Harvesting the prairie wind: Minnesota farmers structure wind business to keep more energy dollars close to home

Rural Cooperatives, Nov-Dec, 2007 by Dan Campbell

"Some farmers will say, 'My farm is on the highest elevation in my township, and it was real windy last week, so this is where the tower should go.' But it's a little more complicated than that," says Willers. Having a neutral engineering consultant make the decision where to site the wind farm helps avoid any appearance of favoritism.

"I don't have any turbines on my land--not even any close," says Arends. But as a member of Minwind, he says he benefits no matter where the towers are located, and thus he supports placing them wherever they will generate the most consistent energy.

Negotiating a power purchase contract is definitely a job for an attorney who specializes in such matters, they advise. "The utility is naturally going to try to buy power from you as cheaply as it can," Willers says. Minwind negotiated with a couple of possible buyers, ultimately opting to sell power to both Alliant Energy and Xcel Energy.

Transmission, tax credit concerns

Lack of transmission infrastructure is by far the biggest overall limiting factor for wind power development in the United States. "Our wind resources are mostly in the eastern Rockies and northern plains, but most of our people are on the two coasts," Willers says. "If you are going to transport all that electricity to the places it is needed, there needs to be substantial expansion in our transmission system."

The biggest obstacle to promoting more local ownership of wind power is the way the federal production tax credit (PTC) law is written, he says.

The value of these tax credits can be huge. Over a 10-year period, they may even be equal to the lion's share of the initial cost of a turbine, says Arends. But the tax credits must be used as an offset to passive income--the kind of income big power companies have in plenty, but not small businesses like Minwind or its members.

Minwind financed its wind farm without reliance on PTCs, which instead flow back to the individual shareholders. But some of them are unable to use the PTCs.

"Why do we have legislation that prevents individuals from being able to use production tax credits?" asks Arends.

Willers sees the situation in even starker terms: "The production tax credit law is very anti-agriculture. It moves revenue out of the Midwest to the coasts, and even offshore. I have a real problem with a tax system that promotes removal or revenue from a given area (the Midwest) to another region of the country (the coasts)."

(Editor's note: James Newby, assistant administrator of Electric Programs for USDA Rural Development, notes that tax-exempt organizations are not eligible for production tax credits, which is why Clean Renewable Energy Bonds (CREBS) were created. He notes that CREBS provide the same level of financial incentives to cooperatives as does the PTC.)

Also hurting the U.S. wind industry is the loss of U.S. core industrial manufacturing capacity. Most wind turbine manufacturing companies are European, and with the Euro at record high exchange levels vs. the dollar, it has caused turbine prices to soar. There is also a backlog of orders, putting even more upward pressure on prices.