By William Lee-Ashley
• Blowing into Mainstream Energy
On a sweeping plateau near Peetz, Colo., just miles from the Nebraska border, the movement of construction machinery and the bobbing of hardhats signal big development. Farmers in this area, far from the bustle of Colorado’s Front Range, are ushering in developers, not to build houses, but to farm the wind.
Indeed, the potential for wind energy today seems to be limitless. “The cost of wind generation has been dropping while the cost of other energy resources has been rising,” commented Gary Schmidt, spokesman for the National Renewable Energy Laboratory (NREL) in Golden, Colo. “Wind is now cost competitive with natural gas.”
The wind generation industry grew by 60 percent last year and is expected to grow by 100 percent in 2001 to 3.5 billion kilowatt-hours, according to NREL. “The possibilities for wind generation are excellent in all three states [Colorado, Wyoming, New Mexico]; we are only beginning to exploit these wind resources,” said Trudy Forsyth, a wind scientist with NREL.(See graphic at the end of this article.)
The explosion of the wind industry is in part due to rising costs of fossil fuels, and partly due to improvements in technology. Now turbines can generate 1.5 megawatt hours as opposed to 1 megawatt hour in 1995 (1 megawatt satisfies the daily power needs for 1,000 customers). “The technology in the wind industry is really emerging quite rapidly,” remarked Mark Shulz, a spokesman for Xcel Energy, formerly Public Service Company of Colorado. “When the wind does blow we can extract more and more.”
Xcel Energy is the largest buyer of wind-generated electricity in Colorado. Currently, the Ponnequin Wind Facility on the Colorado-Wyoming border produces about 30 megawatts of electricity per year. Two more sites, one under construction in Peetz and the other near Lamar, Colo., will provide 26 and 162 more megawatts of power, respectively.
Xcel Energy sells its wind-generated electricity for a premium of 2.5 cents per kilowatt hour over conventional electricity through its ‘Wind Source Program.’ “The program is extremely popular,” boasted Shulz. “We have over 14,000 people participating in the program and hundreds more on the waiting list.”
Consumer demand for wind energy may be coming at the right time. “The wind industry has proven that wind is a viable source of power,” commented Steve Yatsko, spokesman for enXco, the developers of the Peetz site. “With no pollution and thus no externalized cost, wind may just be the cheapest power source.”
From the outside, wind power appears to be the simple answer to growing energy concerns. However, margins in the business remain extremely tight. Tremendous capital is required to construct the infrastructure of substations and transmission lines necessary to get electricity from remote areas to urban areas. The cost of infrastructure and the unpredictability of wind mean that profit is determined to a large degree by the nature of the contract signed with the landowner.
• An Adversarial Relationship
With the farm crisis in full swing, farming the wind is an appealing proposition. Towers for the turbines have a small footprint and they permit farmers to keep farming and receive a yearly check. By enXco’s estimates, one tower and its service road require no more than one-fifth of an acre.
“The farmer typically makes at least $1,000 per turbine per year. With the turbine occupying one-tenth of an acre, the access road another one-tenth of an acre, the farmer can make $5,000 per acre,” said. Yatsko. “I want to emphasize that this isn’t winning the lottery, but is there another legal crop that will pay the farmer that much money?”
Bob Davis, a farmer near Peetz, who was approached by enXco, rejected offers to develop his property. “I was under the impression they were going to have a track out to the tower. Instead, they’d be bringing in gravel, making a boulevard,” commented Davis. “I’ll sit here without anything before I sign a contract like that.” Because the contracts themselves are confidential, it is difficult to determine exactly where the problems are. What is clear is that the devil is in the details.
Davis brought enXco a contract he had drafted up. The company rejected it.
Another farmer near Peetz, who declined to give his name, agreed to allow enXco to put several towers on his land. “Basically there is no end to this contract,” the farmer said. “It sounded good initially but some of the little things are giving us problems.” Since he signed the contract, the farmer has done considerable research into other contracts in other parts of the country. “Unfortunately, our contract is not comparable to the others.”
“Farmers see how much Xcel Energy is charging for a kilowatt hour and complain about how much they are receiving,” said Yatsko. “The fact is that our rates are substantially lower and farmers aren’t seeing how much we are paying in taxes.” EnXco projects that it will be paying 6 percent of the property tax in Logan County next year, decreasing the taxes for other residents.
Payment rates for wind turbines vary according to the wind resources at the site, but typical annual per tower rates fluctuate between $2,000 to $3,000 according to Beth Sohott, spokeswoman for the Izaac Walton League, a leading conservation organization.
“We want to be good citizens,” said Yatsko of enXco. “Income from the turbines is something that will give the landowner an annuity–and it’s a good annuity.”
• The Devil is in the Details
There is no question that tapping into wind power is a sustainable “crop” that produces year after year for the farmer. “I tell farmers to think of wind generation as a commodity like corn or soybeans,” said Don Bain, a consultant on wind contracts in Portland, Oregon. “They need to think of the best way to market their wind product.”
Part of the difficulty in distinguishing good contracts from bad is a lack of knowledge. Commodity prices are public information and they fluctuate daily. Wind contracts are inherently different; they are typically signed in confidence on the farmer’s front porch and are fixed for dozens of years.
Typically, developers such as enXco look to sign easements to allow the developer access to the farmer’s land. Farmers allow the developer to explore the wind potential on the land. If there proves to be enough wind available, they move ahead to sign contracts, usually lasting at least 20 years. Easements on the land typically last much longer.
“EnXco had contracts in hand less than a week after beginning to talk with farmers,” the farmer in Peetz said. Developers will often visit a farmer and provide him with one opportunity to sign the contract. With divide and conquer tactics, landowners have scarce opportunity to research the quality of the contract.
The intangibles that accompany the construction of wind turbines may be equally vexing. Loss of vistas, changing field boundaries and a cap on land value, are some of the hazards that construction entails. Only when landowners are armed with information can they make a balanced, profitable decision.
“Good contracts will vary according to a particular farmer’s needs,” said Bain. “The bottom line is that it is important to get farmers and their attorneys educated, so they can pick the best arrangement, and so they can avoid bad contracts.”
For more information on large and small scale wind generation, contact the National Renewable Energy Labs at (303) 275-3000.
For more information about wind contracts, contact Rocky Mountain Farmers Union at (303) 752-5800 or get “Landowner’s Guide to Wind Energy in the Upper Midwest” at http://www.me3.org/issues/wind/