Midwest Farmers and landowners are getting involved in the fastest-growing electricity source in the world: wind energy. Wind power has the potential to supply more than one-and-a-half times the current electricity consumption of the United States, and the Midwest has the potential to lead the way.
Wind developments of all sizes offer opportunities for farmers and landowners to supplement their incomes. Just one large turbine will provide enough renewable energy to power 600 to 800 residential homes. With that potential, wind power may become farming's next cash crop.
Billy Connelly of Native Energy says, “Right now renewable energy is on course to quickly eclipse the profits of fossil fuel energy.” However, the initial costs of putting up turbines are still high. “A single, medium-size turbine costs $90,000 for the tower, turbine and installation,” says Ed Blume, director of communications, Renew Wisconsin. “The amount goes up from there. If you're thinking about putting up three or four commercial turbines, expect to pay at least one million dollars per turbine.” Because of the high prices, farmers typically look for ways to save money by working with a developer, seeking out investors or looking into grants and tax breaks.
Wind turbines do not require a lot of land. One turbine and an access road take up less than half an acre, allowing a farmer to grow crops or graze livestock right up to the turbine's base.
However, before putting up a wind farm, you must consider whether you have the infrastructure to support turbines. You need more than just good wind; you have to be located near high-voltage three-phase power lines. This allows turbines to connect to the electric grid, giving you a way to transport the energy produced.
Each state has a different threshold for what it calls “net metering,” according to Leo Udee of Alliant Energy. Under net metering, owners of small, renewable energy sources receive retail credit for the electricity they generate. To find out what kind of value you'll receive back for the power you produce, contact your local power company.
When making a connection to distribute your wind energy, expect to fill out an interconnection application and to sign a general buy/sell agreement. The application asks for information about the kind of turbine you're putting up as well as the inverter and disconnect system you'll be using. The application fee may cost up to $280, depending on your state.
The general buy/sell agreement identifies the rate (or the value of the electricity your wind turbine produces), according to Udee. This can be 3.5 to 8.5 cents/kilowatt-hour. After determining the rate, the power company needs to have a copy of a certificate of insurance.
Within 10 days of receiving information from an applicant, engineering technicians go on site to look at the utility system. If the existing transformer is too small, the landowner will need to pay to have it upgraded. In most cases, in a small power situation, an upgrade probably won't be necessary. However, a large power situation of 11 kW or more will need a larger transformer.
“Once the turbine is up, people from the power company come in and make sure things are correctly connected and wired,” Udee says. “All states provide energy credit to turbine owners to be deducted from their energy bills. Some, like Iowa, are credit only, whereas others, such as Wisconsin, first provide credit, then, upon request, can issue a check.”
Does your land have a good wind resource? Before a single turbine goes up, on-site wind monitoring is mandated. The site must have a strong wind resource, which means the wind blows at a pretty good clip and consistently — above 11 mph annually. To evaluate your wind resource, you can use an anemometer or put up a small wind turbine to collect data.
To ensure best wind, a turbine needs to be in a rural setting, free from obstacles and elevated above surrounding terrain. Excellent resources for finding out if your land has a good wind resource are state wind maps. John Dunlop, senior technical outreach representative for the American Wind Energy Association, explains, “Wind energy can change dramatically with precise location even within 80 acres.”
Ways to harvest
Most wind projects are built as a result of public policy where both the farmer and a developer are aware of local wind opportunities, Dunlop says. In some cases, the farmer reaches out, and other times the developer will work with a county board to inform the community about the wind energy potential. There are three basic ways to harvest wind energy: contract with a wind developer; form a joint venture with others; or own the turbines yourself.
Contract with developers
Contracting with a wind developer involves the least time, least effort, least risk and the least reward. A developer obtains the permits, finds equipment and arranges the financing and the construction. The developer assumes all financial obligations and liabilities, leaving the landowner to enjoy a low-involvement way of harvesting wind energy. This is the most common form of wind ownership.
Because developers are looking for land with good wind resources, they typically approach property owners with projects in mind. If you're sitting on land with ample wind, there is a good chance that developers are already looking at the possibility of constructing turbines on it.
Many developers will sign contracts with landowners for guaranteed payments. According to Dunlop, payments to the landowner are typically between $4,000 and $6,000 per wind turbine per year.
Most commonly, landowners and developers sign lease agreements. A developer leases or rents the land for the life of the turbines, usually 30 years. This allows you to retain land ownership. Other agreement options include wind easements or having the developers purchase your land.
Invest with others
Harvesting wind with others, without a developer, has the potential to bring in a greater profit but it also involves greater risk. There are many different forms of investing with others. A pass-through entity allows tax credits and operating gains and losses to be allocated to the members rather than the entity itself. A cooperative gives ownership and control to those who use its services. Returns are based on patronage, not investment. A partnership allows for joint liability. Finally, a limited liability company (LLC) finances a wind project and takes the responsibility if things go wrong; the owners are not liable. This method offers owners some legal protection in case of accidents and disasters. “Many farmers join together in an LLC to get enough turbines up to form critical mass,” says Mike Bock of Bock & Associates.
Own the turbines yourself
Remember the saying, “The greater the risk, the greater the return”? This holds true in individual ownership. When owning your own wind farm, you assume all the risk but you also receive all the profits.
“Having your own wind farm may result in a payoff two to three times greater than collaborating with a developer,” Dunlop says. Owning your own wind farm helps offset your energy consumption without involving a developer. However, it takes a huge investment of time. You assume all responsibility for the work involved and you take on all the risks that a developer typically does.
One option you have as an individual investor is to put up a single turbine for your own electricity and sell what you don't use to the local utility. This can be done with any size turbine.
Because installation price depends on the size of the turbine you install, securing financing is an excellent way to offset initial costs. If you are considering putting up a small wind farm, made up of four or five turbines, having investors take tax credits helps with the initial costs, according to Blume of Renew Wisconsin. Once the tax credits are used up, you own the turbines and all revenue goes to you.
Whether you work with a developer, join an LLC, or take it on flying solo, harvesting the wind promises to be profitable. The winds of change are blowing through the Midwest — and this time, the wind can make you money.
WIND FARM SUCCESS
After attending wind energy meetings put on by the University of Minnesota, Jim Scholl and his son Doug, who has since died in a small-plane crash, realized that energy is part of the future of agriculture. In 2001, Jim and Doug decided to get into harvesting energy from the wind. Jim, along with 42 other landowners in Martin and Jackson Counties in Minnesota, launched the Trimont Area Wind Farm LLC near the Lakefield Junction station power plant.
The limited liability company financed the project. Each landowner received 1% of the company when he or she put up 80 acres of wind rights and $7,500. The Trimont Area Wind Farm LLC has 67 1.5-megawatt turbines producing 100 megawatts of electricity when running at maximum. Trimont Wind is Minnesota's first commercial-scale, landowner-developed wind farm.
The LLC was sold to PPM Energy, Portland, OR, in 2005. PPM now runs the wind farm. According to PPM, “Landowners benefit from revenue participation, as well as from traditional easement payments. In addition, production tax revenues from the project for Jackson and Martin Counties are expected to range from $350,000 to $400,000 annually.” Trimont Wind's landowners now have a contract stating that, for every 1% of the company they own, they get 4% of gross energy per year, up to a cap. “We'll get to that cap in 10 or 20 years, depending on how hard the wind blows,” Scholl says. The landowners also receive $4,000 rental per turbine per year. This project provides more benefit to landowners than the typical wind project.