Bills have been introduced in the Minnesota legislature that would act as an alternative to traditional renewable energy production payments and tax incentives as a way to support community based energy development (C-BED). The concept has been pushed by wind energy-developer Dan Juhl (DanMar & Associates) and longtime renewable energy activist George Crocker (North American Water Office).
The key idea is to establish a utility tarriff rate for electricity from community-based wind energy projects that is derived from a baseline net present value of the electricity. Crocker and Juhl estimate that net present value rates for community wind projects in Minnesota should be established giving a minimum of 2.7 cents/kWh (net present value) over 20 years.
House File 1332 would direct the Minnesota Public Utilities Commission (PUC) to establish a tariff designed to facilitate the development of community-based wind projects and optimize the economic development benefits flowing from them at the local, regional and state level. The new tariff would increase the cash flow to the wind project’s owner during the initial years in order to accelerate the recovery of capital costs.
House File 1344 is the similar to the previous bill but also contains several transmission-related provisions.
The C-BED tariff’s “front-end” arrangement would eliminate the need for Minnesota’s 1.5 cent per kilowatt-hour production incentive for community wind energy projects. The current incentive program is oversubscribed and securing additional public money to fund more wind power incentives could be problematic. The C-BED tariff advocates see it as a longer-term and more stable solution for increasing wind energy production in Minnesota.
For example, today a 2 MW wind project in Minnesota would be able to negotiate a 20-year power purchase contract for around 3.3 cents per kWh (and be eligible for a 1.5 cents/kWh production payment for the first 10 years). The net present value of the current tariff structure is about 1.6 cents per kWh.
Under the C-BED proposal, a power purchase contract might provide payments of 4.8 cents per kWh or higher over the first 10 years and 3.3 cents per kWh for the remaining years of the contract.