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Tight credit markets becalm Minnesota wind industry

50 megawatt Jeffers community-owned wind project
Courtesy of National Wind, LLC
Part of the 50 megawatt community-owned project developed by National Wind near Jeffers, Minn.

To get the wind to blow over a tranquil sea, sailors in the Royal Navy used to whistle, drive a clasp knife into the mainmast, or scratch a backstay. The wind industry in Minnesota, which faces greater challenges than a calm day, may need to look into one of the old superstitions for help.

The immediate problem in Minnesota, as elsewhere, is not variable access, old transmission systems or storage capacity — all hardy perennials. It is a clogged-up capital market that has frustrated developers of the renewable resource.


Take the case of National Wind. The Minnesota-based company, which has its own market niche, has an intriguing business-model mix of local partnerships, supply, demand and government support. But the model takes money, and not a little.

"Right now everything is at a standstill," National Wind CEO Leon Steinberg told me.

Waiting for markets to loosen up
His company has six projects on the drawing board in Minnesota and seven more in nearby states, waiting for the markets to loosen up. "Even a small wind project is $100 million to $200 million," Steinberg said.

National Wind, which develops utility-scale projects (50 megawatts and over), sets up partnership LLCs with local landowners and other community leaders. Rather than stick turbines in the ground and pay farmers for the privilege (a typical lease might be for $6,000 per turbine per year), National Wind establishes what looks a lot like a co-op and local farmers have an ownership stake in the business.

National is a large player in a relatively new area that the state has called Community-Based Development (C-BED). There are eight C-BED wind generators at work in Minnesota; National Wind developed the largest (50 megawatts) near the Cottonwood County town of Jeffers. The Jeffers system (National has since sold its stake to Edison Mission Group) has 20 turbines generating 2.5 megawatts each.

Dramatic growth, and then a halt
C-BED projects grew dramatically during 2008 — and then came to a screeching halt. The economy was already in free-fall and the tax credit market, which is used to finance a typical project, was dried up.

Most of the operational Minnesota C-BED projects are smaller than 50 megawatts. Large or small, those in the industry hope that the federal stimulus plan will alleviate the bad credit problem in a few months, and "once that happens there will be a rush to the goal line," Steinberg said.

The stimulus package includes investment tax credits, as well as cash grants, $6 billion in federally guaranteed loans, and Department of Agriculture funds for qualified projects. Companies will be able to get started with about a 20 percent equity stake, said Dan Yarano, an attorney for Fredrikson and Byron.

Yarano helps establish wind-energy and biomass companies. He said the stimulus package will get money flowing in the coming months. "But we are all guessing [as to when]," he said. "People are exploring financing but nobody is inking deals."

Waiting for DOE rules
The industry is waiting for the Department of Energy to publish the rules about how the stimulus package can be applied.

Dan Juhl of Woodstock, Minn., is often acknowledged as the founder of "small wind" in Minnesota. He's developed 14 wind farms that develop a total of 117 megawatts of energy and took his company public in 2008.

"Our equity partners didn't fall off the cliff," he said. "They took a deep breath."

Minnesota is fourth nationally in wind energy production capacity. State requirements that 7 percent of our power be renewable by next year (and 25 percent by 2025) are helping drive the market.

Wind is 7.48 percent of MN electrical needs
Depending on how you calculate it, wind power accounts for 7.48 percent of Minnesota's electrical needs.

Wind still faces problems of a) transmission; b) access on demand (there isn't any — see whistling, knife and scratching references above); and c) storage. Transmission is the biggest long-term challenge, mostly because the wind farms are far away from the population centers; two decades of transmission-line neglect did not help.

"The next great leap forward is going to be defined by transmission," Juhl said.

Mark Neuzil covers the environment and agriculture.

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Comments (5)

hello all
it is obvious that wind energy is a waste of money. if it was a viable product then investers would be standing in line to invest in windmills. the truth is without large tax incentives there would be no windmill production. the reason is that wind energy is very expensive and very unreliable. england has been investing in wind energy for a decade. the result of this heavy investment has resulted in possible energy shortages and caused the cost of electricity to rise drasticaly. instead of windmills we should be developing of own naturals resources - oil and coal and natural gas. these sources of energy do not require government subsidies- they make money, create high paying jobs and create prosperity. i dont want a windmill to power my home as studies have shown only one in four days have enough wind to generate power. i want my home powered by a low cost, reliable nuclear power plant.

hello global warming believers
nancy pelosi in beijing china where she said
"Every aspect of our lives must be subjected to an inventory ... of how we are taking responsibility."
DO YOU WANT NANCY PELOSI INVENTORYING YOUR LIFE - I DO NOT

president obama's energy secretary just gave us a clue on the green jobs they are going to create.
we will need millons of painters to paint all the roofs in america white. we need to do this to prevent global warming.

David, your thesis does not take into account the great environmental costs of using fossil fuels OR the fact that, as they run out, their prices will increase more and more until they are gone.

We cannot drill our way out of global warming, nor can we afford to believe industry-friendly propagandistic "scientists" who pretend it is not happening.

Wind. Solar. Conservation.

there is no viable energy source that has the remotest possibility of replacing coal and gas power plants in the near or even far future. wind and solar are very expensive and worst yet very unreliable.
china is inversting heavily in developing their own natural resources. in addition they are working with cuba to develope oil fields in our own gulf of mexico. china is also working with argentina to develope their newly discoverd offshore oil fields. china is working to ensure they have a cheap and abundant supply of oil to allow them to grow and prosper.
president obama is stopping the developemnet of our own natural resorces and wasting money on windmills and solar cells.
WHICH COUNTRY DO YOU THINK WILL HAVE A PROSPEROUS FUTUNE ?

Here is exerpt from William Tucker's latest Book, "Terrestrial Energy". He visited the National Renewable Energy Lab in Colorado, and found out their director supported nuclear power. However, Thomas Friedman was on hand to interview him to promote wind and solar.

"At this point Friedman arrived with his cameras and he (the pronuclear director) had to go. I hung around just to see what would happen. Soon Friedman had Kazmerski stationed in a little garden of solar collectors that NREL is testing. After a few minutes strolling together shots he plants Kazmerski in front of one of the more photogenic collectors and says, 'So the reason Germany and Japan are forging ahead solar energy and we’re not is because the government is subsidizing it'.

Let him say it, shouts the director from behind the camera.

And so they do it again a few times but finally he gets Kazmerski to say it. The reason Germany and Japan are developing solar energy and we’re not is because their governments are subsidizing it.

And that was it. He got what he wanted.

The whole country is now going on a Friedmanesque binge we’re going to rebuild the economy around solar and wind energy. (Hot, Flat and Crowded, the current best seller, is the book that finally came out of this.) We’re going to put people to work, achieve sustainability, secure our energy independence, etc. etc. It’s only people like Friedman, who don’t understand the physics of energy, who can be so wildly enthusiastic about wind and other so-called renewables. (In truth, no form of energy is renewable - that’s the Second Law of Thermodynamics.) Scientists who really understand the situation know that you need both solar and nuclear if you’re going to eliminate coal.

By the way, as far as wind is concerned, Kazmerski was less than enthusiastic. He had a little joke about wind. Solar and wind work really well together. We have a big problem with bird droppings on solar panels and wind kills a lot of birds.

I’ll bet to this day Thomas Friedman still does not realize that the country’s biggest expert in photovoltaics is also one of its most enthusiastic supporters of nuclear power.