Small Farm Profitability: Is Wind Energy the Answer?

1. Small Farm Profitability:Is Wind Energy the Answer? www.agmrc.org

2. Why Consider Wind? Many landowners own land with quality wind resources. Electricity prices are not directly related to agricultural commodity prices, resulting in more diverse farm income. Wind is a clean domestic source of energy. Wind development may help support rural economies.

3. Modern Wind Energy Two types of projects: Commercial Scale Sell electricity to a utility company at a contracted rate Numerous state rules and regulation apply Net Metering Scale Allows customers to offset their personal electrical usage by producing small amounts of electricity. Utility company rules generally regulate this type of project.

4. Net Metering Projects The process Customer contacts their utility company to find out about Net Metering Policies These policies often limit the size of turbine that can be installed Customer purchases a turbine Turbine is installed Customer’s energy production is subtracted from their energy use and they are billed for the reduced amount Net metering customers reduce their electrical bill but in most cases do not generate any revenue

5. Commercial Scale Projects Questions to ask in the planning stage: How big of investment are you considering? Will you need financing? Is electrical transmission capacity near your site? Do you have anemometer testing data? How does your state’s regulatory process work? How long does it take? Is equipment available for purchase? At what price? And when will it be available? What contract price is needed to be profitable? Are state or federal tax credits available?

6. Getting Started Why are you interested? As an investor? If you are an investor: Buying shares or bonds in a wind development company may be the extent of your involvement Being an informed investor may help improve your chances of making a good investment For environmental reasons? Consider this question “Is this the most environmental benefit you can purchase with your money?” Answering this question may help you determine if this is the most appropriate investment

7. Getting Started Why are you interested? As a land owner? Most land owner’s simply lease the wind rights on their land to wind developers. Wind leases can be very complex and lengthy. Becoming educated and possibly seeking legal advice may help you obtain the best possible lease. Don’t be afraid to ask questions and to take time to finish your research before signing. For local economic development reasons? Many wind projects in rural areas can benefit the local economy through an increased tax base and new jobs. If these issues are important to you…try to estimate how much these benefits are worth to you and include them in your evaluation.

8. Developing a Wind Project Assume you are developing a wind energy project. What steps do you need to take? The steps will be listed in an “order” but many of these steps will be taken simultaneously.

9. Developing a Wind Project Do you have a good wind resource at the potential site? First look at estimates of regional wind speed. If the site looks promising, on-site testing using an anemometer is recommended (and in many cases required). Anemometer data is often collected for 1 to 3 years An anemometer measures and records wind speeds at a specific location. Anemometers are usually installed on towers to more accurately measure wind speeds at the height of the proposed wind turbine.

10. Developing a Wind Project The regulatory process State rules generally apply The process may takes months to years Environmental studies will required The size and location of the project may need to be determined before or during this process The potential buyer and transmission agreements may also need to be provided during this process

11. Developing a Wind Project Transmission Capacity Any credible buyer needs to have a way to transport the electricity to a market. Transmission capacity is a limiting factor in many rural areas. Expanding transmission capacity can be costly and time consuming.

12. Developing a Wind Project Land Ownership/Lease Agreements In order to build a wind project the developer must have either a lease, option to lease or ownership of the land needed for the project. The land needed may also included land for access roads and support facilities. Some states also have regulations about development that would limit the ability of a neighbor to develop wind on their property. An easement from the neighbor or leaving a buffer zone may be required to develop a project.

13. Developing a Wind Project Determining the correct size of a wind project A number of factors can play a role in determining the size of a wind project. Transmission capacity: If only a limited amount of capacity can be obtained, the size of the project can not exceed this amount. Financing: A developer with limited resources to invest may be limited in large capital investment required for wind turbines. Land: The potential site may have only limited number of viable turbine locations.

14. Developing a Wind Project Selecting wind turbines Wind turbine can be purchased in various sizes from numerous manufacturers. The sizes have increased over the past decade. Common turbine sizes for commercial projects have increased from 0.75 and 1.0 megawatts to 1.5, 2.0 and 2.5 megawatts. The recent boom in wind development has resulted in waiting lists for turbines. Waits times can easily exceed 1 year. Some smaller refurbished turbines are also available in some cases. The capacity of these turbines are commonly less than 0.25 megawatts.

15. Developing a Wind Project Financing Wind Projects generally require significant investment during the development of the project. After the project is operable, wind turbines begin to generate revenue for the owner. Many developers do not have a large amount of capital to invest for 10 to 20 years. They often obtain financing for much of the development cost. Securing financing can be a requirement to get on a waiting list to purchase turbines.

16. Developing a Wind Project Finding a Buyer Electricity produced from wind projects is often under contract to be sold long before the project is completed. The contracts typically specify the amount of electricity that will be sold, the price, and the length of the contract. The contract also may require that casualty insurance be purchased to provide revenue in the event the project is in-operable for some period of time.

17. Developing a Wind Project Tax Credits The Federal Government currently provides tax credits for wind energy development. These tax credit may account for 10% to 25% of the total revenue generated by a wind project. These credits have been renewed one year at a time in recent years. Insuring that your project is eligible for these credits will impact the financial viability of the project.

18. Conclusion Wind projects can be complex and planning is essential to project success. Many different factors can determine the size and viability of a wind project. The wind energy market is developing and changing quickly. Keeping current of new issues is important.