that many of the states only assign one official to oversee their efforts in this market. In light of these circumstances, an attempt was made to have each state’s leading expert in small wind complete the survey to maximize the accuracy of these results, but even this step does not entirely eliminate the problem.

Additionally, limitations exist regarding the extent of the conclusions that can be drawn from the correlation analysis presented in this chapter. For example, while these measures of correlation assist in understanding the degree to which various independent variables are connected with state small wind policy outcomes, they are not able to clearly depict how this interaction plays out in real life. The measures certainly help to identify which factors are likely important in explaining the dependent variable being examined, but they do not do much to explain why these factors are important nor to assess the level of impact that they have on small wind policy adoption. In consideration of the unique political, social, and economic environments that exist in each of the states,

61 exploring these issues further requires the kind of in-depth analysis provided by the case studies presented in the next chapter. These case studies examine the development and evolution of small wind policy programs in three states – Ohio, Oklahoma, and Oregon - and will allow for an expanded examination of many of the crucial issues that were evaluated and addressed in this chapter.

Although small wind energy policies sometimes get wrapped up in the broader debate about renewable energy, this analysis has revealed that there are several primary factors and conditions that are associated with a great deal of the state support for small wind throughout the country. While it is impossible to directly generalize the findings presented here to the policy situation surrounding other distributed renewable energy technologies, further analysis may reveal that other technologies experience similar challenges, pressures, and opportunities. The results presented in this portion of the study have helped to shed light on the policy adoption process associated with a renewable energy technology that is growing in importance but has yet to receive significant academic attention. This project will expand upon these findings in the following chapter by investigating the specific small wind policy experiences of three states through in- depth case study analyses. In particular, these case studies aim to provide greater contextual understanding of how the factors identified above interact within each state’s unique political landscape to generate the support needed to create a particular set of small wind policies and programs.

Chapter 3: Case Studies

Introduction

State policy support for small wind energy has been shown to be highly variable between states across the country (AWEA, 2009a), but little prior analysis has been conducted to examine which factors are responsible for the development of these different policy systems. Although this technology has grown rapidly in recent years, it has largely escaped the attention of scholars examining renewable energy policies, possibly due to the much more prominent role of utility-scale wind energy within the renewable energy sector. Whereas commercial wind farms have a direct impact on society at large via their production of mass quantities of electricity, their role in the operations of large utilities, and their ability to offset large quantities of greenhouse gas emissions, the impact of small wind systems is experienced more on an individual level.

Unlike utility-scale wind, the primary direct benefits of small wind energy, particularly cheaper electric bills and a secure supply of electricity, are experienced only by a low number of individual home and business owners, with the rest of society receiving only the limited benefit of slightly reduced emissions.

Small wind may perform the same physical action as utility-scale wind (i.e., converting wind energy into electricity), but given its relatively limited impact it might

63 seem as though states have few incentives to support this technology compared to others that affect greater numbers of people. In spite of these concerns though, most states have elected to support and promote small wind energy to some degree. However, rather than judge the value of these decisions the primary purpose of this study is to develop a better understanding of the factors driving this policy adoption process at the state level.

Federal, local, and individual entities also play important roles in the small wind universe, but the significance of these different actors will not be examined extensively in this particular study focused on state government policies.

The second chapter of this study utilized a survey instrument to gather information from state small wind experts around the country about the various policies and programs different states have adopted in support of small wind. Using two existing environmental policy adoption theoretical frameworks (i.e. the internal determinants model and the regional policy diffusion model) as the foundation for its analysis, the results of the survey indicated several key variables that were found to significantly influence state support for small wind energy. However, these results did not explain how these factors interacted with each other regarding small wind energy policies, nor did they assess the level of impact that each factor has on small wind policy adoption.

Case study analyses of the particular circumstances and events surrounding a state’s small wind policies are needed in order to examine these issues further and expand upon the policy adoption variables findings in the previous chapter. As the second phase of this multi-phase study, the following two chapters present the results from three in-depth case studies of small wind policies in Oregon, Ohio, and Oklahoma.

64 This examination continues with a brief overview of previous research into state environmental policy adoption, highlighting the key variables identified in the previous chapter and drawing from the more extensive literature review contained in that chapter.

Following this short review of the literature, the primary research questions addressed in this phase of the study are presented, leading into a discussion of the methodology used to conduct this portion of the analysis. Background information about the different small wind policies in each of the three states is then provided in order to setup a detailed examination of the case study results and a concluding discussion about the implications of these findings for future renewable energy policy studies.

Literature Review

Previous research has identified several common policy tools used by state governments to promote environmental and energy-related technologies, and much of the remaining discussion in this chapter will focus on different states’ usage of these various policy instruments. The following subsection will briefly discuss the most commonly cited benefits and motivations for using these policy tools. Building upon this discussion, the literature review will conclude with a review of the two theoretical models of state environmental policy adoption that are used to provide the framework for this study.

65 Key State Policy Instruments Affecting Renewable Energy

This study measures the level of a state’s support for small wind energy through the selection of policy tools that the state has adopted to support this technology. Policy tools (or instruments) can be defined as the mechanisms chosen by a government to translate its policy objectives into actions that achieve its desired policy goals

(McDonnell and Elmore, 1987; Schneider and Ingram, 1990). In the case of small wind energy, states adopt different policy tools to try to increase the rate of adoption and installation of small wind systems. Governments have the ability to select from a wide variety of policy tools at their disposal, with each technique offering a unique approach designed to achieve the desired outcome. The following discussion briefly reviews the primary policy tools that are used in support of small wind energy by the three states included in this case study analysis.

Financial incentives are designed to help stimulate private investment in small wind turbines by helping these technologies overcome the financial barriers that are frequently responsible for preventing their more widespread adoption in the private sector

(Menz and Vachon, 2006). Examples of small wind financial incentives include tax credits or exemptions, grants, and low-interest loans. Similarly, net metering refers to a policy that requires utilities to compensate customers for the power they generate using small wind turbines and other distributed technologies (Byrne et al., 2007). As it relates to small wind energy, the goal of net metering is to improve the financial feasibility and reliability of grid-connected small wind systems by allowing customers to receive credit for producing more electricity than they consume. Many states that offer financial

66 incentives for renewable energy finance these programs through a Public Benefit Fund.

Public Benefit Funds raise money through a rider on the bills of electricity customers, and typically then reallocate these funds to consumers and businesses through various programs designed to support renewable energy development and energy efficiency

(Vachon and Menz, 2006).

Mandates have also been used in support of renewable energy, with Renewable

Portfolio Standards (RPS) representing the most common example of this approach.

Most importantly, a RPS sets a requirement for a specified percentage of a state’s electricity usage to come from qualified renewable sources by an established date, in order to promote greater renewable energy development within the state. (Vachon and

Menz, 2006). However, Renewable Portfolio Standards generally do not require states to use small wind energy, but frequently allow small wind systems to be one of many renewable technologies that policymakers can support to fulfill the RPS obligations. In particular, adopting a RPS does not represent a mandate on individual behavior, but rather mandates that states and the utilities operating within them must meet certain requirements. As a result, this policy tool can lead to greater encouragement for including small wind systems in a state’s renewable energy mix.

The final major category of policy tools involve those used to promote greater awareness and outreach regarding small wind energy, including things such as anemometer loan programs and efforts to train small wind installation professionals.

67 Policy Adoption Theoretical Background

Scholars have identified two primary theoretical models to explain policy adoption, across issue areas, at the state level: the internal determinants model and the regional policy diffusion model. Additionally, prior studies have uncovered a few specific factors that appear to be particularly important to the development and adoption of state environmental policies. The results of the survey analysis performed in the previous chapter identified which of these variables appear to be most relevant in the case of small wind energy, and the remainder of this discussion will primarily focus upon these selected variables.

Most notably, the survey results revealed that variables included in the internal determinants model of policy adoption appear to be the key drivers influencing the development and evolution of state small wind policies. The central tenet of this model claims that policy adoption occurs as a function of certain important state attributes.

Although not all of the variables suggested by this model were correlated with the presence or complexity of small wind policies in a state, five factors associated with this model were singled out for their apparent connection to state small wind policies: a state’s historical commitment to environmental protection and policy innovations; citizen ideology; economic wealth and development; retail price of electricity; and degree of legislative professionalism. Please refer to the literature contained in the previous chapter for a detailed discussion of the previous research about these variables.

Conversely, the regional policy diffusion model emphasizes the role that a state’s relationship with its neighboring states has on its internal policy innovation and adoption

68 process. According to this theory, states apply the lessons learned from the experiences of other states to their own internal policy designs in order to achieve more successful legislative programs (Matisoff, 2008). Two primary variables are commonly believed to facilitate this diffusion process, but the analysis of the survey results in the last chapter revealed that only one of them appears to be relevant in the case of state small wind energy policies. In particular, scholars have highlighted interstate competition as a crucial policy diffusion mechanism (Sabatier, 1988; Ingle et al., 2007). As it relates to small wind energy, the survey results suggest that state competition over the public perception of environmental and energy leadership (and to a lesser extent over jobs associated with these industries) plays a role in a state’s decision about how it chooses to support small wind. Notably, the survey results indicated that possessing the desire to be perceived by the public as a leader on energy and environmental issues was an important driver prompting many states to adopt policies that promote small wind energy.

The remainder of the discussion and analysis included in this chapter will examine in-depth the significance of several of these key variables in the development and evolution of small wind policies in three states – Oregon, Ohio, and Oklahoma.

Research Questions

The motivation for this study originated from the recognition that academic scholars had largely overlooked small wind energy and that state policies in support of small wind energy could provide an interesting study of the policy adoption process related to distributed energy technologies. The first phase of this research project utilized

69 data from a survey instrument to address research questions regarding the current status of state small wind policies in the United States as well as to identify the key variables and factors associated with the development of state small wind policies. However, the results presented in the previous chapter were unable to explain the impact that each of these variables had on the policy development and adoption process related to small wind, nor did they clarify how these factors interact with each other during this process.

Case study analyses are better suited to address these issues, and the remainder of this chapter presents three case studies that were performed to provide insights to the following research question:

The following section outlines the approach taken to evaluate this question and explains the process by which the case studies were performed and data were analyzed for this phase of the study. A second research question related to the case studies provides the focus for Chapter 4 of this document, and will be presented and discussed in that portion of the text.

Methodology

Although the survey instrument described in the previous chapter yielded a great deal of valuable information about state small wind energy policies, the data it provided were not capable of providing in-depth contextual understanding of how each state’s

70 small wind policies came into being. Policy adoption is a complex process involving a multitude of actors, influences, and events, and it was determined that the best way to analyze the policy adoption process in a particular state would be to utilize case study methods. Case study methods are well suited for situations involving complex events and processes, allowing the researcher to develop powerful explanations regarding how outcomes are impacted by local conditions (Miles and Huberman, 1994). In particular, comparative case studies help researchers understand complex phenomena in situations where multiple factors are potentially important and need to be considered. This situation certainly applies in the case of state small wind energy policies given the high variability in polices between states and the numerous factors that have previously been identified as likely playing a role in this policy variability.

When utilizing the comparative case study method, it is important to select cases based on variation in the independent variables of interest rather than simply choosing cases at random (Yin, 2003). Selecting cases based on variation in the key independent variables while holding other variables constant allows the researcher to more accurately gauge the effect of the variables under study in order to test relevant theoretical propositions. According to the results of the statistical analysis of the survey data, the independent variables most closely correlated with state small wind policies were those related to state commitment to environmental protection and policy innovation, as well as the ideology of the state’s citizenry. Given these high rates of correlation, one of the main goals of the case studies was to assess the level of these variables’ impact on small wind policy adoption, and thus these variables were chosen as the independent variables upon which case selection was based.

71 Building upon this knowledge, three primary criteria were identified for the purpose of selecting states for the case study analyses. First, the state had to have completed the survey instrument described in the previous chapter and it must currently have at least one active policy or program in support of small wind energy. This criterion eliminated 13 states from consideration, thus leaving 37 small wind states that could potentially be included in the case studies. Due to time and resource constraints, it was determined that case studies would be performed in three of these states. Second, the three cases must vary according to the key variables identified above – commitment to environmental protection and policy innovation, and the ideology of the state’s citizenry.

The final criterion for case selection was that the states must be similarly ranked on at least two of the other correlated independent variables identified in the previous chapter

(i.e., measures of personal wealth and the price of electricity). The purpose of this step was to minimize the chance that effects from these variables would be responsible for the results obtained in the case studies.

Given the researcher’s location in Ohio, it was determined that this would be one of the states for the case study. Once this was established, the remaining 36 eligible small wind states were considered based on the criteria discussed above, and Oregon and

Oklahoma were identified as the two states that most closely satisfied these requirements alongside Ohio. In regard to variability of the key independent variables, Oregon represents a state with an ideologically liberal citizenry and a high level of commitment to environmental protection and innovation, whereas Ohio represents a state with a moderate citizen ideology and moderate commitment to the environment, and Oklahoma

72 represents an ideologically conservative state with a low level of commitment to the environment.

Following the selection of these three cases, the next step was to collect primary data in order to develop the case studies. For each state, semi-structured interviews were conducted with representatives of the state government, environmental advocacy groups, and employees of wind turbine installation companies (see Appendices C, D, and E for the interview protocol for each state). These three groups of stakeholders were chosen in order to obtain a variety of perspectives and opinions regarding the situation surrounding small wind energy in each state, allowing for a more complete understanding of the role of the different factors being studied in each case. State government officials were selected based on their familiarity and involvement with their state’s small wind policies, and were identified via the same combination of online research and telephone inquiries used to select survey respondents in each state. Representatives from advocacy groups and turbine installation companies were then identified based upon the recommendations of the state government officials as well as the lists of qualified installers provided by the

Oregon and Ohio energy offices. Online queries were also performed to uncover other important stakeholders, and each interviewee was asked to recommend other individuals or groups that serve as key actors in the small wind policy arena in their state. Following the direction of Silverman (2000), interviews were conducted with representatives of these three groups of stakeholders until the point of saturation when little additional information could be obtained from subsequent interviews.

These interviews took place between December 2008 and July 2009, and in total

33 interviews were conducted for the case studies, with 10 interviews in Ohio, 11 in

73 Oklahoma, and 12 interviews in Oregon. The interviews were conducted via a mixture of the telephone and in-person (when possible) in Ohio, although all interviews in

Oklahoma and Oregon were conducted via telephone. Interviews typically lasted 30 minutes to one hour in duration, with notes carefully written and follow-up phone calls or emails being utilized when appropriate to ensure that accurate and complete information was obtained. Furthermore, interviewees were given an assurance of confidentiality in order to encourage honest discussions about the state’s small wind policies. In order to maintain this confidentiality, citations to individual interviews are formatted as “(State –

Interviewee Number)” such as (Ohio – 1).

In addition to the interviews, document analysis was performed to provide background information about the small wind policy situation in each state. Documents examined included state government websites and brochures, relevant environmental advocacy group reports, newspaper articles, and the Database of State Incentives for

Renewables & Efficiency (DSIRE) operated by the North Carolina Solar Center and the

Interstate Renewable Energy Council. Qualitative analysis of the information obtained in the interviews was then performed following the standard techniques of summarizing, coding, and pattern searching prescribed by Miles and Huberman (1994). Although the combination of interviews and document analysis allowed for sufficient within-case and cross-case analysis of these three states, it is important to note that one limitation of this type of comparative case study is the inability to generalize the results to the entire population (50 states). Nevertheless, this approach does allow for inferences to be drawn to theory from these cases, allowing for a better understanding to be developed of traditional environmental policy adoption theories as they relate to small wind energy.

74 Background information about the small wind policies in each state is presented next, followed by analysis and discussion of the results from the three case studies.

Background Information

The following section will outline the small wind policies and programs in each state, briefly touching upon the historical background of the policies and some of the relevant circumstances surrounding their adoption and current operations. Rather than presenting this information chronologically, each policy tool will be discussed independently.

Oregon

Although Oregon contains the most extensive and well funded set of policies focused on promoting small wind energy out of the three states included as case studies, it does not possess the best wind resource among the case study states. In fact, Oregon possesses only a moderate wind resource that is not among the twenty best in the nation, but the state has not let the lack of a stellar wind resource prevent it from adopting some of the most aggressive small wind policies in the entire country. Background information about each of these policies is presented below.

75 Net Metering

Although Oregon began offering net metering in 1999, there currently does not exist a consistent net metering program that applies to all customers throughout the entire state. In particular, the state’s primary investor-owned electric utilities (IOUs) (Portland

General Electric (PGE) and PacifiCorp) operate under a separate net metering program from the municipal utilities and electric cooperatives in the state (DSIRE, 2009). Based on the interviews conducted in this case study it appears that the IOU’s net metering program may be more beneficial for consumers than the net metering program offered by the municipal utilities and electric cooperatives, due to having a larger cap on the size of eligible systems. Oregon allows net excess generation (i.e., a customer produced more power than they used) to be carried over as a credit to the following month, but if the credit still exists after one year it is then automatically given to customers enrolled in

Oregon’s low-income energy assistance programs (DSIRE, 2009).

Renewable Portfolio Standard

Oregon enacted its version of a Renewable Portfolio Standard (RPS) in June 2007 through Senate Bill 838. This RPS requires that large utilities (those with at least 3 percent of the state’s energy load) derive at least 25 percent of the electricity they sell to consumers from renewable sources by the year 2025. Separate benchmarks exist for the years leading up to 2025, and smaller utilities are subject to lower renewable standards in the legislation (either 10 percent or 5 percent by 2025, depending on the size of the utility) (ODOE, 2007). Oregon’s utilities must demonstrate compliance with the RPS by

76 acquiring renewable energy credits (RECs) through their own production of renewable energy or by purchasing RECs from an outside source. At this time, it is still unclear exactly how small renewable systems will be included within this REC purchasing process.

Of particular importance to small wind energy, the RPS also established a goal that at least 8 percent of Oregon’s retail electricity should come from small-scale renewable energy projects by 2025. However, this goal is not mandatory, and the description of small-scale includes renewable projects with a capacity of 20 MW or less

(ODOE, 2007). Even though this includes systems much larger than the small wind turbines being investigated by this study, the fact that the RPS contains a stated goal for small renewables is a sign that Oregon’s leaders believe that small renewables have an important role to play in the state’s energy economy.

Public Benefit Fund

Oregon refers to its Public Benefit Fund as a public purpose charge, and it was originally established in 1999 during the restructuring of the state’s electric industry. In particular, Senate Bill 1149 required the two large investor-owned utilities in Oregon to enact a 3 percent public purpose charge on the electric bills of all of their customers

(Energy Trust, 2006). The legislation called for an independent organization to oversee most of these funds and develop programs through which they could be utilized to support energy efficiency and renewable energy generation. The Energy Trust of Oregon

(a non-profit organization) was authorized by the Oregon Public Utility Commission to conduct this task beginning in 2002.

77 Money from the public purpose charge is used for a variety of initiatives, including energy efficiency programs, renewable energy programs, low-income housing energy assistance, and school energy conservation efforts. Approximately 74 percent of the public purpose funds are given to the Energy Trust for its programs, with the bulk of this money being used for energy efficiency efforts (Energy Trust, 2009a). Roughly 19 percent of the money collected by the public purpose fund is designated for renewable energy programs, which generally amounts to about $12 million dollars annually

(DSIRE, 2009).

One limitation of the Public Benefit Fund and Energy Trust is that it only applies to customers of the major investor-owned electric utilities in the state (PacifiCorp and

Portland General Electric) since their customers are the only ones who contribute to the fund. Customers of PGE and PacifiCorp account for approximately 70 percent of the total electricity customers in the state, but the amount of geographic territory covered by the Energy Trust is much less than that (Oregon Public Utilities Commission, 2008). As a result, many areas of the state (particularly rural) are not eligible to take advantage of the renewable energy programs and incentives that Energy Trust offers. Further complicating this matter is the fact that many of these rural areas have some of the best wind resources in the state, and thus would likely be the areas able to benefit most from

Energy Trust’s programs.

Small Wind Incentive Program

The Energy Trust of Oregon offers cash incentives to help customers purchase and install small wind turbines up to 50 kW. However, since this program is funded

78 through the public purchase charge it is subject to the same restrictions of all Energy

Trust programs, notably that only customers of PGE and PacifiCorp are eligible to take advantage of this incentive. The incentive program requires eligible sites to have a minimum average wind speed of 10 mph in order to ensure that installing a turbine will be successful, and the amount of the incentive is based on the expected production of the turbine. The maximum amount of the incentive is $35,000 for residential systems, and

$60,000 for commercial systems (DSIRE, 2009).

Tax Credits and Exemptions

In addition to the cash incentives provided by Energy Trust, the State of Oregon also offers various tax incentives to encourage the adoption of renewable energy systems such as small wind turbines. However, unlike the eligibility limitations of Energy Trust’s programs, the tax incentives provided by the state government are available to all Oregon residents and businesses. For example, the state has a property tax exemption that ensures any added value to a property resulting from the installation of a renewable energy system (like small wind) cannot be included in the property’s assessed value for property tax purposes (DSIRE, 2009).

Additionally, for residential citizens Oregon offers a Residential Energy Tax

Credit that is determined based on the annual amount of electricity produced by a small wind turbine. In particular, residents are eligible for a credit equal to the lesser of $2 per kWh generated by the system during its first year of operation, or $6,000 (DSIRE, 2009).

At the present time, this tax credit is set to expire at the end of 2015.

79 Oregon offers an even more lucrative tax credit for businesses that install qualified renewable energy systems (large or small-scale). The state’s Business Energy

Tax Credit (BETC) is available to all Oregon businesses (including farms), and in 2007 the tax benefit was increased from 35 percent to 50 percent of the total cost of a renewable energy project (distributed over five years), with a maximum credit of $10 million (DSIRE, 2009). However, during the recent 2009 legislative session the Oregon legislature passed House Bill 2472 which calls for BETC to be cut to pre-2007 levels for all projects greater than 10 MW (Citizens’ Utility Board of Oregon, 2009). Governor

Kulongoski is currently evaluating whether to sign or veto this bill, and even though this legislation will not impact small wind projects if it becomes law its passage is a sign of the vulnerability of renewable energy tax credits during challenging economic times.

In recognition that many entities do not have sufficient tax liability (e.g., non- profit organizations, schools, some farms) to take advantage of BETC, project owners are allowed to transfer the tax credit to a pass-through partner in return for a lump-sum payment. Although this option allows these organizations to take advantage of the benefits of the tax credit, utilizing the pass-through option does reduce the benefit to project owners (ODOE, 2009a).

Small-Scale Energy Loan Program

Originally enacted in 1981 following electoral approval by the general public, the

Oregon Small-Scale Energy Loan Program (SELP) is funded through the sale of bonds and is administered by the Oregon Department of Energy (DSIRE, 2009). SELP’s low- interest loans can be used by any entity in Oregon to help finance the installation of

80 small-scale renewable energy projects (such as small wind), and the terms of the loans generally vary between 5-15 years.

Education and Public Outreach Activities

Various Oregon agencies have launched public outreach and educational initiatives that benefit small wind energy. For example, in order to guarantee that high- quality projects are incentivized, Energy Trust has established a Small Wind Trade Ally

Network and a list of qualified wind turbines to ensure that consumers only work with legitimate installers that have undergone a certification process (Energy Trust, 2009b).

Concurrent with this program, Energy Trust uses a computer based assessment program to help customers evaluate the quality of the wind resource at potential turbine sites in its covered territories. Furthermore, Energy Trust also holds workshops in areas with strong wind resources to educate the public about small wind and build interest in the technology from people who have been identified in advance as potentially being eligible for a system.

In addition to Energy Trust’s programs, the Oregon Department of Agriculture has a renewable energy specialist that travels throughout the state to give presentations about funding opportunities for renewable energy (including small wind) and meets individually with farmers and ranchers to help them move forward with projects (ODOA,

2009). Similarly, some interviewees noted that the state Energy Office holds environmental shows and workshops for the public in coordination with Energy Trust and

Northwest SEED at which they highlight the state’s renewable energy tax credits.

Ohio

Ohio has adopted a wide variety of policies and programs designed to support small wind energy. Similar to Oregon, the development of a complex small wind policy system in Ohio occurred even though the state does not benefit from having a high- quality wind resource within its borders. Ohio ranks in the bottom half of the country based on the quality of its wind resource, and has the lowest quality wind resource of the three states selected for the case studies. Geographically, Ohio has an excellent wind resource located in the waters of Lake Erie, but its strongest land-based wind resource is found in the northwestern third of the state (NREL, 2007). Descriptions of Ohio’s small wind policies and programs are included below.

Net Metering

Net metering in Ohio began in 1999 as a result of the state’s restructuring of the electric industry through the legislative process. Ohio’s net metering policy allows customers who produce their own electricity from wind turbines or other sources to receive credit on their electric bills for the electricity they produce (PUCO, 2009). In the event that the customer produces more electricity than they can use in any given month, the customer will receive a credit from the utility that can be used to offset electricity charges in future months. However, the impact of this incentive was reduced in 2002 when First Energy took a case to the Ohio Supreme Court to challenge the rates it was being forced to pay residential producers for the net excess generation they produced

82 (Ohio - 1). First Energy’s efforts were successful, resulting in residential producers receiving lower rates through net metering ever since. More recently, consumers received better news about net metering in 2008, which saw Senate Bill 221 remove the 1 percent cap on net metering for utility companies, thereby allowing greater numbers of distributed generation systems to participate in the future (Bricker & Eckler, 2008).

Renewable Portfolio Standard

Ohio’s Renewable Portfolio Standard (RPS) was enacted in May 2008 through the passage of Senate Bill 221 and is referred to as an Alternative Energy Resource

Standard. Under this policy, utilities must produce 25 percent of their retail electricity supply from alternative energy resources by 2025. Although this 25 percent target can partially be achieved using technologies such as clean coal or nuclear energy, the legislation requires that at least half of this amount (12.5 percent of the state’s total electricity) must be generated from renewable sources (including wind energy) (DSIRE,

2009). This renewable requirement contains specific annual benchmarks that must be achieved beginning in 2009, and also contains a provision that solar-energy resources must produce at least 0.5 percent of the state’s total electricity supply by 2025.

Furthermore, Ohio’s RPS requires that half of the renewable energy target must be met by in-state facilities, while the remainder of this renewable energy can be imported from out-of-state. This specific requirement is designed to ensure that renewable energy production (particularly solar and wind energy) within Ohio increases moving forward into the future.

83 Included in the text of Senate Bill 221 is a statement expressing a policy goal of the state to “ensure diversity of electricity supplies and suppliers, by giving consumers effective choices over the selection of those supplies and suppliers and by encouraging the development of distributed and small generation facilities” (Section 4928.02 - emphasis added). Increasing distributed generation is not mandatory under the RPS, but by legislating state support for small wind the RPS bill illustrated that state leaders view distributed energy sources (like small wind) as an important part of the energy mix in

Ohio. Furthermore, although distributed generation systems (such as small wind) are allowed to count toward the RPS requirements, the exact manner in which they will be applied is still being determined.

For example, Ohio’s electric utility companies will be expected to satisfy specified obligations for supplying renewable energy under the standard, with one option allowing utilities to purchase renewable energy credits (RECs) in lieu of generating all of the clean energy on their own. One REC is considered to be the environmental equivalent of one megawatt hour of electricity generated by a renewable energy resource.

According to several interviewees, discussions are currently being held to determine how the electricity generated by small wind systems can be included in the REC purchasing process to help utilities satisfy their obligations under Ohio’s RPS. Under the proposed

REC purchase program, utilities will pay customers who invest in customer-sited renewable energy for their project’s positive environmental attributes (Office of the Ohio

Consumers’ Council, 2009). This setup will help the utilities satisfy their requirements under the state’s RPS, while also helping to offset the costs of these renewable energy systems to the customer. By helping these customers receive a faster return on their

84 investment, it is expected that this program (once implemented) will help to encourage more people to adopt small wind systems.

Advanced Energy Fund

The Advanced Energy Fund (AEF) represents Ohio’s version of a Public Benefit

Fund, and was established by the Ohio General Assembly in 1999 under Senate Bill 3, which was designed to restructure the state’s electric utilities. Formerly known as the

Ohio Energy Efficiency Revolving Loan Fund, the current fund is administered by the

Ohio Energy Office in the Department of Development and is used to support the

Advanced Energy Program to provide grants for renewable energy and energy efficiency projects (DSIRE, 2009). Money for the fund is raised from a flat fee assessed to customers of Ohio’s four investor-owned utilities (American Electric Power, Dayton

Power and Light, Duke Energy, and First Energy).6 The current fee amount is 9 cents per month per customer (regardless of the amount of energy used), and the maximum amount of money allowed to be collected for the fund annually is $5 million (ODOD, 2008a). It is important to note that the authorization of the Advanced Energy Fund is scheduled expire at the end of 2010, and several interviewees expressed concerns that the program risks not being approved for renewal at that time.

6 Participation by electric cooperatives and municipal utilities in the Advanced Energy Fund is voluntary, and since none of these are participating their customers are not eligible for the incentives offered through the fund. 85

Residential Wind Energy Incentive

Ohio also offers a direct cash incentive through the Advanced Energy Fund for residents who are interested in installing a small wind system. Like all other AEF programs, this incentive is subject to the eligibility requirements of the AEF, namely that only customers of the four major investor owned utilities are eligible for these grants.

The incentive provides the lesser of $2/kWh produced by the system up to a maximum incentive of $25,000, or 50 percent of the total eligible costs of the system. Systems must be installed at the applicant’s primary residence, and the system must be expected to generate an annual output of at least 3,000 kWh based on the average wind speed at the site and the height of the turbine being installed. This requirement is designed to ensure that turbines that receive incentives actually generate an acceptable quantity of clean electricity. Furthermore, all systems must be connected to the power grid, and the Ohio

Department of Development (ODOD) has provided a list of approved qualified installers that customers are allowed to use to install a turbine. The Ohio Energy Office also offers a similar incentive program with a larger maximum cap amount to non-residential customers who are interested in installing small or large wind turbines.

In total, approximately $1.5 million is currently available for the residential wind energy incentive program, and ODOD recently expressed the desire to increase the number of people utilizing these grants. Through the end of 2008 grants had been awarded for 30 wind turbines, but ODOD officials have expressed a goal to award grants for an additional 266 small wind turbines in the next two years (Adamczak, 2009). One public official interviewed for this study suggested that a primary reason OH offers this

86 incentive is that residents bear the brunt of the burden of funding the AEF, and thus the state will provide incentives designed to serve their needs from this program (Ohio – 9).

Additionally, a separate official mentioned that the state government cannot afford tax credits or exemptions right now given the current budget situation, but that this incentive program has survived since its funding comes from the AEF.

Education and Public Outreach Activities

In addition to providing financial incentives, the Ohio state government also performs various activities designed to educate the public about small wind energy and raise awareness and interest in this technology. For example, the state directly funds and works with outside groups such as Green Energy Ohio in support of programs related to energy efficiency and renewable energy (Ohio - 9). ODOD also conducts some outreach activities itself, such as attending conferences and other events (e.g., Farm Science

Review) to distribute information about the AEF incentives, as well as compiling and disseminating information to consumers about approved small wind installers.

Furthermore, the state also hosts a traveling Advanced Energy Fund road show in which the Advanced Energy Team travels to different counties to promote the AEF programs such as the Residential Wind Energy Incentive (Ohio - 9).

Anemometer Loan Program

Recently the state government has launched a joint operation with the nonprofit group Green Energy Ohio (GEO) to start an Anemometer Loan Program for the state.

The program is administered by GEO but funded by the U.S. Department of Energy and

87 ODOD, and the program is currently entering its third year of operations (GEO, 2009).

The primary goal of this program is to lead to greater adoption of small wind technologies by monitoring wind speeds at potential turbine sites for one year in order to help interested consumers determine if the wind quality is good enough to allow a turbine to be installed. In particular, two sites are selected for monitoring each year, with the focus falling on turbines in the larger end of the small wind spectrum (50-100 kW).

These larger small wind turbines work better for non-residential sites such as schools, business, or government buildings, and one interviewee noted that the increase in applications (from 14 to 24) over the first two years of the program is a sign of its overall success and the growing interest in small wind (Ohio – 5).

Oklahoma

Even though Oklahoma has the best wind resource out of the three states being examined in these case studies, it also has the fewest programs in place to support small wind energy. The results from the survey instrument discussed in the previous chapter indicated that the quality of the wind resource appeared to have little bearing on the level of policy support states express for small wind energy, and Oklahoma corroborates this finding well. The state’s high quality wind resource (particularly in the western portion of its territory) suggests a great potential for small wind systems to thrive within its borders, but the state government has done relatively little to encourage its citizens to adopt this technology. Nevertheless, Oklahoma does have some programs in place, and these limited efforts are discussed below.

Net Metering

Net metering began in Oklahoma in 1988 under the direction of the Oklahoma

Corporation Commission (OCC), which is in charge of regulating public utilities in the state (DSIRE, 2009). The decision to start a net metering program was made by the OCC alone, and was not a result of action by the elected legislature. Under the current net metering policy in Oklahoma, only utility companies regulated by OCC are required to offer net metering to their customers, and as a result many electric cooperatives do not fall under the requirements of this policy. Furthermore, Oklahoma’s net metering program leaves it up to the utilities to decide whether to purchase any excess electricity

(i.e., net excess generation) generated by customers’ systems, thus potentially minimizing the full benefit of this policy as seen in other states.

Energy Loan Fund for Schools

This fund represents the only version of a financial incentive applicable to small wind in Oklahoma, but the restrictions of this program limit its eligibility to K-12 schools. The program is administered by the Oklahoma Department of Commerce, and utilizes Exxon Oil Overcharge Settlement Funds to provide low fixed-rate financing for schools striving to become more energy efficient (Oklahoma Department of Commerce,

2007). Installing a small wind turbine is an eligible activity under the rules of the program, which last year allowed Yarbrough Public Schools in western Oklahoma to borrow $180,000 from this fund in order to purchase a 50 kW small wind turbine to help power the school’s operations (Money, 2008).

Tax Credit for Manufacturers of Small Wind Turbines

Although Oklahoma does not offer any financial incentives to residents or businesses to install small wind turbines, the state has established an incentive designed to encourage manufacturers to construct small wind turbines within the state’s borders.

This income tax credit for small wind turbine manufacturers lasts from 2003 through

2012, and is predicated on the assumption that these manufacturers will invest in activities promoting greater economic development within the state (DSIRE, 2009).

Small Wind Income Tax Credit (Proposed)

House Bill 2247 was introduced during the recent 2009 legislative session calling for a 40 percent tax credit available for five years for the purchase and installation of small wind energy systems on either residential or non-residential properties in the state

(State of Oklahoma, 2009). Although the bill passed both the Oklahoma House and

Senate, it died in Conference Committee during the appropriations process and was not enacted into law. This attempt to enact a tax credit for small wind energy followed several other failed attempts in recent years, and came more than a decade after

Oklahoma’s last tax credit for small wind systems expired in 1995 due to lack of usage

(Oklahoma - 10). Most interview respondents expressed the belief that this bill did not survive due to concerns about the budget crisis currently facing Oklahoma and the rest of the country.

90 Education and Public Outreach Activities

The Oklahoma Wind Power Initiative (OWPI - a joint program between

Oklahoma State University and The University of Oklahoma) serves as the state’s information source for the public regarding small wind. OWPI receives funding support through the Oklahoma State Energy Office coming from federal State Energy Program funds, and utilizes its resources to educate the public about wind energy and to operate an anemometer loan program. However, the anemometer loan program is primarily used for utility-scale wind studies, and thus is not included as a separate small wind program in the state (Oklahoma – 11). In addition, wind conferences organized by the Oklahoma

Department of Commerce are perceived to help people learn more about small wind and to become more comfortable with the technology.

Table 7 on the next page summarizes the small wind policies discussed in this section that are currently in place in each of the case study states. These policies will be evaluated further in the following results and discussion sections.

91 Small Wind Policies

Public Anemometer Net Tax Education/ State RPS Benefit Grants Loans Loan metering Incentives Outreach Fund Program

Oregon Yes Yes Yes Yes Yes Yes Yes

Ohio Yes Yes Yes Yes Yes Yes

Yes (for Yes Oklahoma Yes Yes manufacturers) (Limited)

Table 7 – Current Small Wind Polices in the Case Study States

Source: Interviews and documents.

Results

The results of the analysis for this phase of the study will be presented in two parts. First, within-case results regarding the key policy adoption factors for each of the states are examined followed by a brief summary of these results across all three cases.

Second, an evaluation of each state’s small wind policies and the challenges they face will be provided in Chapter 4. The current section continues below by focusing on the role of different policy adoption explanatory variables within each state.

Case Study #1 – Oregon

The case study analysis revealed that several of the common variables previously identified in the literature as having an important impact on state environmental policy adoption were also found to play key roles in the development and evolution of Oregon’s

92 small wind policies. In particular, Oregon’s historical commitment to environmental protection and environmental policy innovation appears to be the primary factor driving the state to adopt such expansive programs in support of small wind energy. This variable was the most common factor identified by interviewees as playing a key role in the development of Oregon’s small wind policies, with eleven of twelve interviewees identifying this variable as important.

For instance, several interviewees described how Oregonians have developed a culture over time that embraces “green” issues and is very supportive of protecting the natural environment. This mindset is believed to be particularly strong in the more populated and liberal western portion of the state, although it seems to be present (albeit to a lesser degree) in the rural and more conservative eastern portion of the state as well.

Interviewees remarked that the state’s population has adopted a strong environmental and conservation ethic that has led them to be conscious of environmental issues and helped to create a general “philosophical commitment to renewable energy” (Oregon – 13).

There was a perception among interviewees that Oregon exhibits forward thinking on issues related to the environment largely as a result of this pervasive cultural mindset, and it seemed natural to some interviewees that Oregon would want to take the lead on clean energy. As an example of Oregon’s historical commitment to environmental policy innovation, in 1984 the U.S. Department of Energy awarded the Oregon Department of

Energy its Special Award for Energy Innovation for the state’s small-scale energy loan program (ODOE, 2009b). Twenty-five years later this policy is used in support of small wind as well, and in general small wind energy is perceived to benefit greatly from the state’s strong environmental ethic.

93 Other interviewees also mentioned that leadership by Oregon’s governors over the years played an important part in developing this pro-environment cultural and political sentiment. For example, one interviewee noted that Governor McCall made protecting the environment a priority for the state during his terms in office in the 1960s and 1970s, and numerous respondents highlighted the impact that Oregon’s two most recent

Governors (John Kitzhaber and the current Governor Ted Kulongoski) have had in this area. Both Governors set renewables as a key plank of their policy agenda, helping to create a situation where the entire state government was pre-disposed to put policies in place to support renewables in general.

Nowhere was this influence more apparent than in the debate over Oregon’s RPS.

Seven of twelve interviewees cited Governor Kulongoski as being a crucial advocate for this legislation, with one interviewee noting that he views the RPS as a legacy issue for his leadership (Oregon - 1). Years before the legislation passed, Governor Kulongoski established various commissions and working groups to bring together government officials, environmental groups, and other important actors to work on issues related to climate change and renewable energy. Multiple interviewees credited these groups with helping to create a good foundation from which policies like the RPS could develop, and the establishment of the groups helped to create expectations for progress to be made on these issues. According to these interviewees, the Governor’s leadership and foresight helped to develop the intellectual capacity, experience, and relationships that proved to be crucial in the eventual creation of the state’s RPS. As one member of the small wind industry in Oregon pointed out, even if small wind itself is not directly on the agenda of the Governor or key legislators, small wind has still benefited greatly from their personal

94 commitment and advocacy related to clean technology and renewable energy (Oregon –

4).

Previous research has indicated the strength of interest groups in a state influences policy adoption (Bacot and Dawes, 1997; Potoski and Woods, 2002), and the results in

Oregon suggest that environmental interest groups played an important role in the development of renewable energy policies such as the RPS. In particular, interviewees highlighted that key members of renewable energy and environmental groups served in the commissions and working groups designed to examine potential policy solutions to environmental problems. These groups are perceived to have helped develop and advocate for policies that have led to greater support for renewable energy (including small wind) throughout the state. Similarly, one interviewee emphasized that Oregon’s close-knit renewable energy community is an important reason behind the success of renewable energy in the state. In particular, this interviewee mentioned that there is a strong set of advocates and groups that work together to promote these issues, and that these relationships help to ensure continuity on renewable energy over time, even as political leaders change and the political landscape evolves.

Associated with the legacy of support for environmental protection in Oregon is the overall political ideology of the state’s citizenry. Since the state has such a strong culture of environmental protection, it is somewhat difficult to distinguish this conservation ethic from general political ideology. Oregon is ranked as the 9th most ideologically liberal state in the country, and there were some suggestions from interviewees that the state’s general policy liberalism and progressivism were closely connected with its environmental culture and support for renewable energy. However,

95 numerous respondents also mentioned that a regional ideological divide exists in the state, with western portions tending to be more liberal (and more heavily populated), and the more rural eastern part of the state tending to be more conservative. These interviewees suggested that while Oregon’s overall progressive nature likely helped to prompt the state government to adopt policies in support of small wind, the conservative portions of the state have not always been supportive of renewable energy in the past.

According to many interviewees, this situation began to change a few years ago once the economic development benefits of renewable energy became more apparent to conservative politicians and residents in eastern Oregon. Eastern Oregon tends to have better wind resources than the western part of the state, and thus has benefited significantly from the expansion of utility-scale wind energy in this part of the state in recent years. Once job losses began to increase in rural Oregon people began to view renewable energy (particularly wind energy) as a valuable tool for helping with economic development in these portions of the state. Although much of this support is focused on large wind projects, one interviewee noted that some people view small wind policies as a way of supporting local rural economic development in Oregon by helping to manage the risks associated with rising energy costs (Oregon – 10). Overall, the general consensus obtained through the case study interviews was that the primary driver behind

Oregon’s small wind policies was the state’s historical commitment to environmental protection. However, the perceived potential for renewable energy to contribute to economic development appears to have also played an important role in generating support from more conservative legislators and citizens for general policies related to renewable energy such as the RPS.

96 Another variable that was found to influence Oregon’s policy support for renewable energy technologies such as small wind energy was interstate competition over the mantle of environmental and renewable energy leadership. In particular, many interviewees stated that Oregon’s leaders aim to make the state a national leader in the field of renewable energy, with one person expressing that it has “become something of state pride to be seen as a leader in renewable energy, sustainable ecology, and green collar jobs” (Oregon – 2). While collaboration certainly takes place in the Pacific

Northwest on some renewable energy matters, there also seems to be competition over bragging rights in this issue area as well as over the economic development prospects associated with renewable energy expansion. Oregon’s primary competitor in this sense is Washington, and several interviewees noted that both states tend to keep an eye on each other in regard to their renewable energy policies. For example, one respondent described the situation as a “leap frog relationship” in which the legislatures in both states tend to push each other to act in support of renewable energy in order to catch up to or surpass whatever progressive policies the other state has implemented (Oregon – 1).

Case Study #2 - Ohio

Although Ohio has adopted many of the same policy tools as Oregon in support of small wind energy, the manner in which these policies were developed differed in some significant ways between the two states. Whereas the economic development potential of renewable energy played a significant, albeit secondary role in the creation of Oregon’s small wind policies, the results of the Ohio case study revealed that this factor was the

97 primary driving force behind Ohio’s renewable energy policies. Although small wind policies are sometimes developed and debated as independent pieces of legislation, more often than not these policies evolve from broad programs designed to stimulate renewable energy in general. This is particularly true in Ohio, and thus in order to understand the factors motivating Ohio to support small wind it is first necessary to understand the debate surrounding renewable energy development as a whole within the state.

For example, policies such as a Renewable Portfolio Standard had been discussed for many years in Ohio prior to 2008 but had failed to gain enough traction to become law. Interviewees explained that many of these policies originally developed out of a desire to protect the environment and combat global climate change by promoting greater usage of renewable energy. Environmental motivations played a key role in introducing these issues and keeping them alive in the policy process for an extended period of time, but arguments in support of renewable energy based on its environmental benefits alone were not enough to gain sufficient legislative support. Instead, important renewable energy policies were largely kept on the backburner until supporters of renewable energy adopted a new tactic highlighting the benefits of renewable energy related to economic development. Increasing job losses in Ohio’s manufacturing sector produced conditions in which this argument could be well received, and over a relatively short period of time job creation went from a secondary benefit of supporting renewable energy to the primary argument being made for these technologies.

This description is not meant to suggest that the environmental benefits of renewable energy are ignored in Ohio, but rather to recognize that these benefits became much more appealing in the eyes of Ohio’s legislators when they were coupled with job

98 growth and economic development. For example, in reference to the debate over adopting a RPS, one interviewee commented that the watershed moment of the entire discussion occurred when the job creation arguments were finally effectively connected to longstanding environmental concerns (Ohio – 4). Together these two issues worked effectively as selling points for policies to support renewable energy in Ohio.

Respondents explained that the prevailing mindset in Ohio shifted from one of “jobs vs. environment” to one where people began to realize that these two things are capable of working in tandem for the benefit of both, particularly in the area of renewable energy.

Many people credited the recent renewable energy policy advances to this change in mindset, and there is increasing evidence that small wind benefits at the policy level from this belief that developing a diverse renewable energy portfolio will create jobs and strengthen Ohio’s economy.

For instance, Lieutenant Governor Lee Fisher illustrated the importance of economic development and employment concerns as drivers behind Ohio’s support for small wind when he was asked to comment about Ohio’s incentive programs for small wind and solar. In particular, he stated that “these programs are designed to stimulate the market for the small wind and solar thermal industries, complementing our manufacturing efforts and helping Ohio compete in attracting the highly-skilled jobs of the new energy economy” (Adamczak, 2009). This recent quote highlights the connection between the state’s support for small wind and the hope that this support will contribute to economic development, and reflects the strategy that Governor Strickland’s administration has taken in regard to renewable energy.

99 Governor Strickland was recognized by many interviewees as being a staunch advocate for renewable energy development, and his leadership was frequently cited as a key force behind the successful passage of Senate Bill 221 in 2008 which enacted Ohio’s

RPS. Interviewees suggested that Governor Strickland wants to retool Ohio’s traditionally strong manufacturing sector to address the challenges of the 21st century, and that he views renewable energy production to combat climate change as an area in which Ohio can excel. Ohio’s large manufacturing base is well positioned to produce component parts for technologies such as wind turbines, and a recent study suggested that

Ohio ranks second in the nation (behind California) in terms of its capacity for manufacturing wind turbine parts (Ohio Department of Development, 2008b). Clearly the foundation exists in Ohio for the state to reap the benefits from growth in the wind energy industry, and several interviewees credited Governor Strickland for recognizing both the economic and environmental benefits associated with developing a new energy economy.

Other interviewees acknowledged that part of the motivation for the government to support small wind and other renewables was the desire to take the lead in these industries before other states could take advantage of the opportunity. In particular, leadership in a cutting edge area such as renewable energy produces bragging rights for a state and may help to generate a competitive advantage for its manufacturers working in these industries when the rest of the nation decides to try to catch up. Specifically, Lt.

Governor Fisher proclaimed that “Ohio strives to become a leader in the advanced energy industries,” and policymakers viewed incentives and other state support for small wind as one approach to help move Ohio closer to accomplishing this goal (Adamczak, 2009).

100 Results from the case study also revealed that environmental and energy interest groups have played an important supporting role in the development of the state’s small wind policies. For example, two state energy officials suggested that one reason why the state decided to promote small wind energy was that there appeared to be sufficient public support for this technology as expressed through constituent requests and interactions with advocacy groups such as Green Energy Ohio. These officials explained that ODOD underwent a stakeholder assessment process involving customers, installers, environmental non-profit groups, and other key actors in order to gather their feedback and ideas about the types of advanced energy policies they would like to see the state implement. Residential energy programs were one of the things that this process identified as being important, and ODOD developed the current residential wind incentive program in response to this demand. Further evidence of the important role that environmental interest groups play in Ohio’s small wind policy environment can be found in the state’s Anemometer Loan Program. This program was designed through coordination between the state and Green Energy Ohio, and is administered exclusively by Green Energy Ohio for the purpose of identifying new small wind opportunities in the state. Environmental groups are not the most important factor influencing Ohio’s small wind policy development, but they have certainly played a crucial behind-the-scenes role in helping to develop and implement the details of the programs that have been put into place to support small wind.

101 Case Study #3 - Oklahoma

Unlike the results presented above for the Oregon and Ohio case study, Oklahoma represents a case where the key factors influencing the state’s adoption of small wind policies served to largely minimize the policy support Oklahoma expresses for small wind. In particular, the results of this case study found that the strength of Oklahoma’s conventional fossil fuel energy industries coupled with its citizenry’s conservative political ideology were the dominant variables determining the extent of the state’s support for small wind. The findings related to these two variables will be discussed first in this subsection, followed by a brief look at other factors that were found to have played more of a secondary role in this process.

In some regards, Oklahoma’s relative lack of support for small wind energy comes as a surprise considering the strong wind resource located within the state. Of the three states examined in these case studies Oklahoma is endowed with the greatest wind resource, yet the state government has been unwilling to enact comprehensive policies designed to stimulate greater usage of small wind turbines by its citizens. The most commonly cited explanation for Oklahoma’s relative lack of state small wind support focused on the dominant role that Oklahoma’s oil and natural gas industries play in the state’s political process. Several respondents explained that Oklahoma is traditionally an oil and gas state, and they described how the oil and natural gas sectors essentially built the state and were responsible for much of its economic prosperity in recent decades.

These conventional fossil fuel industries represent a significant part of the state’s tax base and have been the state’s “bread and butter for years,” and multiple respondents noted

102 that discussing renewable energy is sometimes viewed as a threat to these livelihoods

(Oklahoma – 9). Although one energy official stated that oil and gas producers encourage the production of renewable energy, nine of eleven interviewees contrasted this view and suggested that the dominant pro-oil and gas culture at the statehouse has prevented significant progress related to renewable energy.

The oil and gas industries were perceived by many to completely control the political agenda and debate about energy in Oklahoma, to the point in which other energy topics such as small wind struggle to avoid being drowned out of the conversation entirely. One respondent familiar with legislative operations explained that the Speaker of the House, along with other key legislators, is primarily focused on natural gas production at the present time. The oil and natural gas industries were viewed as entrenched interests that have accumulated a great deal of political clout through their extensive lobbying relationships with legislators, and supporters of small wind and other renewable technologies often struggle to compete with this level of influence.

An additional challenge facing advocates for small wind energy in Oklahoma relates to the general conservative ideology that dominates the political discourse in the state. Oklahoma ranks as one of the most ideologically conservative states in the nation, with one interviewee describing it as the “reddest of red states” (Oklahoma – 11).

Numerous interviewees emphasized the significant impact that this ideology has had on efforts to promote small wind energy in the state, noting that the population (and its elected representatives) tends to be strongly opposed to government mandates such as a

Renewable Portfolio Standard. Another respondent expressed that Oklahoma is very much a free-market state in which “people are very suspicious of change, especially if it

103 is coming from the government” (Oklahoma – 4). This general opposition to government control and programs designed to modify the status quo (related to energy production in the case of small wind) creates ideological barriers that are already working against efforts to expand Oklahoma’s small wind policies before they have even left the ground.

One environmental group representative described feeling that Oklahoma’s “culture and politics are pretty hostile to anything with the word ‘green’ in it,” and the recent failure to enact a small wind tax credit was partially attributed to the lack of support from the

Republican leadership in both houses (Oklahoma – 4).

As was mentioned earlier, interest groups have also played a moderately important role in determining Oklahoma’s small wind policy environment. For example, groups representing the interests of the oil, natural gas, and utility industries were all perceived to have a very strong lobbying presence at the statehouse, resulting in a favorable policy environment for these industries. In contrast, three interviewees noted that groups representing renewable energy industries in Oklahoma do not have a strong presence at the state capitol yet, and thus have not been able to achieve the level of influence reached by the traditional fossil fuel industries. Nevertheless, several interviewees noted that commercial-scale wind energy has been able to overcome some of these disadvantages by hammering home the argument that investing in large wind will produce economic development benefits for the state. This was a very difficult argument to successfully present to the state legislature in Oklahoma, but commercial wind was perceived to have done a good job selling itself partially due to the help of all of the private sector backing it received from large and established wind companies.

104 However, small wind does not benefit from this type of large corporate support in

Oklahoma, and as a result the lobbying efforts on behalf of small wind energy have largely come down to one man and the small firm he represents. Mike Bergey (owner of

Bergey Windpower) has advocated tirelessly on behalf of small wind energy in

Oklahoma for many years, and six of eleven interviewees credited him with single- handedly moving forward the debate about small wind farther than any other person or entity in the state. He was largely responsible for developing the small wind tax credit proposal, with one interviewee jokingly referring to the legislation as the “Bergey Bill.”

While Mike Bergey has been key for at least introducing small wind legislation into the policymaking process, his advocacy and support alone have not been enough to turn these tax credit bills into law. H.B. 2247 successfully made it through both houses of the legislature in 2009, but eventually died in conference committee during the appropriations process when it had to compete for funding with other pieces of energy legislation pushed by utilities and the oil and natural gas industries. One environmental lobbyist in the state noted that this funding process was particularly competitive given the general poor economic conditions facing the country, and as a result issues that were backed by strong and well-organized lobbying support tended to be more successful at securing funding. The small wind tax credit was not perceived by interviewees as having enough advocates for it to be funded, and thus the bill was allowed to die during the conference committee process.

Compared to Oregon and Ohio, Oklahoma has traditionally been much less supportive of policies designed to protect the environment and has generally avoided taking an innovative stance on environmental issues. Several interviewees perceived this

105 historical indifference to environmental concerns as being an important hindrance to the advancement of small wind policies in the state, with one small wind installer bluntly stating that “people [in Oklahoma] have no regard for the environment” (Oklahoma – 8).

Other respondents reflected this sentiment as well, and in general the interviewees stated that environmental arguments do not work in Oklahoma and that these will not succeed in expanding legislative support for small wind energy on their own.

Unlike what has happened in Ohio and somewhat in Oregon, policymakers as a whole in Oklahoma also do not seem to completely subscribe to the idea that renewable energy should serve as a key component in the state’s future economic development.

Utility-scale wind energy has successfully made some inroads to change this mindset, but the progress made in this regard has not yet been reflected in the policy discussions about other renewable energy technologies. While certain individuals (such as the Governor) have advocated this position, the policy preferences of the legislature to date indicate that this argument has not yet won enough support to be a driving factor in discussions about small wind energy policies. For example, one interviewee suggested that legislative supporters of the recent small wind tax credit proposal (House Bill 2247) primarily viewed the bill as an opportunity for economic development. However, another respondent countered that the reason the bill failed was that not enough legislators were convinced that the measure would create jobs. Given the current economic climate, this respondent said that legislators want to show their constituents that they are producing jobs, and to many of these legislators the economic benefits of giving tax credits for small wind were not significant enough to justify their support. Although small wind advocates have been unable to advance this argument successfully, some respondents believe that

106 this will be the key to the future success of efforts to increase Oklahoma’s small wind support, pointing to the progress utility-scale wind has made in this regard as encouragement.

Cross-case summary

The results for each case study presented above suggest that several of the key policy adoption variables highlighted by previous scholars also appeared to have played an important role in the development of state small wind policies in Oregon, Ohio, and

Oklahoma. Table 8 provides a summary of the most significant policy adoption variables that were identified for each case.

107

Case #1 Case #2 Case #3

Oregon Ohio Oklahoma Variable (level of Variable (level of Variable (level of importance) importance) importance)

1) Level of commitment 1) Economic 1) Strength of fossil fuel to environmental development potential energy industries protection and (High) (High) innovation (High)

2) Level of commitment 2) Citizen ideology 2) Interest group strength to environmental (High) (Medium) protection and

innovation (Medium) 3) Interest group strength 3) Citizen ideology (Medium/High) (Medium) 3) Interstate competition

(Medium) 4) Level of commitment 4) Economic to environmental development potential 4) Interest group strength protection and (Medium) (Medium) innovation (Medium)

5) Interstate competition 5) Citizen ideology 5) Economic (Medium) (Low) development potential

(Medium) 6) Price of electricity 6) Price of electricity (Low) (Low) 6) Interstate competition

(Low) 7) Strength of fossil fuel 7) Strength of fossil fuel energy industries energy industries 7) Price of electricity (Low) (Low) (Low)

Table 8 – Impact of Policy Adoption Variables by State

Source: Interviews with 33 energy policy officials, small wind industry representatives, and members of environmental interest groups in the three states (12 in Oregon, 10 in Ohio, and 11 in Oklahoma).

The results presented in Table 8 reveal that the small wind policy adoption process was largely motivated by a unique combination of factors and circumstances in 108 each case, although some common patterns are also evident. The overall significance of these findings will be discussed in greater detail in the following section.

Discussion

Based on prior studies about environmental policy adoption as well as the results of the survey analysis conducted in the previous chapter it was expected that seven primary variables would provide the key influences to the small wind policy adoption process in Oregon, Ohio, and Oklahoma. These variables included: level of commitment to environmental protection and innovation; interest group strength; citizen ideology; level of personal wealth; legislative professionalism; interstate competition; and the price of electricity in each state. Case studies were conducted in order to examine the exact role that these variables played in the development of the small wind policies in these three states, as well as the manner in which they interacted with each other in this process. Furthermore, the case studies revealed that two additional variables – strength of the fossil fuel energy industries within a state, as well as the state’s perception of the economic development potential associated with renewable energy – were key factors affecting small wind policy adoption in at least one of the cases. By only looking at three states it is not possible to generalize the results from these case studies to the entire country or to draw firm conclusions about how the policy adoption variables will influence small wind policy adoption in other states beyond the three examined here.

Instead however, these results can be used to make inferences to the established state

109 environmental policy adoption theories in order to strengthen our general understanding of the policy adoption process related to distributed renewable energy technologies.

In particular, for the cases included in this study the results support the contention that state small wind policies follow the internal determinants model of policy adoption more closely than the regional policy diffusion model. At the same time, these case studies also reveal that the situation in each state in regards to small wind energy is very unique, as are the factors that come in to play to influence the state’s level of support for this technology. The most important variable determining a state’s small wind policies differed for each of the three cases (see Table 8), and even states such as Ohio and

Oregon that have adopted similar small wind policies were revealed to have taken different paths driven by unique motivations to reach the common policy result.

Notably, previous research suggests states that have historically expressed commitment to protecting the environment are more likely to adopt policies in support of small wind energy. The results of this case study analysis conditionally support this theory, particularly in the cases of Oregon and Oklahoma. Oregon’s legacy of environmental protection and its conservation ethic appeared to have played a prominent role in the development of its extensive small wind policy system. Conversely, the state with the weakest historical environmental record (Oklahoma) also exhibited the least support for small wind energy. However, Ohio stands out for having adopted a more expansive set of small wind policies than may have been expected given its moderate track record on environmental issues. Economic development considerations ended up being the key factors leading to the adoption of policies in support of small wind energy

110 in Ohio, but environmental motivations also played a crucial role in originally placing these issues on the state’s policy agenda.

On the other hand, the case studies revealed that citizen ideology might be a good indication of a state’s level of support for small wind energy for states that are located on either end of the ideological spectrum, but may not play a strong role for the majority of states with a more moderate citizenry. For instance, Oklahoma’s conservative nature was a found to be an important reason behind its relative lack of policy support for small wind, whereas Oregon’s more liberal ideology was credited with helping to drive the state’s leaders to adopt comprehensive programs in support of small wind. In contrast,

Ohio represents a very moderate state that was neither pre-disposed to support nor oppose small wind policies. The development of Ohio’s small wind policy regime was not found to be driven by ideology, but rather occurred in response to the linkage between renewable energy and economic development. These examples illustrate the types of situations in which the ideology of a state’s citizenry is likely to be most influential related to small wind policies, and may contribute to a more nuanced application of this aspect of the internal determinants model in future small wind policy studies.

The case studies also revealed the importance of considering a wide host of variables when examining the development of small wind policies in the context of an individual state, including those that may have been disregarded in the national-level analysis as insignificant. For example, the strength of a state’s fossil fuel energy industries was not identified as a significant small wind policy adoption variable during the survey results analysis in the previous chapter. However, the case study analysis for

Oklahoma discovered that this was likely the most important factor influencing small

111 wind policies in that state. Similarly, although the survey instrument was unable to assess the impact of interest group strength on small wind polices aggregated across all states, the case study analyses suggest that this variable should still be considered in this discussion. In particular, the case study results support the theoretical proposition that states with strong environmental interest groups would be more likely to adopt policies in support of small wind energy than states with strong advocacy groups representing more traditional energy and industry interests. Looking at national trends related to state small wind policy adoption is undoubtedly important, but the results of these case studies also suggest that this type of high-level analysis may fail to account for the unique circumstances present in some states. Future studies of small wind policy adoption should continue to examine this possibility further by investigating the unique circumstances in other small wind states to see how closely they align with the aggregated trends.

Two of the previously identified policy adoption variables – legislative professionalism and level of personal wealth – were not described by respondents to have played an important role in the development of small wind policies in Oregon, Ohio, or

Oklahoma. This finding is not meant to suggest that these factors do not play a significant role in other states, but they were not deemed to be critical in the specific analysis conducted for this study. Similarly, the price of electricity appeared to only have a minimal amount of influence on the development of small wind policies in these three states. However, the price of electricity was found to be a key driver for individual citizens and businesses that have expressed interest in installing small wind energy in these states. Interviewees suggested that most people who have installed small wind

112 systems have elected to do so largely out of the desire to lower their electric bills and to stabilize their energy costs ahead of potential price increases in the future. Overall, the current retail electricity prices in the three case study states are relatively low, which may explain why this was not perceived to be a major factor at the state level in these cases.

Nevertheless, its apparent importance to individual small wind actors suggests that this variable could potentially be a significant motivating factor for small wind policy adoption under other circumstances, and it should certainly continue to be included in future studies.

Although the internal determinants model appears to more accurately describe state small wind policy adoption, the case study analysis does not suggest that the variables highlighted by the regional policy diffusion model are insignificant. In fact, interstate competition over the mantle of state leadership on energy and environmental issues was found to be a moderately important driver in Oregon and Ohio. Ohio’s policymakers have taken the view that the state’s manufacturing sector has the potential to benefit greatly from the development of renewable energy, and they have made it clear that they want Ohio to be a leader in the renewable energy policy field in order to support this development. Oregon also values the economic development benefits associated with renewable energy, but the results of the case study suggest that much of its competition with other states over renewable energy policies is driven more by its strong environmental culture and conservation ethic. In particular, Oregon’s policymakers want to establish the state as a top leader in the environmental arena, and it appears that they view progressive renewable energy policies (such as those that have been established for small wind) as a key element in this leadership effort. As evidenced by these case

113 studies, both policy adoption models are important for understanding the development of state small wind policies, but the exact mixture of key variables in a particular state will primarily be determined by the unique circumstances that exist on the ground.

Conclusion

The results presented in this chapter expand upon the findings uncovered in

Chapter 2 regarding the most important policy adoption variables influencing the development of state small wind policies across the country. Whereas Chapter 2 approached this subject by aggregating information from the 44 states that completed the survey instrument in order to identify significant variables at the national level, this chapter focused on case studies to examine in-depth the situation in three small wind states. Case studies are useful to explain complex situations involving numerous factors such as those surrounding state small wind policies, and are well suited to assess the impact that different variables have in a particular state as they interact with each other.

The case studies included in this chapter looked at Oregon, Ohio, and Oklahoma, and revealed that at the individual state level small wind policy adoption does not always occur in the manner that would have been expected based upon the analysis of the survey instrument results.

For example, the strength of a state’s fossil fuel energy industries as well as the state’s perception of the economic development potential associated with renewable energy were found to be important policy drivers in at least one of the case studies, even though they were not emphasized in the survey analysis. Conversely, two of the key

114 variables from Chapter 2 - the level of personal wealth and the cost of electricity - appeared to have less of an influence on the small wind policy adoption process in the case study states than may have been expected originally. Overall the case study results still supported the finding that the internal determinants policy model best describes state adoption of small wind policies, but they also indicated that the situation in every state is unique and should be examined independent of the aggregated results. Conducting three case studies does not provide a large enough sample from which generalizations about small wind policies throughout the entire country can be made. Nevertheless, this type of analysis is appropriate for investigating theoretical propositions as they apply to small wind energy, and the results presented above strengthen the proposition that internal determining factors are the key variables influencing state small wind policy adoption.

115

Chapter 4: Case Study Policy Tool Results

Introduction

The previous chapter expanded upon the motivations determining the level of state support for small wind energy in order to develop a better understanding of why states have elected to promote this technology. In addition to examining the variables that influence this support, a complete assessment of state small wind policies must also analyze the practical impact that these policies have had on small wind turbine installations. Have state policies designed to promote small wind energy achieved their desired objectives? Which policy tools are perceived to be most effective, and what are the advantages or costs associated with applying policy instruments in one manner compared to another? Not all small wind policy tools are created equal, and a crucial part of expanding small wind energy usage is to understand which policy instruments are most likely to work under which sets of circumstances. This chapter addresses these issues by examining each of the specific policy tools that have been adopted in the three case study states discussed previously.

Although the primary focus of this study is to explain small wind policy adoption, a secondary objective is to explore the outcomes related to small wind usage that have resulted from this complex policy adoption process. This chapter presents the results of

116 this element of the study, and builds upon the previous case study analyses by assessing the actual application of small wind policies in each of the three states. In particular, the following research question forms the basis of this analysis:

RQ 4) Which policy tools are perceived to be effective for increasing the adoption of small wind energy technologies?

In order to address this question this portion of the analysis will look at the policy tools currently being used by the three case study states included in this report – Oregon,

Ohio, and Oklahoma. The primary data used in this assessment comes from the same interviews conducted with policy officials, small wind installation companies, and representatives from environmental interest groups in each of the three states that were discussed in the previous chapter. Please refer to Chapter 3 for a detailed description of the methodology used in developing these case studies and the process by which information was collected. Similarly, previous research into different types of policy instruments is summarized and discussed in the literature review sections of Chapter 2 and Chapter 3, providing a broad overview of the different policy options states have at their disposal to promote small wind energy. Furthermore, Chapter 3 also contains an in- depth look at the historical background of the particular small wind policies in each of the case study states as well as some of the relevant circumstances surrounding their current application. This information presented earlier in this study provides important context to the results included in this chapter, and should be referenced when considering the discussion below.

117 Results

The results of the small wind policy tool examination will be looked at from two different perspectives. Within-case results are presented first, focusing on the perceived effectiveness of the policy tools being used in the states from the perspective of the interviewees and supported by existing secondary documentation when applicable.

Second, important observations and patterns are provided from the cross-case analysis of the situation in all three states.

Case Study #1 – Assessment of Oregon’s current small wind policies

On average, the interviewees in Oregon appear to support the small wind policies and programs currently in place and feel that they have mostly been effective in promoting the growth of small wind energy in the state. In particular, respondents are complimentary of the well-rounded portfolio of financial incentives offered to all different customer classes, although many expressed concerns about restrictions on eligibility for some of the programs. Perspectives on each of the policy tools are provided below.

Net Metering

The overall perception of Oregon’s net metering policy was mixed. All interviewees appeared to think that net metering is very important in order for small wind to succeed in Oregon, but several respondents expressed concerns about the way that the

118 current policy is being implemented. In particular, three interviewees mentioned that the state’s investor-owned utilities tend to have better net metering policies for consumers than the rural electric cooperatives. Many of Oregon’s best wind areas are serviced by some of these electric cooperatives, and as a result of this inconsistent application of net metering some of the customers with the best potential to utilize this program receive the least amount of benefit from it. Furthermore, other interviewees expressed concern that requiring net excess generation to be donated to low-income energy assistance programs reduces the incentive for small wind owners to install larger small wind systems since they will not be individually compensated for excess generation.

Renewable Portfolio Standard

The general assessment of the RPS was that it has been very helpful for large- scale wind projects, but has not had a significant direct impact on small-scale wind energy in Oregon beyond increasing the general level of public and legislative interest in renewable energy. However, one official remarked that the RPS’ level of impact on small wind could potentially increase in the future if a decision is made to allow small wind systems’ emissions savings to count toward the utility companies’ renewable energy credit requirements.

Energy Trust’s Small Wind Incentive Program

This program was widely considered one of the most important policies Oregon has established in support of small wind energy. For example, one installer said that none of his customers would have been able to afford their small wind turbines without

119 the Energy Trust incentive, and many interviewees stated that small wind would not be financially feasible for most people in Oregon without this incentive program. However,

Energy Trust’s programs do not cover the entire state and only customers of the investor- owned utilities are eligible to take advantage of these incentives. Several interviewees cited this limitation as a major drawback to the incentive that has limited its ultimate impact on small wind in the state. Many of the windiest areas in Oregon are located in rural parts of the state that are not covered by Energy Trust, thus automatically eliminating many of the best potential small wind customers from qualifying to take advantage of these funds. Overall this incentive appears to have a large impact on those who are eligible to apply for it, but the impact of this program at the state level can only be considered moderate at this point due to these concerns about customer eligibility.

Tax Credits

The state’s small wind tax credits were also perceived to be important in the development of small wind energy in Oregon, and several interviewees argued that combining tax credits with the Energy Trust incentives is crucial to the success of

Oregon’s small wind efforts. Either of these policies alone would likely not be enough to overcome the financial barriers to installing small wind in Oregon, but together they allow many people and businesses to afford a small wind turbine. In particular, the

Business Energy Tax Credit (BETC) has made a significant impact on businesses and agricultural interests (such as farms and wineries) that want to install small wind, with a few interviewees describing BETC as the most important small wind policy tool in

Oregon. However, one concern about BETC is that many entities that want to use it do

120 not possess a large enough tax liability to take full advantage of the credit and are forced to utilize the less rewarding and more cumbersome pass-through option. Conversely, the

Residential Energy Tax Credit (RETC) is not perceived to have as much of a positive impact on small wind energy growth due to the maximum benefit level of the credit being capped at $6000. Depending on the size of the system, many of the small wind turbines used in Oregon can cost more than 10 times that amount, in which case this tax credit only accounts for a small portion of the total installation costs. Most interviewees were supportive of having a Residential Energy Tax Credit, but they generally expressed a desire to raise or eliminate its maximum cap level.

Small-Scale Energy Loan Program

Oregon’s small-scale energy loan program was perceived to be a potentially attractive way to finance the debt side of small wind projects, but interviewees expressed concerns that the application process is cumbersome and that it currently is not used often for small wind.

Education and Public Outreach

Although some interviewees expressed a desire to expand educational and public outreach efforts focused on small wind energy in Oregon, several people also mentioned that they think Energy Trust has done a good job building public awareness about small wind. Additionally, two officials also stressed that they would like to see a better assessment of the wind resource across the entire state in order to help people evaluate the small wind potential on their property. Energy Trust operates a computer modeling

121 program that assists with this task, but these officials noted that they would like this evaluation software to go more in-depth, and similar to the situation with the incentives this computer program is only available to customers living in Energy Trust’s service areas. As a result, it can be difficult to assess the wind resource in places outside of these areas, which is particularly frustrating when it is a location that is believed to have a potentially strong wind resource.

In addition to the policies already in place in Oregon, the most commonly cited policy tool that interviewees would like to see Oregon adopt in support of small wind was a feed-in tariff that would require utilities to pay above-market rates to customers with small wind systems. Furthermore, a common concern expressed by many interviewees was that inconsistent local permitting processes and zoning requirements were making it difficult for many people to install small wind turbines. Some interviewees recommended that limitations on local zoning restrictions for small wind systems be adopted at the state level (a similar policy was recently implemented in Wisconsin) to minimize further local zoning conflicts.

Case Study #2 – Assessment of Ohio’s current small wind policies

For the most part the interviewees were fairly supportive of the current policies

Ohio has adopted to promote small wind energy and believe that these programs are having the sort of impact they were designed to produce. Numerous concerns were expressed about these programs and their long-term viability, but others remained

122 optimistic that small wind energy is poised to grow considerably in Ohio in the near future. The perceived effectiveness of each of Ohio’s small wind policy tools is examined below.

Net Metering

The general sentiment about net metering in Ohio is that the policy has an important role to play in encouraging people to install small wind, but five of the ten interviewees expressed specific displeasure with the current way in which this policy has been implemented in the state. In particular, several respondents are concerned that the buy-back rates paid by utilities to customers are too low, and thus they do not offer enough of an incentive for people to generate their own electricity. Beyond rate concerns, the most common complaint lodged against Ohio’s net metering program was that customers have struggled to work with the utilities to establish the net metering agreements. Some of the electric utilities were identified as being better than others in this regard, and multiple interviewees singled out First Energy in particular for being the least supportive electric utility regarding the development of small renewable energy systems.

Renewable Portfolio Standard

Overall, interviewees perceive the RPS as having great potential to contribute to significant future growth in small wind energy in Ohio, although the exact extent of its current impact on small wind energy at the time of writing remained up for debate.

Nevertheless, four of ten interviewees agreed that the current proposal to include

123 electricity generated by small wind systems in the REC purchasing program (discussed in

Chapter 3) could significantly boost the small wind industry in Ohio. Currently the RPS does not directly account for the impact of small renewables, which are disaggregated among numerous residential customers. However, including small wind energy in the proposed REC purchasing program would aggregate the benefits of small renewables so that they can be counted towards achieving the requirements of the RPS goals.

Customers would receive financial compensation in return for allowing utilities to use their RECs, reflecting one interviewee’s assessment that the goal of this effort is to

“make sure residential customers with small renewable energy systems are able to partake in the REC gold rush” (Ohio – 1).

Advanced Energy Fund

Although interviewees seem to like the small wind incentive that is funded through the Advanced Energy Fund (AEF) they still presented several crucial concerns about the manner and extent to which the AEF is funded. In particular, four of ten respondents expressed displeasure with the funding format, complaining that charging a flat-rate fee per customer regardless of energy usage places a disproportionate share of the financial burden on residential customers. Similarly, others would like to see the total budget of the fund increased beyond its current $5 million level, and they voiced concerns that the small size of the fund’s budget may reduce the overall impact and effectiveness of the programs associated with the AEF. One interviewee justified this concern by citing the results of a 2007 report that revealed Ohio ranks near the bottom of all states with Public Benefit Funds in terms of its per-capita spending on the AEF as well

124 the AEF’s total budget (Woodrum, 2007). Furthermore, the AEF is currently set to expire at the end of 2010, raising concerns amongst several respondents that the fund risks not being re-approved at that time. In light of this fear, one installer mentioned that stabilizing this funding stream and guaranteeing the long-term availability of the AEF is important for the success of his business going forward (Ohio – 2).

Residential Wind Energy Incentive

The current Residential Wind Energy Incentive was widely viewed to be the most important small wind policy in Ohio and was perceived to have made the greatest positive impact on the development of small wind energy in the state. For example, one installer mentioned that approximately one third of the calls he receives about small wind come from people who are interested in learning more about this incentive. Similarly, another installer estimated that at least half of his customers would not have been able to afford their turbines without using the grant money they received through this program.

Several people also complimented the structure of this incentive program in that the grant funds are tied to the actual amount of power produced by a customer’s small wind system, although one person felt that the minimum power production requirement was too high. This requirement has encouraged customers and installers to do a better job siting turbines in order to maximize the amount of energy that will be produced, and it is complemented by the program’s establishment of a list of certified small wind installers located in Ohio.

Despite the incentive program’s wide popularity, a few respondents still mentioned some problems that they would like to see addressed in the program in order

125 to strengthen it even more. In particular, since the incentive program is funded through the AEF it faces the same worries about its long-term funding status after 2010 when the state’s Public Benefit Fund is currently set to expire. Furthermore, one installer mentioned that he would like to raise the cap on the maximum amount of the grants awarded through the incentive program in order to allow more adequate funding for larger small wind turbines (particularly 50 kW systems).

Education and Public Outreach

The results of the case study revealed fairly widespread agreement that a greater focus on public outreach and education about small wind energy would be important for the continued growth of this technology in Ohio. In particular, one environmental group member suggested that the state should emphasize reaching out to children in its education efforts in order to develop a long-term base of support for renewable energy in the upcoming generation. Two ways in which this task could be approached include incorporating renewable energy in school curriculums or installing small wind pilot projects on school grounds to serve as hands-on learning tools. Similarly, four of ten interviewees also cited the need for increased technical assistance from the state in order to ease the process of determining high quality wind sites and to help customers feel more comfortable with installing this new technology. Most importantly, some interviewees requested that the state reacquire a high quality wind resource mapping tool that can be used to evaluate the quality of the wind resource on any citizen’s property. In the past Ohio possessed an interactive wind resource map that could zoom into a specific property to estimate its wind speed and other information, but ODOD elected to end its

126 subscription to this service after its cost was increased. It is believed that the Ohio Power

Siting Board may be trying to create its own version of this type of map for Ohio, but this has not been completed yet and thus the state currently does not have direct access to this type of important detailed wind resource information.

Anemometer Loan Program

Although this program has only been in operation for two years, it has been well received by the public in Ohio and has experienced a significant increase in the number of applications from the first to the second year of the program. The program currently only possesses the technological capacity to monitor two sites annually, and as a result most of the applications have to be denied. One official familiar with the program explained that they are currently investigating ways to increase funding in order to expand the availability of the program, including applying for federal stimulus money earlier this year.

Case Study #3 – Assessment of Oklahoma’s current small wind policies

All of the people contacted for this case study agreed that Oklahoma does not currently possess adequate policies to support the development of a strong small wind energy market within the state. Although the outreach conducted by the state Energy

Office and the Oklahoma Wind Power Initiative were perceived to be somewhat effective, it was apparent that most people believed that a much larger effort needs to be made to educate the public and the legislature about small wind. One interviewee

127 explained that renewable energy supporters “have not won the hearts and minds in

Oklahoma on these issues (e.g., climate change and renewable energy),” and that for small wind to succeed in the state progress first needs to be made changing the prevailing mindset (Oklahoma – 4). In order to accomplish this goal, respondents said that it will be important to produce studies highlighting the potential economic benefits of small wind in Oklahoma that can be distributed to state legislators, as well as to install small wind pilot projects in schools and other public locations.

The only major policy currently in place in Oklahoma that benefits small wind is net metering, but respondents indicated that this program has not been very effective in the state. In particular, interviewees expressed concern that low buy-back rates from utilities have reduced the profitability of participating in this program, and that many of the utility companies (particularly some of the electric cooperatives) are difficult to work with on this issue. The lack of consistent net metering rules between the regulated utilities and unregulated electric cooperatives makes it difficult for installers to help their customers take advantage of this opportunity, and it generally seemed that net metering has not yet had a large impact on small wind.

Most interviewees expressed hope that Oklahoma will adopt some sort of financial incentive for small wind in the future. Tax credits and grants were the two most frequently cited policy tools that the interviewees would like to see the state develop, although a few people mentioned low-interest loans as well. Some interviewees stated that they would like to see a Renewable Portfolio Standard in Oklahoma that includes a role for small wind energy, but they also acknowledged that the likelihood of a RPS passing in Oklahoma is low due to political realities.

128

Cross-case summary

Although this study has primarily focused on investigating the variables influencing state small wind energy policy, an important secondary motivation for this case study research was to examine the effectiveness of the different policy tools currently being used in the three states. Table 9 below presents a summary of the perceived impact of each of the policy tools on the growth of small wind energy in each state.

Small Wind Policies

Public Anemometer Net Tax Education/ State RPS Benefit Grants Loans Loan metering Incentives Outreach Fund Program

Medium/ Medium/ BETC – High Low/ Oregon Medium Low Low High High RETC - Low Medium

Low/ Ohio Low Medium High Low Low Medium

Oklahoma Low Low Low Low

Table 9 – Policy Tool Impact

According to the results presented in Table 9, financial incentives appear to be the most effective policy tool for promoting small wind energy, although the exact benefits and impact of particular incentive programs vary between states depending on how these programs are structured. It is important to note that these rankings only reflect the impact 129 that the tools have had on small wind energy in these particular cases. Other states could implement these same general policy tools in different ways that could either strengthen or weaken their effectiveness, and these results cannot be interpreted as an overall measure of the effectiveness of the tools in all situations across the country. The findings presented in Table 9 will be examined in greater detail in the following discussion section.

Discussion

The small wind industry continues to face numerous barriers and obstacles to overcome as it seeks to expand and become a more established part of American society.

Most significantly, the initial investment costs dissuade a great deal of people from purchasing a small wind turbine that otherwise may be interested in doing so. For example, the American Wind Energy Association estimates that it costs approximately

$40,000 to install a small wind system large enough to supply the electric needs of an average home (AWEA, 2009b). From a financial perspective, small wind energy is a long-term investment that will help customers save money over time, but quite frequently people who would like to install a turbine do not have the necessary financial resources to cover all of the upfront costs on their own. Perhaps it should not be a surprise then that the interviewees in the case study states seemed to view the various financial incentive programs and net metering to be the most effective policy tools for helping to expand small wind adoption. Furthermore, 9 of the 11 interviewees in Oklahoma (the only case study state without any broad financial incentives beyond net metering) identified

130 financial incentives as one of the key policies they would like to see their state government implement in regard to small wind. Across all three states there seemed to be considerable agreement that these programs are essential for making small wind systems affordable and attractive to consumers.

However, financial concerns are not the only barriers restricting the growth of the small wind industry in the United States. Since small wind energy is still a relatively new and unfamiliar technology to most people the private market is not strong enough to produce sufficient demand and growth without support from the government. People often do not understand small wind energy and the full benefits it presents, nor do they often recognize the challenges and limitations associated with the technology. Public education and outreach efforts are essential for overcoming this knowledge and information gap, and until the industry becomes more established it will largely be left up to the government to pursue these activities. The results from the case studies suggest that simply educating the public about small wind will not be enough on its own to expand the industry, but combining these efforts with financial incentives and net metering were perceived to produce the best outcomes for small wind. Financial incentives are only effective if people know about them and understand the technology enough to feel comfortable with it, and thus the success of these incentive programs seems to be magnified by the presence of effective public outreach and education programs.

In addition to examining policy adoption variables and policy instruments, the case studies also uncovered several common challenges that impacted each state’s attempts to expand the usage of small wind energy. First, multiple interviewees from all

131 three states expressed concern that inconsistent local zoning and permitting policies were causing unnecessary headaches for customers and preventing the installation of some small wind systems. In order to address this problem, several people suggested that their state government should consider adopting a wind access law that places limitations on local zoning restrictions related to small wind turbines, perhaps similar to the one implemented in Wisconsin.

Furthermore, each state also suffered to some degree from problems resulting from the inconsistent application of its policies or the incomplete coverage of the programs it has adopted. For example, net metering seems to be applied very differently depending upon whether a customer has to work with a regulated utility or an electric cooperative. In many cases each utility seems to have its own approach to net metering, resulting in confusion and uneven benefits for customers in the same state depending on their electric utility provider. Similarly, the small wind incentive programs in Oregon and Ohio were both considered very effective in most regards, except that neither of these programs are available to all of the state’s citizens. Since these programs are both funded through their state’s respective Public Benefit Fund, program eligibility is limited to customers of the investor-owned utilities in the state who contribute to the Public

Benefit Fund. As a result of this reduced eligibility, the full benefits and impact of these programs are limited, and many interviewees expressed the desire to expand the coverage of these programs to the entire state.

Another financial concern that arose in both Oregon and Ohio centered upon the long-term stability of the state’s small wind financial incentives. In particular, interviewees expressed concern that if people cannot rely on an incentive to be there over

132 the long-term (such as a 5 year tax credit) they will be less likely to rely on this incentive to help with the financing of their proposed small wind systems. This concern is particularly relevant in regard to tax credits. Although most interviewees agreed that tax credits could provide an effective incentive to encourage people to invest in small wind, multiple respondents also stated that tax credits were not their preferred incentive because they can easily be revoked or reduced during difficult economic times. This scenario is currently taking place in Oregon with the BETC. A second problem that was identified involving tax credits is that they require the recipient to have a large enough tax liability in order to receive the full benefit of the tax credit. Not all small wind customers have large tax liabilities (e.g., some farms, schools, non profit organizations), and thus these customers are at risk for not being able to utilize the full benefit of some tax credit programs.

The final common challenges identified in these case studies focus more on the general concerns rather than issues related to specific types of policies. First, numerous respondents described a general lack of knowledge and awareness about small wind energy amongst much of the public in all three states. They emphasized that more work needs to be done to educate people about small wind energy and to help them develop a realistic understanding of whether or not small wind would be appropriate for their particular property and situation. Furthermore, many interviewees also expressed frustration about the lack of national standards for small wind turbines. People are concerned that poorly manufactured or installed turbines end up putting a black mark on the entire industry, and many expressed hope that the American Wind Energy

133 Association will work with the Small Wind Certification Council to release the first nationally-accepted standards later this year.

Conclusion

Although the results discussed above provide a good representation of the types of experiences states have had using various small wind policy tools, it is important to avoid extrapolating the conclusions from these states directly to the rest of the country.

However, these findings are strengthened by the fact that they seem to corroborate the results from the survey instrument analysis in Chapter 2, which found financial incentives and net metering were viewed as the most effective policies across the 37 participating small wind states. Rather than generalize about policy tool effectiveness based on three cases though, the more significant lesson to be drawn about small wind policy tools are some of the shared problems and successes experienced by these three states which may be applicable to other states in the future.

For example, while financial incentives seem to be crucial in order to develop a strong small wind market in a state, combining these incentives with public outreach and education efforts may be key to maximizing their effectiveness. Conversely, the experience in Oregon and Ohio also revealed a problem facing financial incentives that are tied to Public Benefit Funds that do not cover the entire state. Since these Public

Benefit Funds are only financed by customers from the state’s large investor-owned utilities, anyone who is not served by these utilities is not eligible to take advantage of the incentive programs. As a result, many otherwise well-qualified potential small wind

134 owners have been shut out from this key financing mechanism and then struggled to find alternative ways to go forward with the purchase of a small wind turbine. Both of these incentive programs were still viewed to be very successful by the interviewees in these states, but their effectiveness is reduced as a result of this limitation, and this type of situation illustrates the benefits of also having government-run programs that are available to everyone.

No state operates under the exact same set of circumstances as any other state, and thus one state’s application of a particular policy tool will likely differ from another state’s usage of the same general policy instrument. Although three states is not a large enough sample to definitively evaluate policy tools across all small wind states, the experiences of Oregon, Ohio, and Oklahoma provide an important look at how different small wind policies have fared under a variety of circumstances. Most importantly, these case studies help to illustrate some important considerations that all states should take into account when determining their small wind policy regimes.

135

Chapter 5: Conclusion

The research presented in this document was conducted in order to evaluate the process by which small wind policies and programs are developed and adopted by state governments. Small wind energy is a quickly growing sub-section in the renewable energy field, and it provides governments with an alternative approach to reducing greenhouse gas emissions by encouraging home and business owners to install wind turbines on their property in order to fulfill their electricity needs. Nevertheless, supporting small wind may not always be the most cost-effective approach to take in every state, and not all state governments have elected to promote this technology.

Although small wind usage has increased significantly in recent years, the technology and its proponents continue to operate in the shadow of more established renewable energy technologies such as solar energy and commercial-scale wind energy. As a result, scant prior research had considered the role of small wind within the overall renewable energy industry, nor was it well understood what was driving some state governments to commit fiscal, human, and material resources in support of a technology that produces only limited benefits to society at large. State government support has been instrumental to the recent growth in the small wind industry, yet the level of policy support between states varies significantly and has resulted in many unique arrangements of small wind policy tools.

136 The first step of this analysis was to assess the current status of state small wind policies across the country. A survey instrument was distributed to the top small wind energy policy expert in all 50 state governments in order to collect this information.

Officials from 44 states completed the survey instrument, and 37 of these 44 states were found to currently offer at least one policy or program in support of small wind. When all of the results were aggregated together, respondents rated net metering and financial incentives as the policy tools that have had the greatest success encouraging individuals and businesses to install small wind systems. This finding was further strengthened by the results of the case study analyses presented in Chapter 4. Respondents highlighted that financial incentives have made the greatest impact on small wind policy adoption in

Oregon and Ohio, while interviewees from the one state without financial incentives

(Oklahoma) indicated that this was the type of policy tool they would most like to see adopted.

In spite of the prominent role that financial incentives played in these discussions, the case studies also revealed that the situation is more complex than it first appears.

Most notably, the case studies suggested that combining financial incentives with strong public outreach and education efforts about the attributes of the technology produced the best outcomes for small wind energy. This finding indicates that the effectiveness of small wind incentive programs may be enhanced when operated in coordination with effective public outreach and education efforts, although further analysis in additional cases will be needed to conclusively assess this linkage.

In order to distinguish between different states’ small wind policy regimes, a policy tool framework was established which separated the various small wind policy

137 tools into four types. Based upon this framework, states were classified as having either

“complex” (3-4 policy tool types) or “straightforward” (1-2 policy tool types) small wind policy systems. Using this classification system as a measure of the dependent variable, statistical correlations were assessed to determine which of the key policy adoption variables appear to be correlated with the level of state support for small wind. These calculations highlighted six factors that were found to be connected to the development of state small wind policies: a state’s historical commitment to environmental protection and policy innovations; citizen ideology; economic wealth and development; retail price of electricity; degree of legislative professionalism; and interstate competition related to leadership on environmental and energy issues. Five of these six variables are associated with the internal determinants model, and thus the results from this phase of the analysis suggested that the internal determinants model was better suited to explain and assess state adoption of small wind policies than the regional policy diffusion model.

However, the survey instrument results alone were unable to explain how these factors interacted with each other regarding small wind energy policies, nor could they assess the level of impact that each factor has on small wind policy adoption. These questions formed the basis for Chapter 3 of this study, and were addressed using case study analysis methods focused on the small wind policy experiences in three states –

Oregon, Ohio, and Oklahoma. The results from these case studies supported the survey analysis finding that state small wind policy adoption more closely follows the process described by the internal determinants model than the regional policy diffusion model.

Nevertheless, the case studies also revealed that policy adoption variables interact differently with each other based upon some of the unique circumstances within a

138 particular state. The importance of these local factors make it difficult to accurately predict which policy adoption variables are most important in any particular state, suggesting that a true understanding of state small wind policy adoption may require the type of in-depth analysis provided by case study methods.

Although the aggregated survey results suggested specific factors that were likely to be significant and painted a valuable overview of the state small wind policy universe, the case studies also indicated that other variables might be important under the right set of circumstances. For example, the strength of Oklahoma’s traditional fossil fuel energy industries was perceived by respondents to be a crucial element behind the state’s reluctance to provide financial support for small wind systems. Conversely, Ohio needed a strong reason to support renewable energy beyond its environmental benefits in order to pass legislation to promote clean energy technologies. It was not until the state’s leaders successfully advanced the argument connecting renewable energy development with economic development and the rebirth of Ohio’s manufacturing sector that these policies were finally able to elicit enough support to become law. Even though Ohio and Oregon have adopted a fairly similar set of small wind policies, the case studies helped to uncover that these states were driven by somewhat competing motivations and took very different routes to reach their current common policy outcome.

In addition to discussing the results that were produced by this study, it is also important to acknowledge the limitations associated with the methodologies used to address the primary research questions. For instance, since small wind is often one technology out of a batch of technologies that can benefit from state programs (such as net metering or tax credits), the policy debates within states did not always center on

139 small wind exclusively, even if the eventual outcomes would impact small wind. Instead small wind would sometimes get caught up in the broader debate about renewable energy, and thus the results of this study may capture some of the sentiment regarding renewable energy in general rather than always being able to isolate small wind by itself.

Similarly, the lack of available data to measure small wind adoption levels per state makes it difficult to corroborate the findings obtained from the case studies regarding policy tool effectiveness. Ideally this research would be able to link the measure of state support for small wind with a measure of state small wind adoption levels to confirm that the policies being implemented by state governments are producing the appropriate desired effect. Neither state governments nor the American Wind Energy Association appear to track this information on a state-by-state level currently, and it is recommended that this important data be collected in the future in order to improve the ability to assess the impact of state small wind policies.

Furthermore, there are also some limitations to the conclusions that can be drawn from the survey instrument results due to having only one response per state. Even though this response was believed to come from each state’s top expert on small wind policies, it is impossible to know if the respondents’ interpretations of the situation surrounding small wind in every state were completely accurate. Whereas the survey instrument allowed for a wide coverage of states, case study methods produce a detailed examination of the situation in a small number of specific states. In this analysis, case studies were used to help to examine how the results of the survey instrument actually played out on the ground in three instances, but due to the labor and time-intensive process of performing a case study it was not feasible to analyze every state in this

140 manner. As a result, three cases does not provide a large enough sample to generalize conclusions for the entire population of small wind states, but this does allow for inferences to be drawn to the theories that served as the foundation for this study. Most notably, combining the survey analysis with the case studies indicates that the policy process associated with this type of distributed renewable technology is strongly influenced by certain local conditions that are present within a state. Elements of the internal determinants policy adoption model appear to best describe this process, although in some instances the local circumstances may be influential enough to cause states to deviate from the expected policy adoption approach.

Results from this study also suggest several potential avenues for future research.

First, there is ample opportunity for researchers to conduct additional case studies to examine small wind policies in different types of states to determine if the same policy adoption patterns hold true under different circumstances. For example, states from other geographic regions of the country (e.g., Northeast, Southeast, Southwest) could be researched to see what types of unique regional factors may potentially be present in these locations. Conversely, future studies could also examine states that do not have any small wind policies in order to better understand why these governments have chosen to not support this growing technology and what variables were influential in reaching that determination.

Different approaches to small wind policy research could also be pursued by future researchers. For instance, whereas this study focused on higher level actors

(government officials, installation companies, non profit groups) future research could investigate what the actual adopters of small wind systems think about the programs and

141 policies in their state. The degree of alignment between the views of small wind customers and the government may provide useful insights into the effectiveness of the government’s policies and what steps could be taken to develop programs that work best for consumers.

As was discussed previously, an important goal for future small wind policy researchers should be to acquire data about the actual installed capacity of small wind systems in each state. This information is not currently available, but future research should seek to determine how many turbines have been installed utilizing various state government programs compared to the number of turbines that have been installed out of pocket by private individuals. Once all of this information has been obtained, it could then be inserted as a new dependent variable measure and utilized to review the analyses conducted in this study to see if the results presented here still hold true. Finally, looking beyond small wind exclusively, future studies could compare the findings discussed in this analysis to research on different small-scale renewable energy technologies, such as solar energy, to see if the same patterns and policy adoption variables are significant in those cases as well.

In addition to implications for further research, the results of this study also present important implications for state policy makers to consider. Several recommendations have been developed from these results, although it is important to emphasize that these recommendations primarily apply to states that have already made the decision to pursue small wind energy. Small wind may not always be the most effective or cost-efficient renewable energy technology for every state, and these suggestions do not intend to imply that all states should adopt small wind policies.

142 Before deciding to promote small wind, states should also consider if there are any other technologies or methods that could better accomplish their desired environmental and energy goals. However, for states that have chosen to support small wind the recommendations may help to ease the passage of significant legislation, and they aim to maximize the effectiveness of the policies that are put into place.

First, policy makers trying to pass small wind legislation in an unsupportive state may want to follow the lead of Ohio and emphasize the potential economic benefits associated with this type of technology. Combining this argument with the pre-existing environmental motivations proved to be successful for Ohio’s leaders, and a similar type of linkage proved beneficial in Oregon as well. Furthermore, several interviewees in

Oklahoma believe that the recent failure to adopt a small wind tax credit was partially due to the inability to make a successful economic argument in support of the bill. States such as Oklahoma are likely not pre-disposed to support progressive environmental and renewable energy policies, and thus proponents of small wind in similar locations should focus their efforts on promoting the economic benefits that small wind can provide.

The case study analyses also revealed a few concerns about the existing small wind policies in these states that are likely relevant to other small wind states as well and should be addressed by policymakers in order to maximize the effectiveness of small wind policies. First, interviewees in all three states emphasized that inconsistent local zoning codes regarding small wind energy greatly complicate the turbine installation process. To remedy this problem, it is recommended that policy makers adopt a statewide wind access law that defines how local governments are permitted to regulate small wind systems. Wisconsin currently has this type of policy in place, and this could

143 serve as a potential model for other states interested in developing wind access laws

(DSIRE, 2009). Second, policy makers should strive to avoid establishing small wind programs or policies that are not available to all citizens. Oregon and Ohio both have strong financial incentives programs for small wind, but numerous interviewees in both states noted that the effectiveness of these programs is diminished as a result of their lack of comprehensive coverage due to the funding structure of the Public Benefit Fund in each state. In particular, states should work with rural electric cooperatives and municipal electric companies to bring them into existing state small wind programs, or to help them develop similar policies for their own customers in order to make sure that all residents are eligible for some form of financial assistance.

Regarding financial incentives for small wind, the case study results from Oregon and Ohio suggest that this type of incentive works best when coupled with strong public education and outreach efforts focused on making people familiar and comfortable with this technology. However, in consideration of the concern that some people and businesses are not able to take advantage of tax credits as a result of not having a large enough tax liability, it is recommended that financial incentives programs do not just focus on tax incentives alone. Tax incentives can certainly be an important element of a comprehensive small wind policy regime, but for maximum impact they should not be the only type of financial incentive offered to residents or businesses. Of course, policy makers should be careful when considering the cost-effectiveness of financial incentives to make sure that they are utilizing the public’s money in an efficient and beneficial manner before adopting any new policy. One way to guarantee that financial incentive programs result in sufficient renewable energy production is to tie the incentives to the

144 actual amount of energy that is generated, rather than basing them on the cost of purchasing and installing the system. Furthermore, in recognition that most adopters of small wind systems appear to be driven by the motivation to lower their electricity bills, policy makers should target their small wind outreach efforts with this fact in mind, even if it is not the main reason why the state itself has chosen to support small wind.

The results presented in this study have helped to explain and assess the state policy adoption process associated with small wind energy, a renewable energy technology that is quickly expanding its reach but has still not received significant academic attention. Although it remains unclear exactly how analogous these findings for small wind may be to other distributed renewable energy technologies, further analysis may reveal that other technologies experience similar challenges, pressures, and opportunities. At a minimum, this study suggests that future research should focus primarily on the internal determinants model when analyzing the policy adoption process related to small-scale renewable energy technologies, albeit with the caveats and considerations discussed above. Every indication from this study implies that the future for small wind energy appears promising in most states, although further evaluation of the effectiveness of various policy instruments under different circumstances would be useful to help guide future small wind efforts.

145

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Appendix A: State Small Wind Policy Survey Instrument

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154

155

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158 Note: This page was only viewed by respondents who answered “No” on Question 11

159 Note: This page was only viewed by respondents who answered “No” on Question 11

160 Note: This page was only viewed by respondents who answered “Yes” on Question 11

161 Note: This page was only viewed by respondents who answered “Yes” on Question 11

15.) In your opinion, how important are/were the following factors in generating support for small wind energy technologies among policy makers in your state? (Instructions: Please select the level of importance of each item in the spaces provided next to the item.)

Very Moderately A Little Not Important Important Important Important

High gasoline prices High natural gas prices High consumer electricity prices Potential job creation related to wind energy in your state Concerns about the negative impacts of global climate change Concerns about harmful pollution levels in your state The desire to empower local citizens to be in control of their energy supply Competition with neighboring states for jobs associated with wind energy. The desire to be viewed as a leader in energy and environmental policy. The lack of federal financial incentives for interested consumers. 162 The lack of federal financial incentives for interested consumers.

Other Items (please describe and indicate their level of importance)

163 Note: This page was only viewed by respondents who answered “Yes” on Question 11

16.) During the creation of your state’s small wind energy policies, did your state look to the policies of any other states for guidance?

(Instructions: Consider any policies, programs, or incentives in your state that address small wind technologies directly or as part of a larger bundle of qualified energy technologies in your response.)

o No o Yes

If yes, which states were examined?

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Note: This page was only viewed by respondents who answered “Yes” on Question 11

165 Note: This page was only viewed by respondents who answered “Yes” on Question 11

166 Note: This page was only viewed by respondents who answered “Yes” on Question 11

Other Obstacles (please describe and rank)

167 Note: This page was only viewed by respondents who answered “Yes” on Question 11

20.) To what extent do you agree or disagree with the following statements:

(Instructions: Please select the best option in the spaces provided next to each statement.)

Strongly Agree Neither Disagree Strongly Agree Agree Nor Disagree Disagree "The government of my state is a leader in small wind energy policies." "The policies currently being used in my state to promote small wind energy technologies are effective." "My state already had policies to support other renewable energy technologies (e.g. solar, utility- scale wind, biomass, geothermal) before it began to support small wind energy." "Creating policies and incentives to support small wind energy in my state was made easier as a result of pre-existing policies focused on other renewable energy technologies." "Small wind energy competes with utility- scale wind energy for resources and support from the government in my state." "Small wind energy receives greater 168 support from policy makers due to the existence of utility- scale wind energy in my state."

169 Note: This page was only viewed by respondents who answered “Yes” on Question 11

170 Note: This page was only viewed by respondents who answered “Yes” on Question 11

22.) In your opinion, to what extent have each of the following policy tools encouraged businesses and consumers to adopt and install small wind energy technologies in your state? (Instructions: Please select one option in the spaces provided next to each policy tool. Only consider the experience of your state in the response. If a policy tool is not used in your state in support of small-wind energy please select "N/A".)

A great A A Not N/A- Policy extent moderat Small At All Tool is Not e extent Extent Used for Small Wind Renewable Portfolio Standard System Benefits Fund (or Public Benefits Fund) Net Metering Property or sales tax exemptions, abatements, or reductions Other tax deductions Other tax credits Grants (designed to lower upfront capital and installation costs) Loans with zero, below market, or low fixed- interest rates Consumer subsidies or rebates based on the quantity of renewable energy generated Programs to loan wind measurement equipment to interested consumers Policies promoting knowledge transfer or outreach to the public Policies promoting further research in renewable energy technologies

171 Other Policy Tools (please specify the extent to which the policy tools encouraged businesses and consumers to adopt and install small wind energy technologies in your state)

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Appendix B: Complete Correlation Matrix

Env. Env. Env. Citizen Price of Legislative Protection Protection Policy Wealth Ideology Electricity Professionalism (G.I.) (LCV) Innovation Env. Protection -0.690 -0.605 0.780 -0.463 -0.453 -0.450 1 (G.I.) (0.000) (0.000) (0.000) (0.002) (0.002) (0.000) Env. Protection -0.690 0.876 -0.605 0.298 0.418 0.346 1 (LCV) (0.000) (0.000) (0.000) (0.049) (0.005) (0.021) -0.605 0.876 -0.582 0.366 0.550 0.420 Citizen Ideology 1 (0.000) (0.000) (0.000) (0.015) (0.000) (0.005) Env. Policy 0.780 -0.605 -0.582 -0.436 -0.383 -0.603 1 Innovation (0.000) (0.000) (0.000) (0.003) (0.010) (0.000) -0.463 0.298 0.366 -0.436 0.497 0.402 Wealth 1 (0.002) (0.049) (0.015) (0.003) (0.001) (0.007) Price of -0.453 0.418 0.550 -0.383 0.497 0.396 1 Electricity (0.002) (0.005) (0.000) (0.010) (0.001) (0.008) Legislative -0.450 0.346 0.420 -0.603 0.402 0.396 1 Professionalism (0.000) (0.021) (0.005) (0.000) (0.007) (0.008)

CO2 Emissions 0.512 -0.331 -0.300 0.575 -0.319 -0.380 -0.405 Intensity (0.000) (0.028) (0.048) (0.000) (0.035) (0.011) (0.006) Criteria Air 0.042 -0.079 0.046 -0.333 0.124 0.110 0.583 Pollutants (0.785) (0.610) (0.765) (0.027) (0.422) (0.478) (0.000) Total Energy 0.455 -0.427 -0.302 0.352 -0.056 -0.180 -0.109 Production (0.002) (0.004) (0.046) (0.019) (0.719) (0.242) (0.483) Nat. Resources 0.381 -0.441 -0.373 0.504 -0.095 -0.228 -0.265 Jobs per 1000 (0.011) (0.003) (0.013) (0.000) (0.540) (0.137) (0.083) Total Jobs Small Wind -0.203 0.066 -0.105 -0.316 -0.087 -0.146 0.005 Network (0.203) (0.684) (0.512) (0.044) (0.588) (0.361) (0.978) Discussions Wind Resource 0.343 -0.348 -0.382 0.406 -0.135 -0.428 -0.373 Quality (0.059) (0.055) (0.034) (0.024) (0.469) (0.016) (0.039) Number of -0.608 0.503 0.503 -0.490 0.391 0.326 0.314 Policy Tool (0.000) (0.001) (0.001) (0.001) (0.012) (0.038) (0.046) Types Number of -0.581 0.550 0.448 -0.532 0.353 0.252 0.351 Policy Tools (0.000) (0.000) (0.003) (0.000) (0.024) (0.111) (0.024) Continued

Table 10 – Complete Correlation Matrix

176 Table 10 Continued

# of CO Criteria Total Nat. # of 2 Network Wind Policy Emissions Air Energy Resource Policy Discussions Quality Tool Intensity Pollutants Production Jobs Tools Types Env. Protection 0.512 0.042 0.455 0.381 -0.203 0.343 -0.608 -0.581 (G.I.) (0.000) (0.785) (0.002) (0.011) (0.203) (0.059) (0.000) (0.000) Env. Protection -0.331 -0.079 -0.427 -0.441 0.066 -0.348 0.503 0.550 (LCV) (0.028) (0.610) (0.004) (0.003) (0.684) (0.055) (0.001) (0.000) -0.300 0.046 -0.302 -0.373 -0.105 -0.382 0.503 0.448 Citizen Ideology (0.048) (0.765) (0.046) (0.013) (0.512) (0.034) (0.001) (0.003) Env. Policy 0.575 -0.333 0.352 0.504 -0.316 0.406 -0.490 -0.532 Innovation (0.000) (0.027) (0.019) (0.000) (0.044) (0.024) (0.001) (0.000) -0.319 0.124 -0.056 -0.095 -0.087 -0.135 0.391 0.353 Wealth (0.035) (0.422) (0.719) (0.540) (0.588) (0.469) (0.012) (0.024) Price of -0.380 0.110 -0.180 -0.228 -0.146 -0.428 0.326 0.252 Electricity (0.011) (0.478) (0.242) (0.137) (0.361) (0.016) (0.038) (0.111) Legislative -0.405 0.583 -0.109 -0.265 0.005 -0.373 0.314 0.351 Professionalism (0.006) (0.000) (0.483) (0.083) (0.978) (0.039) (0.046) (0.024) CO Emissions -0.259 0.636 0.860 -0.143 0.419 -0.222 -0.154 2 1 Intensity (0.090) (0.000) (0.000) (0.372) (0.019) (0.162) (0.335) Criteria Air -0.259 0.248 -0.163 -0.003 -0.088 -0.079 0.010 1 Pollutants (0.090) (0.105) (0.290) (0.984) (0.636) (0.624) (0.949) Total Energy 0.636 0.248 0.764 -0.157 0.386 -0.430 -0.105 1 Production (0.000) (0.105) (0.000) (0.328) (0.032) (0.791) (0.514) Nat. Resources 0.860 -0.163 0.764 -0.215 0.316 -0.136 -0.153 1 Jobs (0.000) (0.290) (0.000) (0.178) (0.083) (0.398) (0.340) Small Wind -0.143 -0.003 -0.157 -0.215 0.220 0.204 0.246 Network 1 (0.372) (0.984) (0.328) (0.178) (0.252) (0.220) (0.137) Discussions Wind Resource 0.419 -0.088 0.386 0.316 0.220 -0.323 -0.158 1 Quality (0.019) (0.636) (0.032) (0.083) (0.252) (0.087) (0.413) # of Policy Tool -0.222 -0.079 -0.430 -0.136 0.204 -0.323 0.909 1 Types (0.162) (0.624) (0.791) (0.398) (0.220) (0.087) (0.000) # of Policy -0.154 0.010 -0.105 -0.153 0.246 -0.158 0.909 1 Tools (0.335) (0.949) (0.514) (0.398) (0.137) (0.413) (0.000)

Source: Survey results. Note – The significance of each correlation coefficient is present in parentheses below the coefficient value.

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Appendix C: Sample Oregon Interview Protocol

1.) How is your agency/group/company involved in small wind in Oregon?

2.) In general, how did the Oregon’s small wind policies and programs unfold? What was the order of events? Why do you think policies were adopted when they were and in the way that they were?

3.) What types of policies or programs are in place to promote knowledge transfer or public outreach? When did they begin? Who advocated for them? How did they come into being, and which factors or circumstances helped to bring them to fruition?

4.) How would you rate the effectiveness of the state’s current efforts for the following policies:

a. Residential and Business Grants/Incentives b. State tax credits c. State low-interest loans d. Net metering

5.) At any time in the recent past did Oregon have other policies/programs for small wind that no longer exist today? If so, why were they cancelled?

6.) What role, if any, did the following factors play in the development and evolution of small wind policies/programs in Oregon?

a. High consumer electricity prices b. Job creation c. Concerns about climate change d. Concerns about local air pollution e. Job competition with neighboring states f. Desire to viewed as energy/environmental leader g. Political factors

178

7.) What factors do you think might account for Oregon having a more extensive set of policies in place in support of small wind than many other states that have an even better wind resource than Oregon? What circumstances lead to this greater level of support?

8.) Are you aware of any individuals (lawmakers or people outside of the government) who have played a key role in building support for small wind among state policymakers? How much contact have you had with state legislators or their staff members about these issues? If not very much, why might that be?

9.) Do you view small wind as a partisan issue in Oregon? Does one party seem to be more supportive or opposed to it in general, or has partisan politics not played a big role? What about renewable energy in general?

10.) How would you characterize the support for small wind energy among state officials and policymakers? What reasons do they cite for their support?

11.) Would you like to see additional programs/policies/incentives in Oregon to promote small wind, or are you pretty happy with the way things are now? What are the main steps that can be taken to encourage greater small-scale renewable energy usage in Oregon?

12.) How would you characterize the impact of passing Oregon’s RPS on the state’s small wind policies and on the general level of support for small wind in the public? Why do you think the RPS passed when it did?

13.) How would you characterize the support for small wind energy among Oregon citizens? Do you get many calls asking about this or requesting greater state support? When people contact you and are interested in small wind, what reasons do they cite for their support? Is this the renewable energy source they are most interested in?

14.) Are you aware of any opposition to the state government implementing policies or incentives in support of small wind energy? How would you rate the impact of this opposition (minimal/moderate/great)? a. If yes, who is opposing these measures and what reasons do they cite for their opposition?

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15.) In your opinion, could Oregon benefit by emulating the policies or incentive programs of any other state in order to expand small wind energy in your state? Which other states do you believe set the best example for Oregon to follow in regard to small wind energy policies and incentives?

16.) What is your perception of the future for small wind energy in Oregon? Have you noticed increased interest from the public after the creation of the federal tax credit last year?

17.) Do you have any suggestions about other people I should contact in the state who are involved with small wind?

18.) Is there anything else you would like to add?

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Appendix D: Sample Ohio Interview Protocol

1.) How is your agency/group/company involved in small wind in Ohio?

2.) How would you characterize the support for small wind energy among Ohio policymakers at the state level? What reasons do they cite for their support?

3.) How would you characterize the support for small wind energy among Ohio citizens? When people contact you and are interested in small wind, what reasons do they cite for their support? Is this the energy source they are most interested in?

4.) How would you characterize the impact of passing Ohio’s RPS on the state’s small wind policies and on the general level of support for small wind in the public? Why do you think the RPS finally passed after being discussed for many years?

5.) How would you describe the overall effectiveness of Ohio’s efforts to promote small wind energy?

6.) Would you like to see any additional programs or policies in Ohio to promote small wind, or are you pretty happy with the way things are now? What are the main steps that can be taken to encourage greater small-scale renewable energy usage in Ohio?

7.) What factors do you think might account for Ohio having a more extensive set of policies in place in support of small wind than many other states that have an even better wind resource than Ohio? What circumstances lead to this greater level of support?

8.) What role, if any, do you think the following factors may play in the development and evolution of small wind policies/programs in Ohio?

181 a. High consumer electricity prices – b. Job creation – c. Concerns about climate change – d. Concerns about local air pollution – e. Job competition with neighboring states – f. Desire to viewed as energy/environmental leader – g. Political factors (was one party more supportive than another?) -

9.) Do you view small wind as a partisan issue in Ohio? Does one party seem to be more supportive or opposed to it in general, or has partisan politics not played a big role? What about renewable energy in general?

10.) Are you aware of any individuals (lawmakers or people outside of the government) who have played a key role in building support for small wind among state policymakers?

11.) Has your company/group ever contacted state officials or non-profit groups testified in support of small wind energy or to request new/different state policies? Have you ever contributed to the development of any of the programs in place today? If so, how and through what mechanism?

12.) Are you aware of any opposition to the state government implementing policies or incentives in support of small wind energy? How would you rate the impact of this opposition (minimal/moderate/great)? a. If yes, who is opposing these measures and what reasons do they cite for their opposition?

13.) In your opinion, could Ohio benefit by emulating the policies or incentive programs of any other state in order to expand small wind energy in your state? Which other states do you believe set the best example for Ohio to follow in regard to small wind energy policies and incentives?

14.) What is your perception of the future for small wind energy in Ohio? Have you noticed increased interest from the public after the creation of the federal tax credit last year?

15.) Do you have any suggestions about other people I should contact in the state who are involved with small wind?

182

16.) Is there anything else you would like to add?

183

Appendix E: Sample Oklahoma Interview Protocol

1.) How is your agency/group/company involved in small wind in Oklahoma?

2.) How would you characterize the support for small wind energy and renewables in general among state officials and policymakers? What reasons do they cite for their support?

3.) What factors do you believe account for Oklahoma having fewer policies and programs designed to support small wind compared to many other states, especially considering the strong wind resource in Oklahoma? Why do you think the state does not have a RPS, public benefit fund, or any direct financial incentives for small wind?

4.) In your perspective, why have recent efforts to pass a tax credit for small wind energy failed in the Oklahoma legislature?

5.) What role, if any, do you think the following factors may play in the development and evolution of small wind policies/programs in Oklahoma?

a. High consumer electricity prices – b. Job creation – c. Concerns about climate change – d. Concerns about local air pollution – e. Job competition with neighboring states – f. Desire to viewed as energy/environmental leader – g. Political factors (was one party more supportive than another?) -

6.) Do you view small wind (or renewable energy in general) as a partisan issue in Oklahoma? Does one party seem to be more supportive or opposed to it in general?

184 7.) What about people’s view of the role of government in Oklahoma – in your opinion would the population feel comfortable with the government spending tax money to incentivize renewable energy for individual consumers?

8.) Are you aware of any individuals (lawmakers or people outside of the government) who have played a key role in building support for small wind among state policymakers?

9.) Have you ever contacted state officials or testified in support of small wind energy or to request new policies? How much contact have you had with state officials about these issues? If not very much, why might that be?

10.) How would you characterize the impact and effectiveness of Oklahoma’s current programs (esp. net metering)? Can anything be done to improve them?

11.) Would you like to see additional programs/policies/incentives in Oklahoma to promote small wind, or are you pretty happy with the way things are now? What are the main steps that can be taken to encourage greater small-scale renewable energy usage in Oklahoma?

12.) Are you aware of any opposition to the state government implementing policies or incentives in support of small wind energy or renewable energy in general? How would you rate the impact of this opposition (minimal/moderate/great)? h. If yes, who is opposing these measures and what reasons do they cite for their opposition?

13.) How would you characterize the support for small wind and renewable energy among Oklahoma’s citizens? When people contact you and are interested in small wind, what reasons do they cite for their support?

14.) In your opinion, could Oklahoma benefit by emulating the policies or incentive programs of any other state in order to expand small wind energy in your state? Which other states do you believe set the best example for Oklahoma to follow in regard to small wind energy policies and incentives?

15.) What is your perception of the future for small wind energy in your state?

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16.) Which other entities in Oklahoma should I contact?

17.) Is there anything else you would like to add?

186