Washington (Platts)--5Jan2010/501 pm EST/2201 GMT

Changes in US policy to stimulate wind power development during the current economic slump are more valuable to local, community-owned wind projects than to larger commercial ones, according to a US Department of Energy report released Tuesday.

Earlier this year, the Department of the Treasury began allowing wind developers to receive either a 30% tax credit for investment in wind projects, or a 30% cash grant in lieu of the production tax credit they would have normally received.

Treasury administers the program with DOE, and the agencies already have awarded about $1.7 billion in grants for wind projects. While most of those funds have gone to commercial projects, researchers at DOE's Lawrence Berkeley National Laboratory found community wind projects get more benefit per dollar that they receive than commercial projects.

"On the basis of face value alone, the 30% [investment tax credit] or cash grant -- both of which depend on the size of the investment rather than on the quantity of power produced -- will be worth more than the [production tax credit] to many community wind projects, which on average may cost more or generate less than their commercial counterparts," Berekely Lab researcher Mark Bolinger wrote in the report.

Community wind projects are owned substantially by the local community, use utility-scale turbines and either are connected directly to the grid or displace power provided by the grid, according to Bolinger. Currently, it comprises only about 2% of installed wind capacity in the US, he said.

The subsidies and tax breaks under the new policies only may be used by projects that are operational by 2012.

Bolinger also found that benefits associated with investment tax credits and cash grants, but unavailable under production tax credits, could be worth as much as the credits themselves. He cited one hypothetical example of a community that would receive $15/MWh in benefits from the cash grant, but another $25/MWh from other associated benefits, such as exemption from alternative minimum tax and availability of low-interest loans.

"In other words, this policy shift provides a substantial amount of value to this project, transforming it from one that would likely not have been built under the PTC to one that is significantly closer to market under the cash grant," Bolinger said.

--Derek Sands, derek_sands@platts.com