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Community Wind Model

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Community Wind Model. Guidance for Farm Bill. Section 9006 ... Why Develop Your Own Wind Farm. Wind Farms produce big bucks ... The difference is lots of dough ... – PowerPoint PPT presentation

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Title: Community Wind Model


1
Community Wind Model Guidance for Farm Bill
Section 9006 Application
  • Christine Watson MikellWats Consulting
  • 801-943-0104 or 801-455-1045
  • rayandwats_at_comcast.net

2
Why Develop Your Own Wind Farm
  • Wind Farms produce big bucks
  • Leasing your land produce medium bucks, but
    there is less risk.
  • The difference is lots of dough
  • Waiting for a wind developer to visit you is like
    playing the lottery.

3
Return on Investment Analysis
From the Wisconsin Based Wind Power Project
4
Community Wind Farm Process
  • Form a Steering Committee
  • Mission Statement
  • Select Leaders
  • Raise seed money
  • Research and visit other similar projects
  • Apply for grants
  • Form entity/structure/governance
  • Select professional consultants
  • Feasibility study

5
The 12 Steps in Building a Wind Farm
  • Site Selection
  • Land Agreements
  • Wind Assessment
  • Environmental Review
  • Economic Modeling
  • Interconnection Studies
  • Permitting
  • Sales Agreement
  • Financing
  • Turbine Procurement
  • Construction Contracting
  • Operations Maintenance

6
Site Selection
  • Does it feel like you are in Wyoming
  • Private Land
  • Close to transmission
  • Roads or easy to build roads
  • Endangered Species over head or below
  • Neighbors

7
Land Agreements
  • Term-typically 20 years with option to extend
  • Rights-Wind, Ingress, Egress, Transmission
  • Compensation- of revenues
  • Assignable-financial requirements
  • Indemnification
  • Reclamation Provision
  • Get signed and complete the exhibit
  • before investing money

8
Wind Assessment
  • Find data to correlate toairports, highway
  • Install meteorological tower50 meters or greater
  • Collect hourly wind speed and direction
  • Minimum 1 year hub height data or for purposed of
    grant, correlation to another met tower
  • Report conducted by known meteorologist
  • Energy and Capacity output for turbines (size and
    model)

9
Environmental Review
  • Meet with US Fish Wildlife
  • Find out about endangered species in area
  • Determine which avian studies needed
  • Raptors
  • Bats
  • Migratory Birds
  • Call Division of Wildlife Resources
  • Help with bats and other species
  • Call Hawkwatch/Local Audubon
  • Conduct studies if US Fish
  • Wildlife deem important

10
Environmental Review
  • Visual Study
  • Mock up drawing of wind farm
  • Review with community
  • Noise study if near a community
  • Historical and Archaeological Review
  • Letter to State Historical Preservation Officer
  • Letter to Tribes
  • Wetlands/Flood Plain Analysis
  • Letter to FEMA to ensure no floodplain

11
Economic Modeling
  • Obtain Cost Data for Spreadsheet
  • Have an accountant in your family?
  • Output projections using wind data
  • Get turbine quote from a couple of companies
  • Suzlon works with smaller projects
  • Balance of Plant Costseverything else
  • Foundation--Allan Henderson
  • Collection System/Substaion/Communications
    Control SystemContact Electrical Engineering
    firm and
  • see if they do it free in exchange for doing
  • design build later
  • ErectionOlsen Beal, Lehi Utah
  • Or call Signal Wind or like company for
  • construction estimates

12
Economic Modeling-Continued
  • TaxesAsk County Assessor
  • Sales
  • Property-Depreciation?
  • Income
  • Operation and Maintenance
  • Many mfgs have this along with warranty
  • Finance Assumptions
  • Tax Credits
  • Equity rate of return9-10
  • Debt rate of return
  • Debt/Equity ratio

13
Interconnection Studies
  • FERC Small Generator Interconnection
  • Shorter Timeline for studies
  • Less upfront costs
  • Trade sweat equity or negotiate a deal with
    engineering firm to do free interconnection
    application and participate in interconnection
    study process with utility

14
Permitting
  • Local, State, Federal
  • Public Land
  • Private Landless permitting unless you have
    federal monies.
  • Land Use Permit/Conditional Use
    PermitMeteorological Towers and Wind Farm
  • Building Permitas you prepare to erect the
    turbines

15
Sales Agreement
  • Power Purchase Agreementwhich utility?
  • Kilowatt pricereal or normalized
  • Term
  • Credit worthy buyer

16
Financing
  • Source of Equity
  • Source of Debtsome equity partners can carry the
    debt. Local Utah banksZions Bank
  • Term of Debt
  • USDA guaranteed loan
  • Third party due diligence

17
Turbine Procurement
  • Power curve-output projections, run serveral
    turbines for best fitting turbine
  • Capital Cost-turbine, tower, blades and
    electronics
  • Turn-key Construction Cost-Padmounts,
    Interconnection and Erection
  • Warranties-Equipment and
  • Maintenance
  • Construction Financing

18
Construction Contracting
  • Turn-Key Contract
  • Excavation
  • Trenching
  • Foundation Assembly
  • Concrete
  • Cabling
  • Tower Assembly and Erection
  • Turbine Installation
  • Interconnection to utility
  • Commissioning

19
Operations Maintenance
  • Fixed Cost/turbine/year
  • Fixed price/kwh produced
  • Availability Warranties
  • Penalties from utility for non-performance

20
Sole Ownership
  • Sole Ownership
  • Possible if a business or individual has the
    resources to put the project together and can
    provide the equity.
  • Establish venture in multiple LLCs avoid
    personal financial liability.
  • Owner actively involved in managing the project
    has sufficient tax liability, then the federal
    PTC and accelerated depreciation can be used to
    reduce taxable income and taxes
  • If outside manager is hired to run project, owner
    is passive investor and PTC could then only be
    used to offset income tax liability associated
    with other passive income.

21
Local Investor Ownership
  • Most popular community wind structure
  • Own shares in project
  • Establish min and max each person can invest
  • Require that investors are local
  • Allow for proportionate voting rights-one vote
    one investor
  • LLC
  • All owners are passive which means PTC is awash.
    Okay in MN where they have an additional state
    PTC like credit.

22
LLC/C-Corporation Joint OwnershipAKA FLIP
  • Joint ownership by local investors in an LLC and
    an outside investor.
  • Long-term ownership and financial benefits from
    project
  • Less up-front capital while ensuring taxes are
    utilized.
  • Local investor group does pre-development
  • Local group then markets project to potential tax
    motivated corporate investors

23
LLC/C-Corporation Joint OwnershipAKA FLIP
  • Local investors obtain construction and permanent
    debt financing together with a commitment from
    the corporate investor to acquire an interest in
    the project at commercial operation.
  • Local investors providing 25 of the required
    equity capital. (10-15 of overall capital)
  • Corporate Investor makes investment with turbines
    begin to generate power
  • Investor realized returns in first 10 years
    through combo of PTC and accelerated
    depreciation. Project debt also paid down
  • Ten year mark, ownership flips to the local
    investors.
  • Local investors buy back the project at the
    market value of the turbines.

24
Loan to Own
  • Local Ownership group would pool capital and make
    a loan to outside equity partner
  • Loan lowers the equity partners required equity
    and increases its financial returns.
  • Local investors earn interest over term of loan
  • Equity investor owns 100 and receives all tax
    benefits and income or loss
  • Year 10, equity investor sells project to local
    investors at price equal to principal value of
    loan.
  • Local investor receives the operating income of
    the project from year 10-20.
  • Tax risk in selling project at predisposed price.

25
My Bible
  • http//www.rurdev.usda.gov/rd/farmbill/section9006
    rule.pdf

26
Large Wind Technical Report Differences
  • Less than 200,000
  • Qualification of key project service providers.
    For licensed professionals provide credentials.
  • Meteorologists
  • Engineers
  • Installers
  • Turbine Mfg
  • Greater than 200,000
  • Qualification of Project Team
  • Project Manager
  • Meteroologist
  • Equipment Supplier
  • Project Engineer
  • Primary or GC
  • Construction Contractor
  • Operator Maintainer
  • Design Engineering
  • Project Development schedule

27
Foreshadowing Sticking Points
  • Start EarlyApplication process takes over 100
    hours.
  • Have the federal register, sample application and
    USDA power point presentation next to you the as
    you write the application
  • Number your application the same way the Federal
    Register does in the table of contents
  • FORMS, FORMS, FORMS
  • Find Electrical Engineers/Accountants in the
    community
  • EE can help with the interconnection side the
    technical report
  • Accountantfinancial statements for last 3 years,
    current balance sheet/income statement proformas.
  • Talk to US Fish and Wildlife Early

28
Foreshadowing Sticking Points
  • Meterological studyqualified meteorologist
  • Feasibility Study must be done by an independent
    qualified consultant.
  • Send letter to State Historical Preservation
    Officer and Tribal Officers
  • Look at the scoring criteria and compare to yours
    to ensure you are looking good. Fix areas that
    are weak.
  • Meet with Richard Carrig a day or two before the
    application is due and get feedback
  • Disbursement of Grant MoneyProject complete when
    applicatn provided written final project
    development, testing and performance report.
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