The U.S. subsidiary of Swedish furniture retailer IKEA announced Thursday that it is buying a long-planned wind-energy project in eastern Illinois as part of the company’s initiative to offset its energy use with renewable energy generation.
And IKEA insists the project, which has not yet been built, is more than public relations. The company believes that, long term, wind energy will help the company’s bottom line, Chief Financial Officer Rob Olson said.
But right now wind power is a struggling business. Cheap natural gas and the end of a federal tax break for wind-power producers have left wind generation unprofitable.
Olson said in an interview Wednesday ahead of the announcement that Hoopeston Wind is the company’s first large-scale wind project in the United States. By the time the 98-megawatt wind farm is built and running – planned for 2015 – it will be capable of generating power equivalent to 165 percent of the company’s U.S. electricity needs. It’s part of the retailer’s previously announced push to offset all of its global power use with energy generated from renewable resources by 2020.
“That’s why we started looking at wind turbines,” Olson said. “It was able to move us much further, at this point surpassing our goal from a U.S. perspective.”
IKEA is buying the project, which is planned for farm land about 50 miles northeast of Champaign, from Virginia-based Apex Clean Energy. That company will operate the wind farm, which will employ about five people, according to Apex’s website.
Olson declined to say how much money IKEA is paying.
IKEA’s plan to rely on renewable energy puts it among many companies now trying to make greater use of wind, solar and other renewable forms of energy. Walmart has solar-panel installations and is experimenting with wind power. Google has invested money in a Texas wind farm, solar installations and other projects.
And IKEA has wind turbines in other countries, Denmark and Canada among them, and has installed solar panels on top of some of its retail locations.
For the Hoopeston project, Olson said IKEA will receive some form of government incentives, though he declined to name the source or their dollar value.
Both the Illinois Department of Commerce and Economic Opportunity and officials in Vermilion County, where the project is located, say they’re not providing tax breaks or other incentives.
The key federal subsidy for wind-energy generation, the Production Tax Credit, expired at the end of 2013.
Right now, Olson acknowledges, wind-power generation needs government incentives to make money.
But he insists the company isn’t building a wind farm just for public relations reasons.
“Part of that calculation isn’t just the immediate return on investment,” he said, adding that the company had calculated costs and potential benefits out over 20 years. “It’s also looking at the future growth in energy costs and making sure we can offset that in the future.
“We will not lose money during this process.”
The company might be able to generate some of that value through pure good will, including the appeal of a wind farm to its retail customers, said Don Fullerton, a professor of finance who focuses on energy policy at the University of Illinois.
“Even if they lose money now, they think the goodwill generated by being clean and sustainable can attract future customers and investors who care about such stuff,” he said.
IKEA will be the third owner of the project, which was first granted permits in 2011.
Vermilion County board Chairman Gary Weinard is cautiously optimistic that, this time, the project will be built. And he estimates it’ll be worth more than $1 million a year in property taxes to a rural county where economic growth can be a struggle.
“If and when it occurs, and I think it be positive,” he said.