Clean energy production is emerging in the Northwest as a new revenue stream for farmers and a major opportunity for economic revitalization. A new alliance committed to rural clean energy production called the Harvesting Clean Energy Network, uniting agricultural organizations, public utilities, rural economic development organizations and clean energy advocates, are finding common cause in expanding the use of windpower, biofuels, biogas, and on-farm solar and geothermal applications. A healthy farm economy and a healthy environment are part of the same picture of rural clean energy development sought by this emerging partnership that spans rural and urban, eastside and westside, Republican, Democrat and Independent.

The growth of clean energy production is already supported by the federal government, and Northwest state governments, cities, towns, counties and utilities that are implementing policies and making purchase decisions that are seeding this new crop throughout the region. By building on this work, and putting in place a more comprehensive set of incentives and policies, Northwest states can make clean energy a leading regional agricultural product. In many cases, all that is required is for models of demonstrated success to be replicated in other jurisdictions. Following is a set of incentive-based, market-building actions, some of which are already working in parts of the Northwest. Building from that base, enhancing existing policies and replicating successes, the Northwest can make itself a center of rural clean energy production and rural economic revitalization.

Strategic Investment Plans for Clean Energy

Create state task forces to identify clean energy investment opportunities.

A dilemma facing anyone seeking new state level clean energy programs is the atmosphere of budget constraints prevailing in Northwest state capitols. When a range of state programs are facing cuts, legislators will have tough questions about the source of funds for new efforts. To develop answers, the governors of each of the states, working closely with legislators, should convene task forces to develop strategic plans for cost-effective clean energy investments and quantify economic benefits and potential revenue paybacks. Task forces should also identify other sources of investment funds that could match state expenditures, including businesses, nonprofit funders and the federal government.

Task forces will develop a framework that answers the funding questions for new rural clean energy efforts, and provide legislators with the confidence to move forward even in tight times. To add yet further assurance, automatic sunset provisions for new programs can be included where appropriate, so state commitments are not open-ended. In this way, the effectiveness of various programs can be tested. If they meet or exceed goals, they can be renewed.

Actions to Promote Both Clean Electricity and Fuels

Make capital available for clean energy investments.

The greatest single obstacle to the growth of clean energy is difficulty in raising capital. Clean energy generators are particularly capital intensive, since the equipment embodies the lifetime fuel supply. In other cases, new technologies such as cellulosic ethanol plants are priced out of the market by high rates for risk capital. Two options for capital development are:

• Offer state level clean energy project loans or loan guarantees up to $20 million. (In Washington, where state loans are restricted, allow public utilities and electric coops to keep up to half of excise tax payments to provide clean energy revolving loan funds.

• Investigate tax-exempt inflation bonds as an option for developing capital.

Provide tax credits and exemptions for clean energy producers.

Business tax credits on costs for clean energy projects and exemptions on clean energy installations from property taxes have been an effective motivation for Northwest states. State government should capitalize on these incentives by offering business tax credits of up to 35% on clean energy projects up to $10 million and provide property tax exemptions for small-scale clean energy installations. Clean energy equipment purchases such as clean energy generators 200 watts and above and manufacturing facilities should be exempt from sales taxes.

Actions to Specifically Promote Clean Electricity

Provide a producer tax credit for on-farm clean electricity generators.

Clean electricity generation is moving closer and closer to market competitiveness with fossil fueled electricity. At the same time, fossil fuel-based generation is heavily subsidized through tax breaks, and has lower upfront costs. To level the playing field, and help move clean power to competitiveness, states should offer farmer-owned wind turbines, biodigester-connected generators and solar panels of up to 10 megawatts a 1.5 cents per kilowatt hour production credit.

Build public markets for new renewable electricity.

Government agencies are significant users of electricity. They are also becoming important early adopters for new renewable energy. Northwest public agencies should commit to purchases of renewable electricity that spur addition of new generators to the grid.

Provide information resources on clean energy installations.

In a power network still based on large-scale central power plants, adding smaller-scale clean energy generators to the grid involves a learning curve. Utilities need to understand the technical requirements and implications of interconnection, as do rural landowners and local governments. State energy offices should be funded to provide information resources on interconnection, including education, training and consulting,

Prospect sites for clean energy development.

Clean energy development will be accelerated by pointing developers to good sites and expediting approval. Public authorities should identify good areas for clean energy installations, undertake necessary environmental studies, and identify those locations in comprehensive plans and zoning ordinances.

Actions to Specifically Promote Clean Fuels

Build renewable fuels production capacity through:

• Production payments and loans: Provide a 20 cent subsidy for every gallon of ethanol produced in state, limited to 15 million gallons per year per plant for 10 years. Provide low-cost financing for ethanol plant construction and to help farmers buy ethanol coop shares. This helps buy down the cost of capital for plant construction. Family-owned and smaller farms should be given preference in making loans.

• Feedstock incentive: Provide a feedstock incentive of $10-$30 per ton to help spur use of field stubble in cellulosic ethanol plants. Such an incentive could be applied to Northwest wheat and grass stubble, and provide a public benefit of avoided field burning.

• Property tax abatement: Offer a five-year 50 percent state property tax exemption on new starch ethanol and biodiesel plants, and a 100 percent 10-year exemption on cellulosic ethanol plants to help overcome obstacles facing this new technology process.

Build renewable fuels markets through:

• Tax exemptions: Northwest states should provide a 100% exemption on the ethanol and biodiesel portion of fuels, and require that savings be passed on to retail customers. To ensure that the maximum amount of money remains in state, fuel tax exemptions should kick in only after local biofuels plants are operating.

• Fuel availability: Develop a comprehensive network of E85 (85% ethanol) and B20 (20% biodiesel) pumps for consumers/drivers through public-private partnerships between state and local governments, fuel wholesalers and automobile companies.

• Public awareness: States and other stakeholders should implement public awareness campaigns to urge consumers to buy "home-grown fuel" for its environmental and economic development benefits.

• Public fleet purchases: State and local governments should make commitments to substantially increase use of Northwest-grown biofuels in public fleets. The Northwest states should aim for 100 percent use in diesel school buses and cover any additional costs to school districts.