Second wind for controversial Goodhue turbine? 

Courtesy of Congress, a controversial wind energy development planned in Goodhue County has more time to win millions in renewable energy funding.

Last month, executives for Minneapolis-based National Wind LLC, which is developing the wind farm, expressed grave concerns about the project’s status because a federal grant program that would bring in $37 million was scheduled to expire this year.

But extending the $18 billion renewable energy grant program through 2011could give the AWA Goodhue Wind LLC project new life, said Peter Mastic, president and chief development officer for National Wind.

“At National Wind, several of our Minnesota projects may be able to take advantage of this extension by beginning construction in 2011,” Mastic said in an e-mail.

AWA Goodhue LLC is one of three that could receive grant funding in 2011. Others are National Wind’s High Country Energy in west-central Minnesota and Lake Country Wind Energy developments in southeastern Minnesota.

But federal funding for the Goodhue project won’t be awarded before the project wins state regulators’ approval through a contested hearing process, which is expected to take up to six months.

That will renew a conflict with Goodhue County residents, who raised health-related concerns about AWA Goodhue Wind LLC earlier this year. The Goodhue County Board subsequently approved wind-turbine setbacks of more than half a mile, significantly more than the norm, according to the developers.

The likely prospect of a contested hearing comes at a time when wind industry growth has stalled. Currently, Minnesota has 1,808 megawatts of wind energy, which is nearly two and a half times the wattage in 2005, according to the American Wind Energy Association.

While Minnesota is now ranked seventh in the nation in wind energy capacity, its growth in 2010 was just 1.2 percent – slower than the nation’s 15.1 percent increase from 2009.

Given that pace, wind and solar energy executives don’t expect windfalls from the extension here.

“The fast money is gone,” said Clayt Tabor, former director of finance for Minneapolis-based Midwest Wind Finance LLC.

Because of the downturn in the wind industry, Tabor is winding down operations of Midwest Wind and operating Arcturus Renewables LLC, a wind development consultancy that specializes in financial analysis and due diligence.

According to Tabor, banks are increasingly skeptical of financing high-cost wind projects.

“It’s a sexy product, but it doesn’t necessarily mean it can be financed,” he said.

Banks are scrutinizing the lending risks related to forecast production of a wind farm and are asking developers to pay a higher percentage of the cost, he said. That’s where the renewable energy cash grants should make a difference.

Lenders are looking at wind speed, percentage of the day that turbines turn and how much money a wind farm is generating from its power purchase agreement.

This year is a stark contrast from 2007 to 2009, when wind developers encountered relatively little resistance to gain financing.

“The banks have realized how little they once really knew,” said Tabor. “In a bull market, a lot of sins are forgiven. But in a bear market, all those sins are brought to the forefront.”
So a one-year extension likely isn’t enough to stoke an industry already burdened with layoffs at turbine and blade-production facilities. In Minnesota, the most visible sign of weakness is the planned closing of Suzlon’s Pipestone plant, which makes blades and nacelles.

The renewable energy industry lobbied hard for inclusion in the tax legislation that gives wind and solar developers an extra year to receive cash grants worth nearly 30 percent of their project’s costs. On a $100 million project, for example, the cash grant from the U.S. Treasury department should be about $28.5 million, Tabor said.

How will the industry react to the extra year of grant funding?

“It’s not exactly going to explode out of the chutes here,” Tabor said. “It’s not exactly like Secretariat. I think what it’s going to do is give projects that are healthy a chance to move forward. But what we really need is a national renewable energy standard (RES). One year doesn’t really help us because these projects take three to four years to build.”

In Minnesota, that RES for electric utilities is 25 percent by 2025 and 30 percent by 2020 for the state’s largest utility, Xcel Energy.

Meanwhile, extending the grants gives delayed solar energy projects another chance.

Mario Monesterio, director of renewable design and engineering for Eden Prairie-based Westwood Professional Services Inc., said the solar industry looks forward to 2011 and 2012 partly because of the extension.

“We had some clients that kind of bowed out because of the missed deadline. And we’ve already heard back from one or two of them,” said Monesterio, whose energy engineering design company assembles teams of contractors to build solar arrays.

His company was involved in two high-profile Minnesota solar projects: the 400-kilowatt St. John’s Solar Farm near Collegeville and the 600-kilowatt solar array on the roof of the Minneapolis Convention Center.

Monesterio said the clients that have expressed renewed interest in building their projects are in the metro area.