Rising Wind

 Community Based

“We’ll be aiming for CBED status” with Pheasant Ridge, Wolf says. The initials stand for community-based energy development, and if Wolf’s project gets the designation from the state, it will make everyone involved—the local participants, the equity investors, the utility that buys the electricity, and many in state government—happy.

From the mid-1990s until 2002, the state offered a Renewable Energy Production Incentive to locally owned energy projects with a capacity of 2 megawatts or less—a payout of a penny and a half per kilowatt hour of electricity they produced. (Wolf Wind Development was among the projects that got in on the program, one reason it was set up as five separate companies that could split the 6.25 megawatt capacity.)

Then the state ran into budget troubles. The incentive program came to an end, but not the need to keep encouraging development of new wind energy projects. A CBED statute passed by the legislature in the fall of 2005 was the solution.

It did several important things. First, it defined qualifying projects as those where at least 51 percent of financial benefits “flow to the community” over the life of the project, says Mike Bull, assistant commissioner for renewable energy at the Minnesota Department of Commerce.

Second, the statute helps wind-energy projects to “cash flow” during their first 10 years, when they’re burdened by paying off equity partners—just as state incentive checks used to. But the CBED statute does this by providing for a “front-end-loaded tariff,” Bull says. That is, it permits utilities to pay more for power during the first 10 years of a project than their normal rate structure would allow, in exchange for paying a lower rate during the second 10 years.

Third, the new law “told utilities that they should look at CBED projects” in seeking to fulfill their renewable energy objective, Bull explains. Governor Tim Pawlenty followed up passage of the CBED statute by setting a new goal: 800 megawatts of CBED projects on line in Minnesota by 2010. Currently, about a quarter of the state’s 895 megawatts of wind energy capacity comes from CBED projects. But as that total capacity doubles to an estimated 1,900 megawatts by the end of 2008, about half of the newly installed power will come from CBED.

The mix of benefits for all parties involved—cash flow that makes projects feasible, progress toward green-energy and economic-development objectives—is what makes CBED work. But if legislation that was pending at the end of this spring’s session succeeds in refining the CBED statute, that will be a good thing, Pelstring says. He calls the current statute “really vague” and says new language that makes it easier up to know up front—without Department of Commerce interpretation—which projects will qualify for CBED status will encourage more development.

Pelstring’s objective meanwhile, is to help CBED projects scale up: “Most of the projects done for CBED have been in the 20 megawatt range, and we think that community-based groups can compete [with corporate projects] at 50, 100, 150 megawatts.” Everything is cheaper when projects are bigger, he explains: The per-unit cost of turbines and foundations comes down; the three-quarter-million-dollar cost to bring a crane on site to set up towers is spread over 20 or 30 turbines rather than 10.