Wind Energy in Indian Country: Turning to Wind for the Seventh Generation by Andrew D. Mills Submitted in partial satisfaction of the requirements for the degree of Master of Science In the Energy and Resources Group of the University of California, Berkeley Approved: _______________________________________________________ Daniel Kammen Date Professor, Energy and Resources, Goldman School of Public Policy University of California, Berkeley Approved: ________________________________________________________ Alastair Iles Date Post-Doctoral Scholar University of California, Berkeley Received by the Graduate Secretary: ___________________________________________ Jane Stahlhut Date Wind Energy in Indian Country A.D. Mills Abstract Abstract Utility-scale wind projects are increasingly being developed in rural areas of the United States. In the West in particular, many of the Native American reservations have large areas of windy lands suitable for large-scale wind projects. A number of these tribes are interested in developing wind projects on their land for the purpose of economic development. The aim of this project is to show how wind energy projects on tribal lands can benefit economic development. Further, the project will explore the role of tribal decisions and federal incentives on the feasibility of a project. Although a number of studies have investigated the total impact of wind energy projects on rural economies, no comprehensive study has been carried out for a tribal wind energy project. Tribal wind energy projects are different than other rural wind projects in a number of important ways. The tribe has the option of becoming more than a simple landowner by participating in a project as a partner with an outside investment company or by developing the project on their own. A tribe also has the ability to set laws pertaining to taxation of energy projects, labor preferences, and requirements for preference treatment of tribal businesses in contracts. A proposed 80 MW wind farm with the Navajo Nation provides an opportunity to explore the economic impact of a wind farm on tribal lands. Using the Navajo wind farm for creating scenarios based on different options available to the tribe, I investigate three primary questions: (1) How do the opportunities and risks associated with the wind farm interact with the economic development goals of the Navajo Nation? (2) What are the possible opportunities for the Navajo economy to benefit from a wind farm? In addition to construction jobs, tax revenue, and lease fees I show that Navajo businesses have the capacity to participate in the various stages of a wind farms life. (3) In what ways can the Navajo Nation participate in owning the wind farm and how do federal incentives impact the feasibility of the wind farm? The methods used to answer these questions involve: interviews with Navajo businesses, tribal officials and employees, wind developers, and federal officials; an assessment of the Navajo government and economy through official tribal data and documents; and a comparative financial analysis of tribal wind projects. - ii - Wind Energy in Indian Country A.D. Mills Acknowledgements Acknowledgements I am indebted to a very long list of people that have motivated, guided, critiqued, and supported this project. I was initially turned toward the topic of the economic development impacts of renewable energy projects through discussions with Carla Din of the Apollo Alliance. Her dedication and enthusiasm for linking renewable energy and energy efficiency to economic development is inspiring. She connected me with Bineshi Albert of the Southwest Climate Council who helped me to understand the issues in the southwest surrounding energy development. Dr. Alastair Iles invited me to assist with his research on energy justice in the southwest in February 2005. The week we spent conducting interviews with tribal leaders, grass roots activists, business owners, and even an informal interrogation of a hitchhiker on the Navajo Nation was an experience that I will always be grateful for. I learned an incredible amount from the opportunity to work very closely with Alastair during the two years I spent at ERG. Numerous ERG students provided valuable feedback and guidance throughout this project. Sidney Dietz showed me the intricacies of the Navajo Nation and its history. Sid always challenged me to try to look a little deeper under the surface for topics on development. Merrill Jones was supportive in helping me to understand wind financing. Cliff Chen, Naïm Darghouth, and Cyrus Wadia provided great conversations, feedback, ideas and most importantly friendship. I would also like to thank the faculty and staff of ERG. In particular, Dr. Alex Farrell was a supportive advisor and a tremendous help in going through the CHPS process. Dr. Dan Kammen never failed to provoke interesting conversations about the role that renewable energy can play in our future. I would also like to thank Dan for being a reader and advisor for this project. This project would have never been possible without the support from Larry Ahasteen of the Navajo Tribal Utility Authority and Dr. Earl Duque of Northern Arizona University. Larry suggested the primary direction of this project. His role in providing electricity to the 35% of homes on the Navajo Nation that lack access to the electricity grid should be commended. I would like to thank Larry for providing feedback on draft documents and for many interesting conversations. Earl Duque provided advising and a stimulating working environment with Sustainable Energy Solutions at Northern Arizona University. Earl and Larry spent two brutal days showing me the (im)proper way to use a jackhammer during the installation of the 30m anemometer on Gray Mountain. The researchers at SES provided detailed insight to the wind industry and the wind project development process. John Gaglioti deserves credit for answering any question I had about the wind industry. Grant Brummels from SES will never cease to amaze me with this enthusiasm and dedication to making a better world possible. It was a pleasure to work with him at NAU and to jointly present our work at a RAEL talk in March 2006. Finally, I would like to thank Bob Gough of the Intertribal Council on Utility Policy for his assistance and feedback, participants in interviews for their time and insights, the ERG community in general for making such a place possible, and my family for all of the love and support. This material is based upon work supported under a National Science Foundation Graduate Research Fellowship. Any opinions, findings, conclusions or recommendations expressed in this publication are those of the author and do not necessarily reflect the views of the National Science Foundation. - iii - Wind Energy in Indian Country A.D. Mills Table of Contents ABSTRACT ................................................................................................................................................................II ACKNOWLEDGEMENTS .....................................................................................................................................III LIST OF FIGURES AND TABLES........................................................................................................................ VI COMMONLY USED ABBREVIATIONS ............................................................................................................VII I. INTRODUCTION AND METHODOLOGY ........................................................................................................1 I.1 METHODOLOGY...........................................................................................................................................1 II. BACKGROUND AND CONTEXT.......................................................................................................................3 II.1 THE WIND INDUSTRY ..................................................................................................................................3 II.2 TRIBAL WIND PROJECTS .............................................................................................................................4 II.3 NAVAJO NATION AND ENERGY DEVELOPMENT ..........................................................................................6 III. WIND ENERGY AND ENERGY DEVELOPMENT .....................................................................................10 III.1 MOTIVATION .............................................................................................................................................10 III.2 APPROACH ................................................................................................................................................11 III 3 BENEFITS OF ENERGY DEVELOPMENT.......................................................................................................11 III.4 CRITIQUES OF ENERGY DEVELOPMENT .....................................................................................................17 III.5 DISCUSSION OF WIND ENERGY AND ENERGY DEVELOPMENT...................................................................23 IV. ECONOMIC IMPACTS OF WIND ENERGY PROJECTS ..........................................................................25 IV.1 CONSTRUCTION PHASE..............................................................................................................................26 IV.2 OPERATIONS PHASE ..................................................................................................................................31