A serialized version of our new report, Democratizing the Electricity System, Part 5 of 5. Click here for: Part 1 (The Electric System: Inflection Point) Part 2 (The Economics of Distributed Generation) Part 3 (The Political and Technical Advantages of Distributed Generation) Part 4 (Regulatory Roadblocks to Democratizing the Electricity System) Download the report. The electricity … Read More
In a press release earlier this week, WWEA released this definition of community power alongside a new study on the public acceptance of community-owned wind:
A project can be defined as Community Power if at least two of the following three criteria are fulfilled:
1. Local stakeholders own the majority or all of a project
A local individual or a group of local stakeholders, whether they are farmers, cooperatives, independent power producers, financial institutions, municipalities, schools, etc., own, immediately or eventually, the majority or all of a project.
2. Voting control rests with the community-based organization:
The community-based organization made up of local stakeholders has the majority of the voting rights concerning the decisions taken on the project.
3. The majority of social and economic benefits are distributed locally:
The major part or all of the social and economic benefits are returned to the local community.
The press release also references this recent study of community ownership that we covered last week: Community Ownership Boosts Support for Renewables.
The use of tax credits as the primary federal incentive for renewable energy has often stymied cities, counties, and cooperatives from constructing and owning their own wind farm. But the temporary cash grant in lieu of the tax credit (expiring this December) has opened the door for one South Dakota cooperative and over 600 local investors:
The Crow Lake Wind Project, built by electric cooperative Basin Electric subsidiary PrairieWinds SD 1, Inc., is located just east of Chamberlain, S.D. With 150 MW of the project’s 162 MW owned by Basin Electric subsidiary PrairieWinds SD1, Inc., the facility has taken over the title of being the largest wind project in the U.S. owned solely by a cooperative, according to Basin Electric. [emphasis added]
The project is also distinguished for having local investors in addition to ownership by the local cooperative:
The entire project consists of 108 GE 1.5-MW turbines, 100 of which are owned and operated by PrairieWinds. A group of local community investors called the South Dakota Wind Partners owns seven of the turbines, and one turbine has been sold to the Mitchell Technical Institute (MTI), to be used as part of the school’s wind turbine technology program, which launched in 2009. PrairieWinds, which constructed the seven turbines now owned by the South Dakota Wind Partners, will also operate them. [emphasis added]
The key to success was the limited-time opportunity for the cooperative to access the federal incentive for wind power:
The opportunity became viable following passage of 2009’s American Recovery and Reinvestment Act, which created a tax grant option allowing small investors to access government incentives and tax benefits, making public wind ownership possible. Creating the Wind Partners for that purpose were Basin Electric member East River Electric Power Cooperative, the South Dakota Farm Bureau Federation, the South Dakota Farmers Union and the South Dakota Corn Utilization Council…
“This development model created opportunity for small local investors to have direct local ownership in wind energy and access the tax benefits previously reserved for large equity investors,” said Jeff Nelson, general manager at East River Electric. “It offers a model for others to participate in community-based wind projects.”
The South Dakota Wind Partners consist of over 600 South Dakota investors, some who host the project’s 7 turbines and many who do not. Investors bought shares in increments of $15,000 (combinations of debt and equity). Brian Minish, who manages the project for the South Dakota Wind Partners, hopes to see future opportunities for this kind of development. “There’s a lot of political benefit in letting local people become investors in the project,” Minish said in an interview this afternoon, “local ownership can help reduce opposition to wind power projects.”
Photo credit: Flickr user tinney
Last month, a Grist writer noted sarcastically that “Money is a miracle cure for ‘wind turbine syndrome’.” It is. And environmental advocates frustrated by the (spurious?) health and aesthetic complaints raised by not-in-my-backyard (NIMBY) actors would do well to consider why.
The implication of the Grist post (and this attitude in general) is that we can’t green our energy system without sacrifice. Getting to big carbon reductions will require enormous new renewable energy development and it will often happen in places where land was previously undeveloped (note: see this counter-argument). The folks who live there, the NIMBYs, need to do their share.
It’s awfully easy to offer sacrifice when you’re not on the altar. And it’s worth considering what’s really behind the “syndrome.”
In a recent study by the ever-methodical Europeans, they found that opponents to new wind and solar power have two key desires: “people want to avoid environmental and personal harm” and they also want to “share in the economic benefits of their local renewable energy resources.” It’s not that people are made physically ill by new renewable energy projects. Rather, they are sick and tired of seeing the economic benefits of their local wind and sun leaving their community.
Such opposition is perfectly rational, since investments in renewable energy can be quite lucrative (private developers and their equity partners routinely seek 10% return on investment or higher). And the economic benefits of local ownership far outweigh the economic colonialism of absentee owners profiting from local renewable energy resources.
Of course, NIMBY-ism only sometimes manifests itself as an economic argument, and there’s a good reason for that, too. In the project development process, there are precious few opportunities for public comment, and almost all of them represent up-or-down votes on project progress. None offer an opportunity to change the structure of the development to allow for greater local buy-in or economic returns. And no project will be halted simply because it isn’t locally owned. Projects can and have been stopped on the basis of health and environmental impacts. Enter Wind Turbine Syndrome.
There are alternatives. In Germany, Ontario, Vermont, and Gainesville, Florida, local citizens can use a renewable energy policy – a feed-in tariff – that offers them a guaranteed long-term contract if they become a renewable energy producer. This contract guarantees a reasonable, if small, return on investment and helps them secure financing. In Germany, the program’s simplicity means that half of their 43,000 megawatts (MW) of renewable energy are owned by regular farmers or citizens.
In Ontario, the provinicial clean energy program specifically requires project developers to use local content, guaranteeing a higher economic benefit for the province in exchange for its robust support for renewable energy. The program is forecast to generate 43,000 local jobs in support of 5,000 MW of new, renewable energy.
In the United Kingdom, public officials are piloting a “community wind fund” program for all new wind projects. Under the program, each wind project must pay in £1000 per megawatt (~$1600 per MW) per year, for 25 years, into a community fund where the project is located.
The impact for the community is significant. Compared to the typical land leases (often $5,000 per turbine for the host landowner), the community fund payments would increase local revenue by over 60 percent, with the additional funds spread to the entire community rather than just the lucky turbine hosts.
The impact on turbine owner net revenue is small but not negligible, reducing the net present value of the project by about 3 percent.
It’s not that any of these policies represent the silver bullet for local opposition to new renewable energy projects, but they do address the underlying problem.
The truth is that many people are frightened of being left behind by the clean energy revolution or angry that their local resources are tapped without commensurate local benefit. They find that there’s no way to be heard in the (democratic?) process without resorting to tangental arguments about health and viewsheds.
NIMBY has been misunderstood by the clean energy community. It is not a knee jerk, it’s a market failure.
When citizens see a new wind or solar energy project, it shouldn’t be from the sidelines. They should see it from the front seat, where they have hitched their wagon to environmental and economic progress by investing in a local energy project.
Our energy policy should make that possible. It doesn’t.
Federal tax policy makes it very difficult to share renewable energy tax incentives among multiple investors. Federal and state tax-based incentives preclude many local organizations (nonprofits, cities, schools) from owning wind turbines or solar panels. And utility billing rules make it nearly impossible (in most states) to share the electricity output from a shared project that isn’t utility owned.
There are brilliant examples of entrepreneurs overcoming these barriers to install community-based projects. Developer Dan Juhl and others have a record of success with community wind in Minnesota. The Clean Energy Collective is piloting a new community solar program in Colorado.
There are even some policy ideas bringing hope. Virtual net metering laws in eight states allow for sharing electricity output. Colorado’s solar gardens bill enshrines a small amount of community solar.
But the theme is one of triumph over adversity, with local ownership the exception rather than the norm. And without better energy policies that give locals a chance to buy in, the wind turbine syndrome epidemic will likely continue.
Community ownership may provide the solution for increasing resistance to wind power in the United States.
Wind power has expanded rapidly in recent years, but the new wind farms have a common characteristic: absentee ownership. These large wind farms promise a broad expansion of clean energy production, but not a commensurate expansion in local economic benefits. True, every wind power project will create some jobs and ripple effects in the local economy, but with absentee ownership most project benefits will leave the community (whereas locally owned projects have significantly higher rewards).
Without a say or stake in the turbines remaking their local skyline, communities have raised red flags. The result is more restrictive wind siting policies and opposition to new high-voltage transmission lines that may carry wind power from remote areas to major cities.
The wind industry’s initial reaction to local resistance seems to attempt an end-around, looking for states to pre-empt local siting authority and the federal government to pre-empt state transmission planning authority. Unsurprisingly, such moves win few friends for wind power.
There’s an alternative.
Some wind developers have learned that gaining local acceptance means rewarding not just the landowners who host project turbines, but neighbors who will also be affected by the turbines’ proximity. In the United Kingdom, state policy is requiring wind farms to pay into community funds (perhaps inappropriately, as a tool to offset severe budget cuts). But this policy has two drawbacks. For one, it only buys off the opposition, it doesn’t transform them into wind advocates. Second, it fails to take advantage of a community’s capital and the interest of residents in owning a stake in local wind power, rather than simply observing.
Community wind projects typically find a warmer welcome:
“In local communities, there’s been little to no opposition to wind projects,” said Eric Lantz, a wind policy analyst at the Renewable Energy Laboratory and a co-author of the study. “There’s more pride taken when you’re able to participate with an ownership stake.”
Community ownership not only eliminates most local opposition, but makes locals into stakeholders in the success of wind power. A new 25 megawatt wind project in southwestern Minnesota will feature significant community ownership. Just listen to the heartfelt pride in wind power from these members of a wind power cooperative in the United Kingdom:
Community wind projects are also more likely to reduce demand for long-distance transmission, because gaining local acceptance means wind farms can be built closer to cities and because communities lack the capital to build that largest-scale wind farms. This is a key issue, since there’s yet to be a community-owned transmission line.
While community wind could save the wind industry, it won’t be without some better rules. Community wind projects still require financial acrobatics, largely because the federal incentive for wind power (the Production Tax Credit) can only effectively be used by big banks and investment firms. And utilities tend to favor a few negotiations with large wind projects rather than many negotiations with smaller projects to meet their renewable energy obligations. Laws like Minnesota’s Community-Based Energy Development statute or CLEAN contracts can pave the way for more community-based wind projects.
Wind power is a key element of transforming our electricity system to clean energy and to combatting climate change. But it’s future may hinge on the willingness of the wind industry to embrace community ownership.
How self-sufficient in energy generation could states be if they relied only on their own renewable resources? In November 2008, ILSR began to address this question in the first edition of Energy Self-Reliant States. That report included a limited set of resources – on-shore wind and rooftop solar photovoltaic (PV) – and also examined the potential … Read More
Decentralized renewable energy doesn’t top the climate and energy agenda in Europe or the United States, but for very different reasons. In Europe, there has already been substantial development of decentralized renewable energy, and policy makers have moved on to discussions of 100% renewable energy. In the United States, by contrast, well-heeled interest groups tend to dominate renewable energy discourse, and American energy policy reflects their paradigm of centralized generation dependent on high-voltage transmission lines.
Vermont, Oregon, Gainesville, FL, and the Canadian province of Ontario have recently adopted feed-in tariffs for renewable energy, allowing any prospective renewable energy producer will get a guaranteed connection to the grid, a long term contract to sell their power, and a fixed price sufficient to recover their costs plus a reasonable profit. We believe that feed-in tariffs could turbocharge state level renewable electricity standards, reduce costs, and spread the economic benefits across many more project owners.