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A Comparative Analysis of Community Wind Power Development Options in Oregon

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A Comparative Analysis of Community Wind Power Development Options in Oregon A Comparative Analysis of Community Wind Power Development Options in Oregon Prepared for the Energy Trust of Oregon by Mark Bolinger, Ryan Wiser, Tom Wind, Dan Juhl, and Robert Grace July 2004 About the Authors Mark Bolinger Mark Bolinger is a research associate at Lawrence Berkeley National Laboratory (LBNL), as well as an independent consultant. Mark’s research focuses on renewable energy economics, markets, policies, and programs. Through his work at LBNL, Mark has written extensively on community wind power development in Europe and North America. Mark received a B.A. from Dartmouth College and holds an M.A. in Energy and Resources from the University of California, Berkeley. Ryan Wiser Ryan Wiser is a scientist at Lawrence Berkeley National Laboratory (LBNL) and is principal of Wiser Consulting. Mr. Wiser founded Wiser Consulting in 1995, a firm that emphasizes economic, policy, and business analysis of renewable electricity markets. At LBNL, Mr. Wiser manages, leads, and conducts research in the planning, design, and evaluation of renewable energy programs, green marketing opportunities, and renewable energy economics. Mr. Wiser has advised numerous state and federal organizations in the development of their renewable energy programs. Mr. Wiser received a B.S. from Stanford University and holds an M.S. and Ph.D. in Energy and Resources from the University of California, Berkeley. Tom Wind Mr. Wind is the owner of Wind Utility Consulting. As a professional consulting electrical engineer, Mr. Wind specializes in wind generation projects and in the integration of wind generation into the utility grid system. He has been the project engineer for several small distributed wind generation projects in the Midwest. He graduated from Iowa State University in 1974 with a BS in electrical engineering. He was employed at Iowa Southern Utilities for 15 years before becoming a self- employed consulting engineer in 1989. He is a member of AWEA, UWIG, IEEE, the Technical Advisory Group for wind generation for the U.S. National Committee of the IEC, and the MidContinent Area Power Pool Design Review Subcommittee. Dan Juhl Mr. Juhl has pioneered conservation and renewable energy technologies, particularly wind power, in the Midwest for over 25 years. During his tenure in the wind industry, Mr. Juhl's activities have covered every aspect of the technology including R&D, design, manufacturing, development, installation, and O&M. He has also been instrumental in helping to form public policy by working with legislators and regulators on the workings and benefits of utilizing renewables in the energy mix, and is considered to be one of the nation’s leading experts on locally owned renewable distributive generation. Mr. Juhl currently owns and manages two companies active in the renewable energy business, including a 10.2 MW wind farm on the Buffalo Ridge in Southwest Minnesota. Robert Grace Robert Grace (Sustainable Energy Advantage) helps public, private, and non-profit clients develop opportunities for renewable resources in competitive electric markets. By delivering strategic, policy, and market analysis, Bob has supported the development and implementation of renewable energy policy and funding programs, wholesale and retail electricity businesses, and electric market infrastructure. Bob previously headed up green power marketing at AllEnergy Marketing Company, and has also worked for the New England Power Company and LaCapra Associates. Bob holds degrees in Energy and Resources (M.S., University of California) and Energy Studies (B.S., Brown University). Acknowledgements This report was prepared under the direction of Peter West of the Energy Trust of Oregon. We appreciate his direction, counsel, and comments throughout the research and writing process. We also appreciate the assistance of Jeff Keto (Oregon Department of Energy), Paul Woodin (Western Wind Power), and Ed Ing (Law Office of Edwin T.C. Ing) in answering Oregon- specific and tax-related questions. We also thank John Harper for his comments on an earlier version of this report. Of course, any errors or omissions that remain are the sole responsibility of the authors. Table of Contents Executive Summary....................................................................................................................... i 1. Introduction.............................................................................................................................. 1 2. Community Wind in Europe .................................................................................................. 4 2.1 History and Current Status................................................................................................... 4 2.2 European Ownership Structures .......................................................................................... 5 2.3 European Drivers of Community Wind............................................................................... 6 2.4 Lessons Learned................................................................................................................... 7 3. Community Wind in the United States.................................................................................. 9 3.1 History and Current Status................................................................................................... 9 3.1.1 Minnesota...................................................................................................................... 9 3.1.2 Iowa............................................................................................................................. 13 3.1.3 Wisconsin.................................................................................................................... 14 3.1.4 Illinois ......................................................................................................................... 15 3.1.5 Massachusetts ............................................................................................................. 15 3.2 Lessons Learned................................................................................................................. 16 4. Potential Barriers to Community Wind in the US (and Oregon)...................................... 18 4.1 Financial Barriers............................................................................................................... 19 4.1.1 General Inability to Utilize Tax Incentives................................................................. 19 4.1.2 Determining a Feasible Financial Structure................................................................ 21 4.1.3 Financing the Project .................................................................................................. 24 4.1.4 Potentially Poor Economies of Scale.......................................................................... 25 4.2 Regulatory Barriers............................................................................................................ 28 4.2.1 Securities Regulation .................................................................................................. 28 4.2.2 Utility Rate Structures................................................................................................. 31 4.3 Technical Barriers.............................................................................................................. 33 4.3.1 The Interconnection Process....................................................................................... 33 4.3.2 Limitations on Interconnecting Wind Turbines to the Distribution System............... 34 4.4 Market Barriers .................................................................................................................. 37 4.4.1 Wind Easements Already Sold ................................................................................... 37 4.4.2 All-Requirements Contracts........................................................................................ 38 4.4.3 Lack of On-Site Opportunities.................................................................................... 39 4.4.4 Identifying and Securing Potential Revenue Sources................................................. 40 4.5 Summary of Barriers.......................................................................................................... 41 5. Development of a Standard Set of Assumptions for Comparative Financial Analysis... 44 5.1 Description of Financial Model ......................................................................................... 44 5.2 Project Cost Assumptions.................................................................................................. 44 5.2.1 Turbine and Works ..................................................................................................... 47 5.2.2 Balance of Plant .......................................................................................................... 47 5.2.3 Interconnection ........................................................................................................... 47 5.2.4 Soft Costs.................................................................................................................... 48 5.2.5 Operating Costs........................................................................................................... 49 5.3 Project Performance Assumptions..................................................................................... 51 5.4 Incentive Assumptions......................................................................................................
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