Business Models

Report Uses Cases Studies to Explore Community Wind

Lessons & Concepts for Advancing Community Wind, released by The Minnesota Project, seeks to advance the development of community-based wind projects in the United States by drawing keys to success and policy recommendations from three compelling Midwestern case studies.

Wind energy continues to experience double digit growth rates because of the relatively cheap technology and the widespread availability of wind resources, and numerous studies have now shown that locally-owned wind projects produce disproportionate benefits to the local community and region where they are built. This presents community wind energy development as a stand-out opportunity for communities across America to pursue locally-owned projects that will help meet their electricity needs and contribute to energy independence while also providing tremendous economic benefits. 

Report Contents:

  • Section I: Community Wind Case Studies
    • Winona County, MN
    • City of Willmar, MN
    • Miner County, SD
  • Section II: Keys to Success
    • Visioning & Planning
    • Project Leadership
    • Involving the Community
    • Financing & Pricing
  • Section III: Solutions for Advancing Community Wind
    • Dispersed Generation Studies
    • Siting & Permitting Standardization
    • Establishing or Improving C-BED Legislation
    • Rural Utility Service Loans
    • Investment Tax Credit or Cash Grant
    • Net Metering
    • Advanced Renewable Tariffs
    • Standard Offer Contracts
    • Increasing Renewable Portfolio Standards

Stimulus Incentives Benefit Community Wind

A new report from Lawrence Berkeley National Laboratory reveals how the 30% investment tax credit (ITC) and cash grant equivalent have increased benefits for the development of Community Wind projects. “Revealing the Hidden Value that the Federal Investment Tax Credit and Treasury Cash Grant Provide To Community Wind Projects” analyzes the impact of new federal policies for wind farm investment incentives introduced this year as part of the U.S. economic stimulus program.

Historically, the production tax credit (PTC) has been the primary incentive for wind farm development, but the PTC requires passive income that only certain equity investors can leverage. The ITC and cash grant equivalent now available to qualified projects have reshaped the financial landscape for renewable energy development by lowering the hurdles for investors to obtain tax credits as well as providing cash grant equivalents for upfront capital. In addition, the American Recovery and Reinvestment Act of 2009 included provisions that eliminated the ITC's anti-double-dipping (or "haircut") provision for subsidized energy financing.

“Many of these ancillary benefits circumvent barriers that have plagued community wind projects in the United States for years.”

-Mark Bolinger,
Lawrence Berkeley National Laboratory

Mark Bolinger, the report's author, argues that while the stimulus changes were intended for the wind energy markets in general, they have been a blessing in disguise for community wind project development in the United States.

“It stands to reason that community wind, which has had more difficulty using the PTC than has commercial wind, may benefit disproportionately from this newfound ability to choose among these federal incentives. This report confirms this hypothesis,” says Bolinger. “Just as important are a handful of ancillary benefits that accompany the 30% ITC and/or cash grant, but not the PTC. Many of these ancillary benefits—including relief from the alternative minimum tax, passive credit limitations, and certain PTC ‘haircuts’—circumvent barriers that have plagued community wind projects in the United States for years.”

The report compares two financing structures, the Strategic Investor Partnership Flip and the Cooperative LLC, finding that the “Strategic Investor Flip structure benefits significantly more from choosing the ITC over the PTC than it does from switching to the 30% cash grant. Meanwhile, the opposite is true for the Cooperative LLC structure, which does not benefit much from selecting the ITC over the PTC, but realizes a tremendous amount of value by choosing the 30% cash grant over the ITC.”

This report, “Revealing the Hidden Value that the Federal Investment Tax Credit and Treasury Cash Grant Provide To Community Wind Projects,” and others are available at the Electricity Markets and Policy Renewable Energy Publications section of the Lawrence Berkeley National Laboratory web site.

Lisa Daniels, Executive Director of Windustry, served as a draft reviewer for this report.

Introduction to Landowner Wind Energy Associations

Have you been approached by a wind developer? Are you interested in leasing your land for wind development but want to make sure you are getting a fair deal?

This Introduction to Landowner Wind Energy Associations (LWEA) provides an overview to this model of landowner participation. A landowner wind energy association bridges the gap between full ownership participation and simply leasing your land. This model allows landowners to come together and combine their resources, which provides greater negotiating power with the developer. The association model can also be used to provide financial benefits to all landowners in the association, not just those who host the turbines. Download the two-page handout to learn more.

Wind Project Financing Structures: A Review & Comparative Analysis

This report from Lawrence Berkley National Laboratory was released in September, 2007. The report, titled "Wind Project Financing Structures: A Review & Comparative Analysis," was authored by John Harper (Birch Tree Capital, LLC), Matt Karcher (Deacon Harbor Financial, L.P.), and Mark Bolinger (Lawrence Berkeley National Laboratory), and was funded by the U.S. Department of Energy's Office of Energy Efficiency and Renewable Energy, Wind & Hydropower Technologies Program.

The rapid expansion in the U.S. wind power industry over the past few years has required the mobilization of a tremendous amount of capital. In 2007 alone, for example, an estimated $6 billion will be invested in new wind projects in the U.S. To attract this kind of capital, the wind power sector has, in recent years, developed multiple financing structures to manage project risk and allocate Federal tax incentives to those entities that can use them most efficiently. These structures are the underlying focus of this report.

Specifically, the purpose of this report is three-fold: (1) to survey recent trends in the financing of utility-scale wind projects in the United States, (2) to describe in some detail the seven principal financing structures through which most utility-scale wind projects (excluding utility-owned projects) have been financed from 1999 to the present, and (3) to help understand the impact of these seven structures on the levelized cost of energy from wind power.

The seven structures -- which range from simple balance-sheet finance to several varieties of all-equity partnership "flip" structures to leveraged structures -- feature varying combinations of equity capital from project developers and third-party tax-oriented investors, and in some cases commercial debt. Their origins stem from variations in the financial capacity and business objectives of wind project developers, coupled with the investment risk tolerance and objectives of the tax-oriented investors and debt providers.

The full report (including an executive summary) can be downloaded from:
http://eetd.lbl.gov/ea/emp/reports/63434.pdf

In addition, a high-level PowerPoint summary of the document is available at:
http://eetd.lbl.gov/ea/emp/reports/63434-ppt.pdf

[Text of this item is adapted with minor changes from from a 09/2007 LBNL press release.]

Chapter 12: The Minnesota Flip


The Minnesota Flip business model was developed in response to a unique combination of federal incentives for wind development and state policies that encouraged development of community-owned wind projects. The structure has proven a successful model for landowners and equity investors interested in partnering in the development of wind projects. This partnership allows the equity investor to take advantage of federal tax credits, while providing local owners the economic benefits of ownership.

Ownership: 

Chapter 11: Choosing a Business Model


There are several options for structuring a community wind energy project. Business structure options should be evaluated based on their ability to deliver low-cost wind energy and local benefits, as well as on their profitability. In general terms, business arrangements are best when they:

Ownership: 

Trimont Area Windfarm LLC, Trimont, MN: Community Wind Project

From the Great River Energy Press Release

Trimont Area Wind Farm celebrates dedicationNation’s largest landowner-developed wind farm generates enough electricity to serve the annual energy needs of about 29,000 homes

Trimont, Minn. - The Trimont Area Wind Farm, the nation’s largest landowner-developed wind farm, was officially dedicated on Saturday, July 8 at the Trimont Chocolate Festival. Generating enough electricity to serve the annual energy needs of nearly 29,000 Minnestoa homes, the wind farm consists of 67 wind turbines, each nearly as tall as a 30-story building.

The project, developed and operated by Portland-based PPM Energy, provides power to Great River Energy, which distributes the renewable energy to member electric cooperatives throughout Minnesota.

“This project is a significant step that will help spur the creation of homegrown, renewable energy in our state and in our region,” said Jon Brekke, vice-president, member services, Great River Energy. “The land continues to be owned and farmed by local landowners, and energy customers throughout the state will benefit from the wind energy produced at the Trimont Area Wind Farm.”

Tim Seck, business developer, PPM Energy, adds: “The Trimont Area Wind Farm has become a model for community wind across the country, and we hope to replicate the success elsewhere as well as expand Trimont.”

The wind farm generates up to 100 megawatts (MW) of clean, renewable energy. Forty-three landowners in the area partnered with PPM Energy and Great River Energy to develop the project, which will help Great River Energy meet the Minnesota Renewable Energy Objective, calling on electric utilities to produce 10 percent of their energy from renewable sources by 2015.

The project will generate more than $1 million in local economic impact to the Trimont area in the form of taxes, easement payments, landowner revenue participation payments and jobs.

Neal VonOhlen, chief manager of the Trimont Area Wind Farm and a local farmer, notes his satisfaction with the project saying, “As a Minnesota farmer, I understand the value of wind energy to my farm, my community and the importance of it to our partners in the project. We’re incredibly excited to dedicate the wind farm, and look forward to producing energy for many years to come.”

Wind energy is the fastest growing energy source, with an annual average growth rate of more than 35 percent since 2001.

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