Community Wind – the development of locally owned, utility-scale wind farms – is one of the fastest-growing segments in the U.S. wind industry. Community Wind projects are developed and owned, in part, by members of the communities in which they’re developed. A typical project ranges between 5MW and 80MW, although they can range both higher and lower. Most importantly, this approach to development leads to a genuine sense of community involvement and acceptance.
Community Wind currently represents just 4% of all installed wind in the United States, though the sector is growing at a record pace – an average of 76% per year. Market share is expected to increase significantly by 2012, as the abundance of viable, large-scale sites that traditional developers require, diminishes.
While the concept of community-developed and community-owned wind farms may be relatively new in the U.S., it is a model that has been widely and successfully deployed across much of Europe. As much as 83% of wind in Denmark and 45% in Germany has been developed with local ownership. But Community Wind’s success in Europe lies in stark contrast with conditions here.
In the United States there is real concern from residents of rural communities that wind development is happening around them, but that it doesn’t include them. Community Wind is a response to that dynamic that allows communities and their members to take an active role in the project and to perceive greater economic benefits in turn. With the Great Recession nearly behind us, we are charged to reinvent America’s economy and recreate its energy future. Our citizens and communities can – and must – play a critical role in setting that course.
Today, a number of compelling factors have converged to create the “perfect storm” for Community Wind in the U.S. The first, and most important, factor is the creation of jobs and economic development.
Community Wind projects have been shown to have greater economic benefits and drive more job creation than large-scale “absentee” wind farms. At a time when this nation must create jobs and stimulate economic growth, Community Wind does both. Since ownership is retained in the community and profits are recycled, incremental jobs are created, along with more wages, business income and tax revenue. In fact, according to a University of Minnesota study, the economic impact of Community Wind on the local region can be as much as five times that of an absentee project
Another benefit of Community Wind projects is that they can often reach “shovel-ready” status sooner than larger, traditional wind development projects. Much of this has to do with the important role played by development partners local to the area. Community Wind projects are often smaller, tend to require less land for siting purposes and have a lesser potential environmental impact than larger projects.
Local development partners in Community Wind projects do the lion’s share of the work to socialize the project, manage relationships with neighbors and secure additional wind rights required to build. Often, the local partner will customize leases and other land documents to meet local commercial conditions and requests. Having that local partner as a member of the development team can also serve to increase support for the project in the community and thereby help to reduce local opposition to the project.
Another very compelling factor, particularly for utilities, is the issue of transmission. Our current transmission grid is straining to deliver clean energy from the rural areas where it is generated to the populous cities where it is consumed. Close to 300,000 MW of proposed wind projects are in interconnection queues.
In the face of these issues, transmission operators see value in having distributed generation on their system and having smaller generating units closer to the load. This value could come through increased system stability, power quality, and reactive power, or it might simply come from a reduced need for new power lines and/or upgrades.
Since Community Wind projects are smaller and more distributed by nature, and since Community developers site these smaller projects to avoid network upgrades, utilities are often able to connect the projects to existing grid infrastructure without building new lines or making costly transmission upgrades. In fact, in some instances, higher voltage area network transmission upgrades might be able to be deferred if wind generation were distributed over a larger area through dispersed Community Wind projects. These dynamics all compare with Absentee projects, many of which are now dependent on the creation of new large-scale transmission infrastructure. OwnEnergy estimates that the majority of these new lines will not complete construction before 2015.
There is further potential transmission value in the reduction of wind generation variability due to the geographical diversity that comes from smaller, more distributed projects. Simply stated, there will likely be fewer times when the overall wind generation on a transmission system is at zero or at full output if wind generation is distributed over a larger area. These diversification benefits increase system balance and stability and may translate into real dollars and cents, as this diversification leads to more predictable dispatch of existing conventional power stations in wind-rich areas.
Community Wind is also a more favorable way for utilities – especially Rural Electric Cooperatives – to meet their renewable generation needs, compared with Absentee wind power. Community Wind projects typically have strong support from community members, who are often also members of the local electric cooperative. They may also ease integration issues on these utilities’ systems. Additionally, community projects may present an opportunity for utilities and co-ops to own their own wind generation because Community Wind projects frequently invite utilities into the project as partners. In current financing market conditions, rural utilities may also be the least expensive form of rate-based equity capital for U.S. wind projects.
One way to encourage even more participation in Community Wind by electric cooperatives would be to lower the threshold for inclusion under any Renewable Energy Standard contained in any forthcoming Energy or Climate Bill to 1million megawatt-hours served from the present 4million megawatt-hours. This would nearly double the number of co-ops and municipal utilities that are required to procure renewable energy for their members and residents.
Another important factor leading to an uptick in Community Wind is the availability of financing. In light of the drastic changes in economic conditions, smaller projects have become very attractive from a financing perspective.
Investors want to participate in mid-sized, Community Wind projects because they require a smaller investment and have relatively low risk because of local involvement and support. These projects can also often see benefits from investment by local banks and investors.
Several states have implemented policies that foster the development of community wind, including Minnesota, Maine, Colorado, Montana, and Nebraska. We expect to see this trend continue across the country. And with increasing support for Community Wind from the industry’s leading trade association, the American Wind Energy Association (AWEA), Community Wind is increasingly in a position of prominence across the industry. AWEA recently created a Community Wind Working Group and hosted the inaugural Small and Community Wind Conference in Detroit, in November 2009, which attracted 2,100 attendees – the most ever to attend an AWEA regional conference. This event was truly a “coming of age” for Community Wind.
OwnEnergy is a leading developer of Community Wind in the U.S and the only venture capital-backed company in the industry that partners with local communities and landowners across the country. This model enables those individuals and organizations to have a direct stake in these jointly developed projects. It also taps into the entrepreneurial spirit of farmers, ranchers and landowners across the U.S. to develop sources of clean, renewable energy that they can call their own. With more than 50 years combined industry experience, OwnEnergy team members leverage their networks, resources and industry know-how to guide partners through the complex hurdles of wind development to get projects done.
Each partner takes an active role in the development and installation process, particularly in local aspects of development around procuring wind rights, measuring wind, conducting community and local government relations and many of the commercial processes and negotiations in development. In return, our local partners receive a meaningful ownership stake in the resulting project.
For its part, OwnEnergy manages the development process from start to finish. This includes a heavy emphasis on technical, legal and commercial development processes such as siting, resource assessment, interconnection, permitting, power marketing, turbine procurement, financing, construction and operations.
About the Author
Jacob Susman is the founder and CEO of OwnEnergy, the leading developer of Community Wind projects in the United States. Jacob has ten years of investing and business development experience in the field of renewable energy and has led OwnEnergy since its inception. Before founding OwnEnergy, he was a founding member of Goldman Sachs’ Alternative Energy Investing group, where he was involved in Goldman’s investment in Horizon Wind Energy and co-led a portfolio financing that was named Project Finance’s N.A. Renewable Energy Deal of the Year.
Earlier, Jacob served as Project Manager for the AES Corporation, working on a team that developed one of the largest power plants in Spain. He also led AES’s efforts to develop a Spanish renewable energy business, which included negotiation of more than 1,000 MW of wind energy investment opportunities.
Jacob holds an MBA from The Wharton School of the University of Pennsylvania, where he led a team to the finals of the Business Plan Competition with the concept for OwnEnergy.
