Commercial Scale

Minnesota legislator wants state to encourage small, locally-owned energy projects

 

Article by: H.J. CUMMINS , Star Tribune

January 15, 2008

A legislator's plan to encourage small, local energy projects in Minnesota borrows from Germany's experience.

 

A Northfield legislator wants Minnesota to take a more European approach to renewable energy.

Rep. David Bly, DFL-Northfield, is expected to announce Thursday that he'll sponsor a bill to encourage local ownership of small energy projects. The measure would be a counterpoint to other tax incentives, including a federal production tax credit, that typically benefit large, corporate investors.

The proposed model, known as "feed-in tariffs," has worked in countries such as Germany, increasing both renewable-energy capacity and the role of small owners. Other states looking at feed-in tariffs include Michigan and California, although no state yet has such a program.

The proposal raises two issues likely to surface along with other renewable energy bills expected in the 2008 legislative session: What are the relative roles of government and the free market, and if clean energy costs more, who should pay that cost?....

 

Click here to read the article

"Local ownership urged for energy projects"

on the Star Tribune website.

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.]

Property Taxation of Wind Generation Assets

"Property Taxation of Wind Generation Assets," North American Windpower, May 2006, Vol. 3, No. 4, pp. 31-34. This article, written by Warren Ault, summarizes research he did for Windustry in 2005 into the actual and potential local economic benefits of wind power, focusing particularly on a survey of the varieties of approaches throughout the United States to the use of local property taxes. Click on the link below to download a PDF copy of the article.

Minnesota Energy Legislation in 2007

2007 was a landmark year for energy policy in Minnesota. The legislature passed the strongest renewable energy standard in the nation with overwhelming support from both sides of the aisle. This law makes Minnesota a leader in clean energy policy and creates a great opportunity for our state to reap the rewards of the booming renewable energy industry. With the passage of The Next Generation Energy Act of 2007, the legislature made sure much of the economic benefits of the increased renewable energy would stay in our rural communities.

The bill also contains real solutions to global warming that will create tangible cost savings for Minnesotan families and businesses.

The Renewable Energy Standard

The strongest renewable energy standard (RES) in the nation became law this session when Gov. Tim Pawlenty signed a requirement that the state’s electric utilities obtain 25% of their energy from renewable resources by 2020. Minnesota’s utilities currently get about 6% of their energy from renewable sources. Under this new law, Minnesota will add between 5,000 and 6,000 MW of new renewable energy, a large part of which is expected to come from new wind turbines in our rural communities.

The renewable energy standard is a market-based mechanism that requires utilities to gradually increase the portion of their energy that is produced from renewable sources like wind, solar, biomass, and geothermal energy. The RES uses tradable renewable energy credits to achieve reductions in a flexible, low-cost manner that creates competition among renewable energy generators and provides them with an incentive to continually drive costs down. Minnesota’s Renewable Energy Standard will help keep electricity costs low, spur economic development, increase energy independence and security, and lead to cleaner air.

The Next Generation Energy Act of 2007

The Next Generation Energy Act, signed into law this May, provides for concrete actions that will set Minnesota on a path to achieve 80% reductions in greenhouse gas emissions by 2050. Key components of the law include:

Three times the current amount of investment in energy efficiency measures that will produce a 25% energy savings by 2025.

  • A goal to aggressively reduce our global warming pollution to reach an 80% reduction below 2005 levels by 2050.
  • The creation of an economy-wide climate change action plan by February 1, 2008. Arizona’s climate action plan will result in an estimated overall net economic cost savings of more than $5.5 billion from 2007 to 2020.
  • Required reductions in CO2 from the power sector. After August 1, 2009 there will be a moratorium on new power plants unless they can offset their CO2 emissions

The Next Generation Energy Act also includes critical provisions that will help rural communities plan, build, and own renewable energy facilities themselves, thereby keeping energy dollars in local communities. The Act:

  • Allows counties to take over permitting authority to site wind energy facilities up to 25MW in size, an increase over the previous 5MW, and impose higher standards than state laws.
  • Allows local governments to own wind energy projects with more than two turbines without partnering with other entities.
  • Requires utilities to study the amount of renewable energy that can be connected to existing local transmission lines and substations with minimal upgrades, thereby using existing utility infrastructure more efficiently and delaying the need for new large transmission lines.
  • Requires that developers finish projects within 7 years or renegotiate land development agreements with landowners to extend these agreements.
  • Requires the Department of Commerce to consider the Community-Based Energy Development (C-BED) economic benefits that flow to all local interests, not just the project developer, when approving C-BED projects.
  • Allows C-BED developers to negotiate market-based rates unhindered by out-of-date price caps.
  • Requires utilities to consider contracting with C-BED projects to comply with the Renewable Energy Standard.
  • Allows utilities to partner with C-BED projects.
  • Requires a variety of studies on emerging community energy issues.

“These changes in law will help cities, counties, school districts, and other local agencies develop, own, and benefit from wind farms. Local ownership of wind projects helps ensure that a broader spectrum of Minnesotans benefit financially from renewable energy, and it also helps make rural communities more energy independent.”

-David Benson, Nobles County Commissioner


More Information
For more information about the benefits of community wind, click here.

For the full text of the Renewable Energy Standard bill click here.

For the full text of The Next Generation Energy Act, click here.

Farmer's Guide to Wind Energy

This publication was released by Farmer's Legal Action Group in August 2007. According to the FLAG website, "This book serves as a guide to the many legal issues faced by farmers and rural landowners who seek to develop wind energy projects.

The Farmers' Guide to Wind Energy: Legal Issues in Farming the Wind provides legal information for individuals developing wind projects, regardless of size. This includes farmer-owned large utility-scale wind farms as well as smaller on-farm or residential wind turbine projects. Legal issues covered in this guide include negotiating wind property agreements, siting a wind farm, liability risks associated with developing and operating wind turbines, project financing, choice of business structure, government incentives for wind development, and the tax consequences of these efforts."

Click here to go to the FLAG website.

Pages

Subscribe to Commercial Scale