Wind Farmers: United We Profit
[imgbelt img=south-dakota-wind-resources.jpg]Landowners in the wind-rich Upper Plains are joining forces to gain
better — and bigger — business deals for locally produced power.
[imgcontainer left] [img:wind-jeffers320.jpg] [source]Courtesy of National WindThe “Jeffers 20” wind project, a community-based energy development managed by National Wind, operates in Cottonwood County, Minnesota, with 20 2.5 megawatt Clipper turbines. Its
power is being sold to Xcel.
It’s how the United States of America won the Revolutionary War. And two Omaha, Nebraska, lawyers say that Midwest landowners can succeed with the same strategy.
Ron Comes and Steven Case, with McGrath North Mullin & Kratz, have been involved in organizing landowners and other groups to negotiate more favorable arrangements with utilities and wind companies for the siting of turbines.
The basic principle: “An individual acting on his own behalf has no bargaining power,” Comes said.
Many Iowans live in places with ideal wind patterns for turbines. As wind energy develops at a breakneck pace, many landowners, acting as if they have won a lottery of sorts when a utility or wind company knocks on their door, sign up quickly for the deals as presented, not realizing they may be able to negotiate.
Signing up might be a fine option for some people, Comes said. But with a raft of federal incentives, as well as growing political favor for higher renewable energy standards, Iowans are in a position to organize and work for better deals.
Comes said that, by a conservative estimate, a 1.5 megawatt wind turbine brings $184,000 in revenue annually. Tax incentives drive most of the investment.
Landowners who strike better deals can be “getting a little bit more of the action that’s coming in at that level,” Comes said.
Some landowners may do well for themselves by signing individual leases for placement of turbines on their property, Comes said. Alternatively, he said, landowners can organize, perhaps as townships or in other groups to work with wind energy developers or utilities, entities that will likely be chasing more arrangements in the Midwest in coming years.
“We’ve got the land,” attorney Steven Case said. “We’ve got good wind. We bring that to the table.”
There is potential beyond smaller-scale projects, Comes said. Landowners can form groups and seek out wind energy companies for utility-sized deals.
“Now we’re starting to see some really big community projects,” Comes said, for example, Dakota Wind Energy, LLC, in northeast South Dakota.
This project, expected to involve 500 wind turbines and create 750 megawatts of wind power over three counties: Roberts, Day and Marshall. Projections call for enough power to be created for 220,000 homes. There is significant local ownership in Dakota Wind Energy, so that much of the investment and profits stay in the area; in many arrangements, wind companies and utilities pay a limited lease to landowners and send much of the money to out-of-state investors.
Dakota Wind Energy is just one of 13 community-based energy projects under the umbrella of Minneapolis-based National Wind.
Typical lease arrangements for placement of a 1.5-megawatt turbine on property run between $6,000 and $9,000 a year, says Erin Edholm, director of communications for National Wind.
But with a community wind project, landowners pull more profit — as much as 10 times, she said.
Why? “The short answer is, you get a share of the profits from the wind farm,” Edholm said, plus the lease.
For the South Dakota project, the company is working with about 400 landowners over the three counties. Once they sign an agreement for wind rights, landowners can choose to apply an upfront cash payment for those rights to equity in the project. Residents from the project-area can also purchase equity in the National Wind development, which essentially functions as a cooperative.
Edholm said that National Wind concentrates on working with communities in a collective effort rather than approaching landowners one by one with contracts.
Steven Case said that as federal and state governments mandate higher percentages of renewable energy, more companies will come to Iowa to develop projects.
Offshore turbines will have some success, but most wind energy will be developed on land, Case said. “The majority of it is going to be in the middle of the country,” he said.
He expects mandates for more renewable energy sooner rather than later. “I think something is going to get passed,” Case said. “You have a Democratic president. You have a Democratic Congress.”
One financing structure that may work well in certain cases for local people and developers is called “the flip.” In this arrangement, the developer, usually backed by an investor seeking the large federal tax credits, will take 99 percent of the profits for the first 10 years to get the tax advantage. Once the tax advantages have been realized, the profit percentages flip in favor of the landowner.
Additionally, there are U.S. Department of Agriculture loans and grants available for wind projects, including money for initial studies.
By blending government programs with investors’ appetites for tax credits, and by organizing themselves, groups of rural residents may be able to take on large-dollar energy projects.