Wind Power, Downsized

Aug 24 - The Oregonian

When alternative-energy enthusiasts ponder the potential of wind generation, they generally envision huge, 100-turbine projects capable of producing power for tens of thousands of homes.

But there's a new, more modest player on the block. It's called community wind, and if pent-up interest is any indication, it's destined for a small but determined place on the Northwest's energy grid.

Loosely defined, community wind projects involve fewer than 10 turbines and direct ownership by the farmers, ranchers and others who might live in the breezy, rural reaches that make for prime wind-turbine territory.

Generally, such small-scale endeavors are shunned by large developers, who want lots of turbines, windier wind and high-voltage transmission connections to population centers. In that light, they will help round out the national foray into wind.

Several community wind farms, years in the making, are poised to make their debut in Oregon, right alongside the big corporate enterprises that already lay claim to some of the choicest spots in the blustery Columbia River Gorge. Many more are in the works.

"We've got landowners lined up, wanting to get in on it," said Judge Gary Thompson, who heads the Sherman County board of commissioners and has watched a region of dryland wheat farms become a hotbed of wind-farm development and speculation.

Although community wind is characterized by its contained scope and local tie-in, it is by no means quaint. The projects use the same high-tech, high-capacity turbines employed by the big boys. And they rely on sophisticated financial arrangements, including outside investors' ponying up plenty of immediate cash in exchange for federal tax advantages that the projects offer.

Another, smaller piece of the financial package would come from the Energy Trust of Oregon, which has about $3.5 million available for a first round of projects. The nonprofit organization, fed by revenue from a 3 percent fee tacked onto the energy bills of Portland General Electric and PacifiCorp customers, will provide grants to cover the extra, or above-market, costs associated with wind generation.

The Energy Trust narrowed a list of 17 initial applicants to four and hopes to announce at least one recipient, maybe several, by fall.

"We're in the thick of negotiations," said Alan Cowan, the trust's renewable-energy program manager. "We're looking for the ones with the most likelihood of success."

The largest and perhaps most finely tuned proposal on the list outlines plans for a cluster of nine turbines on farmland west of Morrow County's Boardman.

Together, the turbines would boast a 15-megawatt capacity -- enough to power about 3,750 homes. (One megawatt of wind capacity is equal to the amount of electricity used by 250 average Oregon homes a year.) The electricity would feed into a substation and transmission lines leading to cities to the west.

The developer is Momentum Renewable Energy Inc., a recently formed subsidiary of engineering firm David Evans and Associates Inc., based in Portland. The landowner is Threemile Canyon Farm, a big dairy and farming enterprise owned by R.D. Offutt Co., the North Dakota potato giant, and Bos Family Farms of Bakersfield, Calif.

Momentum was formed specifically to develop renewable energy projects. Threemile Canyon Wind would be the first, but not last, of the small-scale Oregon wind projects to range in size from 10 megawatts to 50 megawatts, company officials said.

"Definitely, we've got a pipeline," said Jessica Morrison, Momentum's business development manager.

Both Momentum and Threemile Canyon Farms would invest in the project, which carries a total estimated price tag of $25 million. But most of the upfront cash would come from a large outside investor eager to use two federal tax breaks available to developers of renewable projects: a production tax credit and an accelerated depreciation schedule.

"The benefits to the investors are the tax advantages," said Peter Solomon, Momentum's executive vice president. "Small guys like us can't use it. You need someone with a tax appetite."

Momentum is working with John Deere Wind Energy, a division of tractor maker Deere & Co., to provide the debt and equity that would finance as much as 95 percent of the project, Morrison said.

John Deere offers another advantage. It has the turbines needed to complete the project. Given a recent rush of large-scale projects, turbines have been difficult, if not impossible, to secure.

In an innovative twist in equity positions, Momentum and Threemile Canyon would take over as majority owners in 10 years, after John Deere's ability to use the tax credit ran dry.

This switch-over, known as a flip, has been used in Minnesota, where community wind farms are popular. All four proposals in Oregon would employ the model, although details vary.

Don Coats, a dryland wheat farmer near Rufus in Sherman County recently took a trip to Minnesota to learn more about the flip's execution.

He's involved in two projects on the Energy Trust's list, one called China Hollow and the other, Sherman County Wind Farm.

Coats said he got "bitten by the wind bug" five years ago when a large wind developer began trolling Sherman County for prime sites. The developer moved on, but Coats began rounding up support for smaller projects in which farmers could own a piece of the action, not just lease their land to a big developer.

Coats and fellow farmer and investment partner Tom Martin hope to put a single turbine in an area known as China Hollow, on land owned by Martin's son. The electricity from the $2 million project would feed directly into PacifiCorp distribution lines and, on windy days, light up homes in nearby towns such as Rufus, Moro and Wasco.

Sherman County Wind Farm is a larger, $17 million project, with five turbines and a 10-megawatt capacity. Coats and three other farmers are involved, as is county government, which has helped pay for some preparation costs and would receive a portion of revenue.

Western Wind Power, a wind development and consulting firm based in Goldendale, Wash., is working with Coats and the county on both projects. Paul Woodin, president of Western Wind, said he's lined up an equity partner, one that would bring in about 25 percent to 30 percent of the investment costs.

Farmers would fork over enough money to cover about 5 percent of the total costs. A loan from the Oregon Department of Energy would account for roughly 40 percent of the financial package, Woodin said. The remaining 25 percent would involve another tax break, this one at the state level: the Oregon Business Energy Tax Credit.

Chris Crowley -- who, like Woodin, heads a development company focused on small-scale wind projects -- said he's rounded up all the financial and logistical pieces for the Mar-Lu Wind project in Morrow County, the remaining finalist under the Energy Trust's review.

He sees a commitment from the Energy Trust as the cog that will finally kick the project into gear. But, he said, even if he doesn't get the money, "we'll find a way to make it work."

Mar-Lu Wind, which Crowley named after his wife, Martha, and daughter Lurana, would rely on a debt-and-equity package similar to the one outlined by Woodin.

Crowley said he's working with Meridian Investments, a tax investment broker, for the cash piece and the Department of Energy for the debt. A longtime farmer and rancher owns the land on which the turbines would be placed.

Farmers throughout the gorge often struggle to make ends meet, Crowley said, and wind turbines are looked upon as a venture that might, quite literally, save the farm.

The three-turbine, 4.5-megawatt-capacity project would plug into Arlington's power lines and supply most of the town's electricity when winds, as they often do, howl through the gorge, Crowley said.

For Crowley, Mar-Lu Wind represents the best attributes of community wind: a local farmer and local use of the power that's produced.

"This is what we ought to be trying to do," he said.

The ability of these projects to draw on state and federal tax incentives and on state-backed loans makes Oregon one of the best states in the country to initiate them, Western Wind's Woodin said.

Oregon utility regulators gave another boost to such ventures last year when they wrote rules that require Portland General Electric, PacifiCorp and other investor-owned utilities to buy power from wind farms of 10 megawatts or less at set rates over 15-year to 20-year periods.

Final rates are still being negotiated, but they will represent what the utilities otherwise would pay for natural-gas generated power.

That's where the Energy Trust comes in. It would pay for that extra cost for qualifying renewable energy projects -- essentially, the environmental premium associated with the renewable source, also known as a "green tag."

For Woodin, the true measure of a community wind project is the strength of its home-grown component.

"We're trying to do purely local projects, where the landowners and counties can partner with the equity investor," he said.

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