WIND ENERGY EDUCATIONAL
PROGRAM FOR FARMERS AND
LANDOWNERS
Professor Stephen B. Harsh
Department of Agricultural Economics
Michigan State University
And
Professor Lynn Hamilton
Department Of Agribusiness
California Polytechnic State University
San Luis Obispo
Energizing
Michigan
WIND ENERGY
EDUCATIONAL THRUSTS
1. The initial grant was to involve the
Extension System in conducting a general
wind energy awareness educational
program
 It involved both campus and district staff
 Lynn Hamilton was hired as director of the
project

First phase related to becoming informed
about various aspects of wind energy
 The knowledge gathering trip to Iowa and
Minnesota played a large role in this
process
Energizing
Michigan
(Educational Thrusts Continued)
 (Initial Grant Continued)
 A four hour workshop curriculum was
developed
 Introduction to wind energy and
economics of wind energy systems
 Legal aspects of a wind power lease
 Issues related to local approval and
zoning considerations
 Small wind systems and grant
programs for wind energy
Energizing
Michigan
(Initial Grant Educational Thrusts Continued)
 Introduction to Wind Energy and
Economics of Wind energy session
 Basics of wind energy
 Key factors to consider in developing
wind energy
 Economics of both utility scale and
small wind systems
Energizing
Michigan
4
2
3
Energizing
Michigan
Michigan
Wind
Power at
50 Meters
Energizing
Michigan
Energizing
Michigan
WHY GROWTH IN WIND ENERGY
Energizing
Michigan
 It is renewable energy
 Wind will blow for generations – it can not be
depleted
 It is environmentally friendly
 A 1 megawatt turbine in a “good” wind area will:
 2.6 million kilowatt-hours electricity per year
 Serve about 300 average households
 Removes over 5 million pounds of
greenhouse gasses(CO2)
• Equivalent of 16 carloads of coal
 Also removes sulfur (SOX) and nitrogen
(NOX) dioxide and mercury
 Helps the local economy
 Property taxes
 Funds not being sent to oil producing countries
 Creates jobs
 It can be a very good economic investment
(Initial Grant Educational Thrusts Continued)
 Key factors for developing wind energy
 A good source of wind
 Wind is solar energy and the speed is
critical
• As the speed increase by 25%, the power
increases by 100%
• 15 mph to 18 mph results in a 73%
increase in power

A power purchase agreement
 Renewal Portfolio Standard (RPS)
 Net metering




Energizing
Michigan
Access to power sub-station
Adequate transmission capacity
Good financial plan
Local acceptance and approval
UTILITY SCALE TURBINES
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Michigan
EXAMPLE OF UTILITY SCALE PROJECT
 A is community wind project with eight 1.5 mW
turbines in the project
 Key assumptions for a turbine (Case 1):
 Total cost per turbine is 2.2 million dollars
 Assumed life of investment = 20 years
 Power purchase agreement = 6.0 cents per kWh
 Federal tax credit of 1.9 cents per kWh for 10 years
 Average power capacity factor for each turbines =
30%
 Financing 60% of the cost (15 year loan @6.5%)
 Major rebuild of gear box every 5 years
 Annual costs include repairs, utilities, property
taxes, insurance and service contract
 Before tax desired return on investment = 12%
 Aggregate marginal tax bracket = 41%
 Prior taxable income of 640,000 & $182,000 taxes
paid
Energizing
Michigan
(Utility Scale Project Continued)
 Analyzed with the “Alpha-3” version of Utility Wind
Investment Model (used capital budgeting methods)
 Uses after-tax discounted flows
 Results (Case 1):
 Years with negative after-tax cash flows = 3
 After-tax discounted income = $169,000
 Before-tax internal rate of return = 16.6%
 Results (Case 2), Flip ownership (Corporation owns
the first 10 years and farmer owns the next 10
years):
 Results are nearly the same for both owner groups
Energizing
Michigan
SMALL WIND SYSTEMS FOR
INTERNAL CONSUMPTION
Used
60 kW
System
Purchased
over
Internet
Less
Than
$30,000
Installed
Energizing
Michigan
Energizing
Michigan
ECONOMICS OF
SMALL WIND SYSTEM (CASE 1)
Key assumptions:
 Total cost of project is $36,000
 Assumed life of investment = 20 years
 Power purchase agreement = 3.3 cents per kWh
 Before installing system, purchased 130,000 kWh
of electricity at 8.8 cents/kWh
 Average power capacity factor = 20%
 Proportion of business potential not usable = 20%
 Financing 60% of the cost (15 year loan @6.5%)
 25% cost share under Section 9006
 Annual costs include repairs (higher rate), utilities,
property taxes and insurance, service contract
 Aggregate marginal tax bracket = 41%
Energizing
Michigan
(Small Wind System Economics Continued)
Analyzed with the Small Wind Investment
Model
 Used after-tax discounted flows
Results (Case 1):
 Net Present Value = $13,688
 Number of years with negative after-tax cash
flows = 4
 First couple of years have negative operating
losses
 Before-tax internal rate of return = 49%
Energizing
Michigan
(Initial Grant Educational Thrusts Continued)
 Legal issues related to a wind lease session
 Initially Roger McEowen from Iowa State
provided materials for this session
 Later on an in-house lawyer handled this
session
 Main points of presentation
 Do not sign anything until you discuss with
a qualified lawyer
 Be cautious about a “high pressure” lease
 Look for a good lease rate
 Every add-on should have an enhancement
fee
 Understand the 3 time phases of the lease
(discovery, production, renewal)
Energizing
Michigan
(Initial Grant Educational Thrusts Continued)
 Local approval and zoning
 Nuisance issues (noise, avian kill, ice shed,
flicker, visual impact, etc.)
 Zoning (setbacks, wind energy shadow,
removal provisions, etc)
 Small wind systems and grant programs
 Small wind applications (homeowner, small
business, special function systems, etc.)
 Grants to help offset the cost of the systems
such as the USDA 9006 grant
 What is considered in evaluating these
grant requests
Energizing
Michigan
(Initial Grant Educational Thrusts Continued)
 12 Workshops were held
 Nearly 800 attended
 Evaluations were very positive
 Information presented met their
needs
 Increased their general knowledge of
wind energy issues
 Caused behavior change
Energizing
Michigan
EDUCATIONAL THRUSTS
2. The second grant focused on an
anemometer loan program and small wind
systems
 More than one grant was actually used to
purchase the ten anemometer systems
 Used an application process to select
participants
 Eric Wittenberg is director of the
Anemometer Loan Program
Energizing
Michigan
MSU
Anemometer
Loan
Program
Energizing
Michigan
Energizing
Michigan
Energizing
Michigan
(Second Grant Thrust Continued)
 Small wind program
 Special workshops
 Presentation by an actual user of a
small wind system
 In depth presentation on what is
involved in the installation of a
system by an installer
 Economics of a small wind system
• Use of the small wind model
 Presentations at grower meetings
(e.g., greenhouse association)
Energizing
Michigan
EDUCATIONAL THRUSTS
3. Currently with the aid of a third grant
the educational effort is continuing
 Continuation of the Anemometer Loan
Program
 Community wind assistance
 Wyandotte Municipal Power
 Others in discussion stage
Energizing
Michigan
Energizing
Michigan