Business Meeting #16

Welcome and Introductions

Kent Larson, Dakotas CEO of Northern States Power, welcomed the 111 Forum participants (see attached) comprised of a broad spectrum of regional wind stakeholders and 31 NWCC members, alternates, staff and consultants. He noted that Sioux Falls is experiencing tremendous load growth of 6%, compared to the Midwest’s 2% average due to fast-paced economic development and an influx of new residents. NSP has a strong commitment to wind energy and a long tradition with environmental management; currently 132 MW of wind power is on-line; by 2002, NSP will be purchasing 425 MW.

Panelists listed under discussion questions were asked to provide remarks and responses to launch roundtable dialogues of varied perspectives on topics of interest to regional stakeholders, in order to advance the NWCC’s goal of building consensus and identifying issues that need to be addressed. NWCC’s vision is a self-sustainable wind industry, one that is environmentally, economically, and politically sustainable.

Overview of Midwest Wind Development

• What is the history and evolution of wind development in the region? How have projects performed?

John Dunlop, Great Plains Representative for the American Wind Energy Association, presented a short slideshow about wind energy installations in the region. Installed wind power capacity has grown in the Midwest from 600 kW in 1992 (Waverly, NSP, Spirit Lake) to 27 MW in 1995 (Lake Benton, MN; Turtle Lake, ND; Green Bay, WI) to 107 MW today. By 1999, 510 MW of Zond, Micon, and Vestas turbines will be constructed across eight major sites in Iowa and Minnesota, all mandated by state laws. A participant pointed out that an additional 11 MW will be installed in Wisconsin. What the landscape will look like two years from now is the big question.

Ken Hach, of Enron Wind Corp., noted that wind technology has come a long way since the 10 kW Jacobs machines he installed in the 1980s. Prices are down considerably and reliability has increased. A participant noted that although technology improvements have been a factor, the policy environments and stakeholder support were essential in bringing about rapid development in Iowa and Minnesota. Another pointed out that NSP had included 100 MW of wind energy in its 1992 resource plan, prior to the state mandate.

• What are the emerging trends affecting wind development in Upper Midwest?

Michael Noble, of Minnesotans for an Energy Efficient Economy, predicted that federal and international climate change policies with ratification of the Kyoto accord and early markets for trading carbon emissions due to a growing economic awareness of the impacts of our energy use will lead to increased wind development. However, dependency on coal power has increased over the past two years, and federal efforts to deregulate electricity is in conflict with Kyoto targets utilities and will lead to increased fossil fuel use if a solid emissions cap is not included. The second major trend is the electric reliability crisis, with 5000 MW of nuclear power out of service in the region (2000 permanently). While there are great opportunities for wind energy, a major obstacle is transmission availability and how to deliver the power to consumers. Policy drivers and grassroots support have been very important, but a sustained market is needed. Reaching the next threshold poses a challenge: how to move beyond the mandates.

Glenn Cannon, General Manager of Waverly Light & Power, noted that although his utility’s wind project is small compared to the large-scale farms, when its 1.5 MW installation is complete wind will supply 4% of the municipal’s total electric needs. This will help evaluate the amount of non-dispatchable wind power a small utility can handle. He sees three sectors of the public: while some don’t see any negative impacts from electricity generation, and others are worried we’re going to drown in our own pollution, the vast majority of the public is concerned about the environment. Utility interest is emerging; several municipals in Iowa, including one with less than 100 customers, are jointly building a 2.25 MW wind facility in Algona. Such new methods for becoming involved are important for small systems, which often have a closer pulse of their customers. Wind projects are great PR tools as they bring strong customer support.

Mark Eilers, of Eilers & Associates, noted that Joint Implementation of climate change mitigation may create opportunities for emissions credit trading between tribal entities and utilities. Long-distance green pricing and support from landowners may help South Dakota recover some of its overall load loss and export wind electrons to the Chicago market.

Wind-Related Land Use & Landowner Considerations

• What are the region’s primary wind-related environmental and permitting considerations?
  What safety issues and physical factors need to be addressed?

Bill Grant, Director of the Izaak Walton League of America’s Midwest Office, helped launch the NWCC and was Chair of its Siting Workgroup which developed a landmark Handbook on Permitting of Wind Energy Facilities (see overheads). While some people think wind turbines are beautiful, others consider them noisy and ugly; aesthetics are just one of the many considerations in designing a publicly-accepted wind project. Land use is clearly the biggest issue in the Midwest, and although wind farms are not land-intensive they are land-intrusive. NWCC’s handbook provides tips and recommendations for permitting agencies and developers to handle common concerns; other wind siting protocols include guidelines developed by the Appalachian Mountain Club, Green-e and the Green Group’s Power Scorecard. Environmentalists must keep in mind there is no energy "free lunch" – local issues should not override big picture problems such as climate change, air pollution, nuclear waste, and fish kills. IWLA has published three other reports: "Landowners’ Guide to Wind Energy," "Wind on the Wires," and "Power to Spare in the Upper Midwest."

Paul Helgeson, of the Wisconsin Public Service Commission, has gained perspective from farming, serving on the city council and working for the PSC. Landowners are concerned that neighboring wind facilities will hurt their real estate values; at a recent public meeting in Stockbridge, a vocal minority expressed opposition to the development.

Skip DeLong, formerly of Minnesota West Community College, suggested that turbines be sited right on property lines, so two landowners share the benefits. Often landowners suffer from a lack of information when signing away land rights and easements; they may regret decisions such as agreeing to "in perpetuity" particularly if the selling price of electricity triples. Developers should not pressure landowners during lease negotiations with "take it or leave it" offers.

Michael Vickerman of RENEW Wisconsin noted that early communication with landowners is key; a lack of familiarity with developers or outside utilities may slow down acceptance. A participant noted that farmers want a portion of the revenue stream from wind turbines on their property; the avian issue can be a red herring as it is not as large a concern as land value. He pointed out that for a $45 hunting license, one person could kill hundreds of birds in Minnesota; however the state is spending $500,000 for an extensive avian research study. Bill Grant pointed out that under the Endangered Species Act even one eagle collision with a wind turbine can be considered an illegal taking. If wind developers don’t do their homework, the issue can be a show stopper. A Rosebud tribal member noted that although raptors are sacred species, statistically there are so many other causes of mortality so it is a non-issue for wind power development.

• What lessons can be learned from Minnesota’s experience with wind land easements and property tax issues?

Jack Keers, Pipestone County Commissioner, explained that wind development was exempted from property tax in Minnesota when there was very little capacity installed. Local government services such as roads, emergency assistance, and law enforcement were picked up by host communities. After three years a limited property tax was reinstated on a tiered basis for medium and large-scale wind facilities (under 2 MW projects are still exempt). This new arrangement is more equitable for all as it still provides a break but doesn’t penalize taxpayers.

Rick Halet, of Northern States Power, noted that for NSP’s early wind power demonstration project (three 65 kW Bonus machines), the full property tax divided by energy output amounted to 5 cents per kWh. NSP’s land easements are not based on production, but they do often pay for buffer property (neighboring land) as well. What is fair compensation is hard to judge, as some landowners request more turbines on their property, and welcome the development with open arms. Landowner education is very important. A participant added that the biggest lesson was the need for credible information to get past the suspicion of rural residents, who are traditionally at the mercy of extractive economies.

• How can farmers and businesses participate in locally-owned wind projects?

Don Gackstetter, farmer, noted that the placement of access roads has lasting effects. Although they own the land, farmers don’t have enough capital to build their own wind farms so they can form complementary partnerships with big business.

Lee Hall of Windway Technologies asserted that wind projects’ disturbance to land needs to be economically beneficial for farmers, but payment methods should be up to each individual. Some want money up front and others want it for their children, so the terms of negotiation should not be dictated. Co-ownership by several farmers would be a good approach, if access to transmission lines could be gained.

Lisa Daniels, of the Sustainable Resources Center, agreed that landowners need knowledge and tools to host projects. Mentioning eminent domain and perpetual easements adds to distrust; landowners have experience with land-based products.

• What are the opportunities and barriers for wind development on Tribal lands?

Jack Davey of the Rosebud Sioux Tribe and Intertribal Council on Utility Policy, noted that land controlled by sovereign Tribes present unique opportunities and problems for wind power. Rosebud’s long-term goal is to establish wind farms for clean power and plans to start with a small demonstration project at the casino. The rural electric co-ops that serve western South Dakota are locked into sole-source provider requirements with coal plants, precluding net metering or other purchase agreements.

Jeff Besougloff, of the Lower Sioux Indian Community, described a five-year effort including a feasibility study, a 20 kW test turbine, and an environmental assessment. A goal of 30% wind power will be put to tribal vote, which may lead to a 10 MW community-sized project. County and regional economic development officials need to take a more active approach in attracting wind development.

• What wind resource assessments are underway throughout the region? What additional efforts are needed?

Rory Artig, of the Minnesota Department of Public Service, showed that a fairly uniform state-wide assessment obscures high variability within Murray County – in the town of Chandler, the worst site is within 1 km of the best. Needs include more regional GIS-based wind mapping efforts; uniform monitoring across state lines, which are meteorologically artificial boundaries; and detailed WASP-type site-specific analyses.

David Ried, of Omaha Public Power District, learned that wind speeds vary from year to year, and rural phone lines do not provide high quality data transmission. Landowners are important assets to help identify monitoring problems and do minor on-site repairs such as battery replacement. The joint utility effort has led to plans for two turbines. Stacie Hebert, of Otter Tail Power, noted that in monitoring five sites, her company is looking for areas to support 10 MW of wind.

Michael Brower, of Brower & Company, noted that methods for models and mapping can be a mystery; which to use depends on terrain and climate complexity, the extent of the area involved, and the project budget. A second issue is how to forecast wind, two days ahead of time, which will add significant value to scheduling transmission and other generation sources as more wind power is added to the region.

• What transmission issues arise for wind in the region?

Rick Gonzalez, of Northern States Power, described technical, economic, and institutional/regulatory issues (see overhead). Wind generation equipment needs to provide adequate frequency and voltage control. The amount of transmission redundancy and reliability needed may be less for wind as a non-dispatchable resource; there is likely no need to build more transmission capacity, and the traditional way of calculating losses may not apply. Evaluating the cost of replacing expected wind power during peak periods can help the overall economics of wind. In response to participants’ questions, he estimated that exporting 500-1000 MW of wind power to Chicago or Milwaukee (about 500 miles) would cost $250-300 million; wheeling expenses would be about $18/kW-year for firm transmission. In MAPP, wind receives credit for 25% of nameplate capacity, with a 15% reserve required; a facility’s four hour sustained output determines its capacity credit. Non-FERC jurisdiction entities aren’t required to interconnect.

David Blecker, of MSB Energy Associates, raised the issue of environmental tradeoffs between clean wind energy and potential necessary additional transmission lines to move the power to urban markets (Minneapolis, Chicago, Denver). FERC authorizes charges that are burdensome to wind; will new system operator structures be more equitable? Full and functional divestiture is needed. Under FERC Order 888, system impact engineering studies and facility improvements are billable to generators, creating an inherent economic disadvantage to new resources.

Betsy Engelking, of Cooperative Power, noted that new flow-based zonal transmission tariffs will require payment for distance, but will eliminate rate pancakes. Compared to New England, MAPP is fairly loose as all utilities dispatch their own resources; under a more centralized system provisions would be needed to assure wind access to the grid, not based on instantaneous economic order. For distribution lines, which move power into load centers and are radial in nature, costs are assigned to local beneficiaries; many rural lines are really transmission as they travel through an area. FERC uses seven factors to distinguish transmission from distribution lines.

Jimmy Seidita of the Environmental Law & Policy Center, pointed out that Illinois, Indiana, and Ohio have the largest populations of Midwestern states, but don’t have good wind resources. There is a need for new capacity in these states (ComEd recently bought power at $5/kWh); these customers are used to paying high rates for electricity, and they are clamoring for clean power. Wind is the most economical, reliable non-polluting power; wind supporters should not be intimidated by large numbers to build new transmission lines to connect buyers and sellers. A participant pointed out that due to wind’s intermittent nature, it is not necessarily available during peak demand; others discussed whether improved forecasting techniques (currently achieving 20-30% accuracy levels) will help wind’s dispatchability.

Luncheon Slideshow: "Wind Power in Europe: A Model for the U.S. Midwest?"

Brian Parsons of the National Renewable Energy Laboratory

Brian Parsons of the National Renewable Energy Laboratory introduced the joint NREL/NWCC research project on Distributed Wind Development to evaluate the cluster approach as opposed to California wind farms.

Tom Wind of Wind Utility Consulting recounted his recent trip to Europe (see overheads) and lessons applicable to the Midwest. Public ownership structures have led to widespread support. The cooperative tradition and rural heritage was very comparable, but differences include strong government involvement and concern for conservation ingrained throughout society. Due to limited land remaining and increasing concerns about visual impact, development is moving 3-6 km offshore, with larger turbines. Power purchases are legislatively guaranteed at 85% of the retail rate (Feed Law); clean power customers are eligible for standard carbon tax refunds.

• What lessons can be learned from Minnesota’s REC wind collaboration?

Steve Clemmer, of the Union of Concerned Scientists, outlined a joint project to subscribe rural electric customers to support 2 MW of wind -- 3800 blocks of 100 kWh/month (see overheads). The outreach of advocates was very important, but they learned not to let the perfect stand in the way of the good and to give project champions time to work internally to build support. Blocks were initially priced at $4 but reduced to $2; the 10-year payback period was extended to 15 to improve the project’s economics.
Tim Seck, of Cooperative Power, agreed that grassroots support was vital in achieving 1% penetration. Marketing could likely boost this number.

• Is there a consumer market for wind power in the Dakotas and other Midwest states?

Kim Christensen, North Dakota Office of Intergovernmental Assistance, noted that despite a very conservative legislature and influential lignite industry, a 1994 survey of North Dakotans indicated considerable public support for wind power: 63% said they’d pay more, and 83% said developing wind is as important as developing coal. Green pricing programs have great potential to improve customer relations.

Ben Paulos, of the Energy Center of Wisconsin, noted that surveys always show a high response, but actual participation is lower. Madison Gas and Electric achieved 12% participation, equaling 45 million kWh/yr to support an 11 MW wind facility. Commercial and industrial customers may provide larger bases of support than residential customers; Toyota alone will purchase 4 MW of green power equivalent to 5500 homes. ECW’s report "Green Power in Perspective," studies environmental marketing of consumer goods and applies lessons to electricity.

Participants discussed the effect of mandates on green pricing programs, and potential negative PR from marketing required investments. NSP’s marketing team is considering incremental new investments for premiums from customers. Based on deliberative polling, CSW will construct 75 MW of wind as rate-base generation; an additional green pricing program will allow customers to support higher levels. One participant noted that a national Renewable Portfolio Standard (RPS) would set a floor for renewable development and ideally green marketing will support additional capacity; however others expressed concern that such a requirement could undercut green marketers’ ability to sell their products. In Wisconsin, green pricing programs laid the foundation for a renewable energy mandate.

Overcoming Barriers: Consumer Response, State Policies and Programs

• How is/will utility restructuring affect the region’s wind energy development?

Walt Bleich of Nebraska Citizen Action described worst-case and best-case scenarios of utility restructuring; fears of rising rates, poor service, cherry picking, and an unregulated oligopoly with total disregard for public good versus a dream vision of a shift to an egalitarian renewable energy future. In order to prevent the nightmare, a national RPS and/or SBC is needed; market forces alone won’t move the industry towards dawn rather than sunset.

Michael Vickerman of RENEW Wisconsin described the diverse Customers First! coalition of disparate interests formed to create a public policy wedge and shape utility restructuring. The partnership has been successful in drafting comprehensive legislation to revamp the state’s power plant siting law and create an independent system operator, and achieved a 50 MW renewables set-aside. Unlikely alliances can organize to formulate their own initiatives and write their own ticket.

• What policies can support distributed wind development? What are advantages and disadvantages of net metering, loan/financing programs, wire charges, & mandates?

Mike Bull, Minnesota Senate Counsel for Research, noted that all of Minnesota’s renewable support policies (production incentive, property tax reduction, streamlined siting regulations, net metering requirement, sales tax exemption, Prairie Island mandates) appear to be designed to reduce barriers, and have developed out of coalitions of economic, environmental and agricultural interests. A state-level RPS will likely be difficult to pass as the legislature’s appetite for mandates is low; tinkering with details takes too much time. Including existing renewables and hydropower may gain political viability, but lose support from the environmental community. Legislators are very concern that restructuring may increase electric costs.

Lara Levison, Union of Concerned Scientists, described several policy options for supporting distributed wind. Net metering in particular is designed for small systems sized to a customer’s load – by turning back the meter, all power generated offsetting the customer’s monthly use receives the retail value of electricity; in most states excess power is bought by the utility at avoided cost. Solar activists have promoted this policy throughout the country; however several new laws do not include wind power, and many have tight caps limiting its implementation. Standard contracts for small projects are also helpful.

• What mechanisms can best build a regional sustainable commercial market for wind power?

Steve Wegman, of the South Dakota PUC, noted that 70 utility companies serve 700,000 customers in South Dakota with a peak load of 2000 MW; the state is already a net energy exporter with 3200 MW of hydropower – 9% is sold to Iowa, and 11% is sold to Minnesota. In order to build the wind industry, partnerships like those that harnessed the Missouri River are needed. States with more experience can provide guidance for the Dakotas in developing the wind resource.

Mark McGree of Northern States Power noted that the wind industry needs to educate financiers and investment bankers about commercialization. Wind can be coupled with other resources to firm up its capacity. Frank Thompson, of the Nebraska Public Power District, stressed that agricultural customers depend on low-cost electricity. Technology improvements driving down the cost of wind will keep it in a positive light.

• How can the NWCC build on this dialogue?
• What NWCC outreach initiatives could assist local efforts?
• What are the next steps for NWCC members and regional stakeholders?

 Ideas for follow-up activities included:

• Support forecasting efforts to add economic value to wind
• Develop guidelines for transmission requirements
• Conduct analysis of cost of harvesting wind in Upper Midwest for distant markets
• Facilitate dialogue with the banking community to overcome investment barriers
• Host internet discussions on modeling techniques
• Explore feasibility of off-shore development in Lake Michigan
• Define capacity value for wind with dispersed, large-scale developments (correlate peak demands and distributed resources)
• Evaluate the impact of various regulations and policies
• Post map of all wind projects on website
• Examine how to implement net metering
• In-state collaborative with economic development agencies in Iowa

Closing Remarks

Pam Nelson, Commissioner of the South Dakota PUC, asserted that wind development in South Dakota will depend on all participants of the Forum – state residents and policymakers don’t know much about wind power, and it will likely be one of the last states to pursue deregulation. The diversity of representation is quite impressive and powerful; counterparts in neighboring states have much to contribute. Even without detailed wind data, Dakotans know they have great resources, and need to be shown how to develop that potential.