Minnesota has become a national leader in renewable energy development, with the lion's share of this new electric generating capacity coming from the wind resource.

The genesis is the state's 1994 agreement with Xcel Energy in Minneapolis that allows the utility to continue to store nuclear waste onsite at its Prairie Island generation facility. The 1994 Minnesota Legislature called on Xcel to develop or contract for 425 megawatts of wind energy by 2003 as part of that agreement.

In 2003, the Legislature required Xcel to bring on-line an additional 300 megawatts of wind energy in exchange for the state's permission to allow for additional temporary storage of nuclear waste at Prairie Island.

Much of Minnesota's wind development is taking place in southern areas of the state - particularly along the Buffalo Ridge in the far southwestern corner. This area has the strongest, most consistent wind regime.

To translate megawatts into real world terms, it is important to understand that one megawatt of power generates enough electricity to light approximately 800 homes. It also is important to consider that wind is an intermittent source of energy. The wind does not always blow when utilities are serving customers' peak demand.

State policy makers have taken significant steps in recent years to better understand the potential of the wind resource. In 2003, the state commissioned a wind study to characterize the wind resource throughout Minnesota, along with a “Wind Integration Study” to understand the impacts of the variability of wind power on the electric transmission system in the Upper Midwest.

In 2005, the Legislature enacted the Community-Based Energy Development (C-BED) framework within which Minnesota residents are to benefit more directly from the development of financially viable wind generation projects.

Even in the areas where the wind blows the strongest and the longest, wind energy has needed some government support to be an economically competitive energy source that's financially viable for project developers.

At one point, Minnesota had a program to provide a one and one-half cent per kilowatt-hour incentive payment for wind energy development. That incentive subsequently was reduced to one cent, and finally eliminated.

A federal production tax credit now provides the primary source of financial return for equity investments in wind energy projects. Entities with significant federal tax liability can invest upfront capital in wind projects and derive most of their financial benefit from the federal tax credit of 1.9 cents per kilowatt-hour.

The turbines going up across the state vary in capacity from 1.25 megawatts per turbine to 2.5 megawatts. At least four manufacturers are producing turbines, or have models scheduled to be be produced within the next year. A significant issue affecting near-term deployment is whether developers can obtain turbines for their projects. The rapid growth in wind development has made turbines increasingly hard to come by and, not surprisingly, prices are steadily rising.

Still, it is expected that wind energy development will continue in the foreseeable future. From a public policy perspective, rising oil prices and environmental issues are driving policy makers to push utilities to increase renewable energy in their portfolios. From a purely economic standpoint, those same price pressures on natural gas and other fossil fuels improves the relative competitiveness of wind energy.

Even “small scale” projects -typically fewer than 10 turbines producing less than 20 megawatts of capacity - are not as small as people might think.

Equipment being developed is on an increasingly larger scale. One generator being developed for a number of projects across the state has a 2.0 megawatt capacity turbine perched atop a tower that stands 250 feet tall and blades that are 100 feet long. Depending on the particular make and model of generator, project development costs range from $2 to $3 million - per turbine.

Every project requires a myriad of agreements and approvals. Project developers must negotiate a power purchase agreement with a utility company.

Every project also requires an Interconnection and Facilities study to secure authority to connect to the transmission system. Financing - both equity and debt - must be secured; turbine supply agreements and construction contracts must be negotiated; land use permits and Federal Aviation Authority (FAA) approvals must be obtained.

As wind generation equipment improves and our understanding of the wind resource becomes more exact, prospects for developing financially viable projects in Northeastern Minnesota improve.

Some of the foremost experts in analyzing the wind resource have a base of operation in the Northland. WindLogics, the St. Paul company commissioned by the state to do much of the wind resource characterization for the Wind Integration Study, has its operations center in Grand Rapids.

As technology advances and expertise in wind development expands, we'll find greater opportunity for renewable energy in the region.

Kevin Walli and Michael Mahoney are attorneys with Fryberger, Buchanan, Smith & Frederick, P.A. They represent firm clients on a variety of legislative and administrative matters, including wind energy development projects. They can be reached at Fryberger's St. Paul office at 651.221.1044.

Useful Links:

Wind Project Data Base

Xcel Energy Southwest Minnesotar Transmission Project

WindLogics

Fryberger, Buchanan, Smith & Frederick PA

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