Wednesday, March 19, 2008

Lietenant Governors' Interests

I was in Washington DC last week to do a talk at the National Lieutenant Governor’s Winter Meetings. About 30 of the 50 Lieutenant Governors in the country were at the conference, although Lt. Governor David Paterson from NY who was to talk about his state’s renewable energy plan was a no-show with the unfolding drama of the Eliot Spitzer resignation.

There was quite a bit of discussion on the problems that have been encountered in 2008 with the presidential primaries, with suggestions that the USA develop a regional primary system that either divides states by population or location with primaries spread over a four month period from March to June. It sure seems to make a lot more sense to me than our current hodge-podge.

During the session on rural issues, in addition to my talk there were interesting talks on broadband and wind farms.

Former Federal Communications Commissioner Gloria Tristani related, “Only 31% of rural residents have access to broadband compared to 52% in urban areas. We also spend twice what Japan does for broadband and yet they have 20 times our bandwidth.”

John DiDonato, of FPL (Florida Power) Energy LLC, told of the push that Florida Power is making in alternative energy, specifically wind, “Right now we have 5,077 megawatts of wind power, which if they are all blowing would power over 1 million homes.” With 7,500 wind towers in their wind fleet, there is just under 1 megawatt/tower.

DiDonato explained the economics of the industry, especially for the landowners who agreed to place these wind towers on their farms, “We typically lease the land from landowners at $4,000 to $6,000/megawatt/year.”

The most shocking piece of information that he shared was that “the tax benefits of a 2.1 cent/kw federal tax credit and being able to depreciate over five years account for over 50% of the economic return of wind.”

While these types of incentives can really accelerate the development of new technologies like wind, it has been my experience that they are hard to do away with even when the economics of the industry couldn’t be better. With oil now over $110/barrel I wonder if anyone would stop looking for oil if the oil depletion allowance was done away with, or if ethanol production would fall if the 54 cent/gallon ethanol subsidy was done away with. I also wonder if even one acre of corn wouldn’t be planted if the new farm bill didn’t continue the massive subsidies to that crop and others.

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