Community-based energy development projects are expected to add an additional 880 megawatts of wind power capacity in Minnesota during 2008, according to a recent study.
Minnesota has the fourth-largest installed wind power generation capacity in the United States, but it was the first to pass C-BED legislation in 2005. The text of the law established a framework for qualifying owners, namely residents or companies comprised of residents, to develop wind generation projects and negotiate Power Purchase Agreements with all Minnesota electric utilities.
The law also set a price for electricity that is based on the net present value of energy over a 20-year PPA. Proponents say NPV pricing stabilizes the cost more so than a production incentive.
Since then, other states have followed suit, including Illinois, Massachusetts, Oregon, Washington and Wisconsin. Those states, while not working to pass legislation, have used the Minnesota model to develop projects and there are similar initiatives in Canada and Europe but since 2005, no other state has enacted legislation.
“Rural America is economically challenged and a lot of these towns are getting smaller along with family farms,” said John Ihle, owner of PlainStates Energy in Fargo, Minn. “C-BED works really well for smaller communities in that more of the money is staying local.”
Dan Juhl, touted as one of Minnesota’s “founding fathers” of C-BED and owner and operator of Danmar and Associates, Inc., is providing testimony to some of the states just coming into the industry and contemplating some sort of C-BED initiative.
“It’s becoming more popular,” Ihle said, “especially when state decision makers realize the huge economic benefits to their constituents.”
C-BED is an organization that encompasses a range of community members, including farmers, bankers, residents and wind developers. Based in Porter, Minn., the group attempts to bolster local economic development through independent renewable energy projects, specifically wind.
While the benefits depend on the size of the project, on a project that is about 20 megawatts, there might be seven to 10 funding sources representing local ownership and that group might receive about $10,000 a megawatt or more per year, Ihle said. The profit for local owners comes largely from local fees.
The current average size of C-BED projects in Minnesota is about 20 megawatts, but, Ihle said, they are getting bigger. The bigger the projects get the more turbines and up front financing is needed to construct them.
Ihle said that finding investors can be difficult. The background work including site studies, land leases, interconnect deals and PPAs. He has found that large financing institutions are only interested when the project is around 130 megawatts and costs more than $100 million. Another challenge to keeping C-BED projects entirely local is the recent shortage of wind turbines.
High demand has caused a spike in cost as well as a shortage of turbines so C-BED developers, Ihle said, are forced to go to large corporate developers for turbine allocations as well as funding. When corporate entities are brought on board for C-BED projects, the production tax credits and other incentives are funneled to the corporate sponsor and the revenue is also split, usually, about 49 percent for the corporate and 51 for the local.
During March of 2006, Xcel Energy, electric power and natural gas utility, based in Minneapolis, has committed to developing 500 megawatts of community-based wind power by 2010. The utility is already developing projects that should yield 300 megawatts of community-based wind power by 2007.
In January, a study done by CapX2020 Utilities and the Minnesota Department of Commerce, North American Water Office was released. It showed that adding C-BED generation to the grid caused overload in some areas but improved reliability in others. The estimated cost of adding transmission lines was around $50 million dollars for 800 megawatts of C-BED generation and $97 million for 1,400 megawatts.
Currently there is C-BED legislation on the table in Nebraska and Iowa to adopt the Minnesota framework. There is also legislation being worked on in both the House and the Senate to adjust the federal production tax credit.
“The federal production tax credit does hinder community development,” Juhl said. “The corporations are getting good deals and the PTC should be opened up so it can be utilized by private citizens.”
By Kristyn Ecochard
UPI Energy Correspondent
20 February 2007
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