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January 25, 2008
Community-based energy development . . . what a concept
GRAND MEADOW, Minnesota (STPNS) -- Recently, an informational meeting was held at Grumpy's in Grand Meadow with John Garry, Development Corp. of Austin, welcoming the crowd that attended. He made a few comments about wind energy in this area, and introduced several men who are either involved with, or have an interest in, the development of wind energy in the Southern Minnesota area.
Most of those attending weren't sure exactly what this meeting was about. . . . hadn't wind energy already come to our area? If this was an "informational meeting," it seemed a bit after-the-fact; or, as one farmer in attendance said, "I think that horse has already left the barn."
But they would find out, as the afternoon unfolded, that perhaps there was a whole other facet to this subject than they had thought about.
First on the agenda to speak was Commissioner Ray Tucker, who explained where the turbines are now located and where they are being proposed, as well as who is building them and who owns them. He also hit on some key points on economical development and future opportunities and the overall general assets of the industry, such as employment, income from leases and prospective tax dollars. He noted, "Wind energy output is also taxed."
Tucker also mentioned that wind power was better for the environment than coal plants and most other energy methods. Wind energy is not a pollutant, he said, but admitted there "may be a different landscape" as a result of having wind farms built.
The differences in the way the various wind power companies lay out their towers, was brought up, and someone in the audience mentioned that there is also a difference in the methods of payment regarding the land that is occupied, wind rights, etc. He stated that those who sign over wind rights to Horizon, according to their contracts, gave Horizon the right to cut their trees if they are deemed to be in the way. Also, the landowners are limited by what they can do on the land they lease out; they cannot disturb the ground to build a geothermal pond, for instance.
Later, a statement was made that "corporations will seek to tie up your land for up to 99 years." It was agreed that once a contract is signed, the landowner is "married" to the owner of the project. Some companies buy up 1000 acres, for instance, then never build anything on the property; but they have the "rights" so that no one else can build on it.
Patrick Pelstring of the National Wind and High Country Project, which straddles the Northern Mower/Dodge/Olmsted counties area, spoke, giving a general overview of wind energy, opportunities and challenges in further development, saying, that the High Country Project "has been called the most ambitious project in the US."
The company currently has over 1200 megawatts in development, representing an investment of over $2 billion, and wind is now the fastest-growing energy when it comes to new installations.
Attendees learned that Germany has, in an area the size of Minnesota and Wisconsin combined, three to four times the number of wind towers than are in the entire U.S. They also learned the number-one state in the U.S. for wind power is North Dakota. Minnesota is number nine, and Iowa comes in tenth on the list.
Some of the "growth factors" are the concern about global warming and the federal subsidies and tax breaks that are offered. Along these lines, Gov. Pawlenty has called for 25 percent of Minnesota's energy to come from wind by the year 2025. This is being referred to as the "25-25" law.
When it comes to wind power, how good is good? Pelstring explained that wind is measured by meters per second (mps), at the turbine's hub height, which is usually 250 feet up, he said. The average is 7-8.5 mps in Minnesota. The difference between 7 and 8.5 mps is a 20-percent increase, but it represents a 34 percent increase in revenue.
The main problem plaguing the wind power industry is transmission of the energy that is generated; so, when it comes to transmission, how bad is bad? he asked.
The answer was: There is now "gridlock" when it comes to connecting to the power grid. The first step to the wind energy process is the need to file an application with the Midwest Industrial System Operations (MISO), and that process is now taking at least three years to begin the necessary study.
As State Senator Dan Sparks took the podium, the second-term senator stated that he is on the Energy, Utilities and Technology committee, which deals with, among other things, the wind energy concept.
He stated that he and other local representatives are trying to reinstate the wind energy production tax that was held back from the cities, townships and school districts, and were trying to change the legislation that took the tax dollars away.
Once again, while a lot of this information was very interesting, most of the audience had probably heard a great deal of it before. For those who came to the meeting not knowing exactly what it was about, the crux of the matter was now unfolding. What these people had been invited to hear about was Community-Based Energy Development (C-BED).
Dan Juhl of DanMar Associates, introduced as "The Dean of Wind Energy in the US and in Europe," had a lot of information to share about wind turbines and Community-Based Energy Development.
He is from Woodstock, in southwest Minnesota, and has been involved in wind energy for 30 years. He said that around Buffalo Ridge, where it all started, they had three wind generators that were the highest producing in the country at that time and they have remained at the top.
Juhl reminded those in attendance that the key to the development of wind farms in Southern Minnesota was "getting a place to sell your crop." Community-owned wind farms would be one answer to this, he said, explaining how the concept came about was people realizing that most of the projects that are owned by foreign multinational companies are exporting $60,000 in revenue each year to France, Scotland, Italy, Spain, etc.
Those of us who live here ought to "get something from this God-forsaken wind," Juhl stated, "not just the landowners."
Juhl added that 14 different school districts own wind farms and are realizing the revenue from them.
In comparing types of wind turbines/projects, he stated that the one going up by Brownsdale is "pretty cutting edge." He also stated later on that "Europe is "light years ahead of us. . . all the technology is coming out of Europe."
He also said a project should be between 20-40 megawatts in order to compete in a turbine project. "Then you have buying power" . . . but ultimately, "you size them to the community."
In comparison, Tucker stated at one point that the City of Austin uses 35mw of electricity per year, excepting Hormel; and Rochester uses 100 mw annually.
Juhl explained there are a couple models of CBED ownership. One would be a "Minwin model", where a lot of people own a small piece of a wind farm; also there's a "Flip model", where a community is partnered up with an equity investor and after 10 years the ownership "flips". There is a higher rate of return after the tax credits are used up, he pointed out.
As with any business, along with being the owner of a wind farm comes some risks. The question came up about the warranties and maintenance involved in such a project.
Juhl said the manufacturer typically has a two-year warranty program; then an extended warranty should be purchased. Owners would need a "substantial pool of money ($40-60,000 per machine per year) for maintenance expenses. He explained that when the warranty is done, the pool of money would be used to buy additional insurance coverage and the turbines would have a scheduled maintenance program.
"Preventative maintenance is the key to post-warranty life. It will kill you to wait until it breaks," he opined. He later added during a question-and-answer period that the average machine will last 25 years if it is well-maintained, and said that the ones in California that were built circa 1983-86 are still working but have been retrofitted.
Last on the agenda to speak was former State Senator Kenric Scheevel of Dairyland Cooperative, a generating and transmission coop located in LaCrosse, Wisc., that is less than five years old. Their service area is northeast Iowa, Western Wisconsin and Southeast Minnesota. They provide services to Freeborn-Mower, Peoples Electric Coop and Tri-County Coop, all of whom are members this coop.
Scheevel pointed out that "five years ago very few were tuned in" to wind energy in this region; but this is changing very rapidly. Scheevel also shed some light on the various innovations in renewable energy production, as follows:
? Landfills account for three percent of renewable energy. They do this by capturing methane gas and running it through generators, then capturing the energy produced.
? "Contented cows" account for 15 mw of the renewable energy by using a manure digester to capture methane gas from dairies.
? Hydro electric power (dams) make up 22 mw of the renewable energy.
? Wind energy has taken over the lead, accounting for 23 mw of the renewable energy produced.
Of these, wind projects are the easiest to develop, with farms producing in the 20 mw range fitting nicely into Northland's system.
Among the challenges, he stated, are: getting financial backing, sourcing turbines and transmission constraints, and keeping the price competitive, due to the smaller scale (which makes it hard to compete).
Probably the biggest negative aspect, once again, is transmission of the energy that is created. It will cost billions to upgrade grids, Scheevel stated. "Everyone loves electric, but everyone hates the transmission lines on their property."
Among those attending this informational meeting were representatives from two banks (Steve Drennan of FF&M Bank, Brownsdale/Austin and Steve Gleason of US Bank); two attorneys, Southern Minnesota Initiative, representing a 20-county region that partners with C-BED and other projects; and several county and city administrators.
There was a question about what happens if a company goes bankrupt and in the bankruptcy process the court rules to decrease the amount paid to the landowners. The answer came from an attorney in the audience who said this is what a shopping mall landlord faces, or the landlord of a major commercial center. He said, "The landowner very seldom has anything to say. Bankrupcy court can continue the contract or reject. Or 'cram down' (rewrite a lease). . . You are at that risk"
He said an attorney familiar with these kinds of contracts would "try to write provisions to review or rewrite a contract in a certain number of years so the landowner doesn't feel so locked in."
For information on Community-based Energy Development, any of the above speakers may be contacted, or a good Web site to look up would be cbed.org.
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