Nebraska Wind plant needs buyers of electricity to get aloft

Source: By Paul Hammel / World-Herald staff writer • Posted: Monday, September 9, 2013

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OAKLAND, Neb. — A small wind farm planned near this small town is ready to begin construction except for one major snag — no one, so far, wants to buy the electricity it will produce.

The 22 farmers behind Burt County Wind LLC are trying to change that by convincing Nebraska utilities that they need to look past the slightly higher cost of the energy produced by small wind farms and consider the bigger economic impact that such projects would provide.

“We have such an abundance of natural resources in our state. Our communities across the state of Nebraska ought to be able to reap those benefits,” said Graham Christensen, president of Burt County Wind.

The state’s two largest utilities, the Omaha Public Power District and the Nebraska Public Power District, are both taking a second look at the Burt County project and its benefits.

But whether that results in a purchase of power remains to be seen.

Burt County Wind faces a Dec. 31 deadline to start construction in order to qualify for attractive federal production tax credits for wind power development.

The story of Burt County Wind points to a nagging problem facing all wind farms in Nebraska.

Although the state passed a new wind energy tax break this year, wind power can be produced at a lower cost elsewhere because of more generous tax incentives in other states.

The small wind farm in Burt County faces a second hurdle. Its costs to buy turbines and bring in cranes to erect the tall towers are higher, pushing up the costs of power generation even higher.

The higher costs prompted the Lincoln Electric System in July to purchase cheaper wind power from a project in Oklahoma, rather than buy it from Burt County Wind or another Nebraska project.

“One of the difficulties for Burt County Wind is that it’s a smaller project. Obviously, the bigger the wind farm, the more economies of scale,” said Shelley Sahling-Zart, vice president and general counsel for Lincoln Electric System.

Sahling-Zart said the best proposal from a Nebraska wind farm would have cost Lincoln Electric an extra $2 million a year over a 20-year period. That was too much of a price difference to top the lower bid from the 100-megawatt wind farm planned in Oklahoma.

“If things had been relatively close, my hunch was the (Lincoln Electric) board would have looked at Nebraska,” she said. “But it wasn’t close.”

Burt County Wind officials are now hoping that other electricity buyers, such as OPPD and NPPD, will consider the economic benefit to Nebraska of buying wind power locally and not just the price of the electricity.

Two state senators, Lydia Brasch of Bancroft and Annette Dubas of Fullerton, a candidate for governor, have lent their support to the Burt County effort.

A bill pending in the Legislature would require the state’s Power Review Board to consider the economic development potential of wind projects, not just whether they generate electricity at the lowest cost.

The farmers group in Burt County, about an hour’s drive north of Omaha, formed a corporation three years ago to develop a small six-turbine, 12-megawatt wind farm between Oakland and Tekamah. About $200,000 has already been invested in wind tests and legal costs for the $22.5 million project.

By using local contractors and investors, Burt County Wind hopes to qualify for more generous tax incentives offered under Nebraska’s Community Based Energy Development (C-BED) Act, which was patterned after a successful Minnesota law.

Passed in 2007, the goal of C-BED was to maximize the economic benefit of wind farms by keeping the investment and contractor payments local.

But so far, no Nebraska project has qualified for C-BED. The reasons vary, such as arguments that “it’s too complicated” and a lack of qualified local investors. Burt County Wind, if built, would be the first to qualify for C-BED.

Christensen said the C-BED concept is still sound.

He estimated that the Burt County project — because most contractors and financing would be local — would generate an economic benefit to Nebraska of $39.9 million.

By comparison, Christensen said, a typical larger wind farm developed by out-of-state companies returns only 2 percent to 10 percent of its revenue to Nebraska.

Finding a buyer for its power is critical to the Burt County Wind project’s moving forward. Obtaining “power purchase agreements” is a requirement for receiving state approval to build a wind power plant.

The project was among 19 that submitted bids recently to Lincoln Electric. Sahling-Zart said the Burt County proposal was among the highest considered.

The decision by the Lincoln Electric System to buy wind power from Oklahoma instead of from Nebraska was criticized by the Nebraska Farmers Union and Sierra Club.

But Sahling-Zart said the system’s highest priority must be its Lincoln-area customers. Economic benefit is important, she said, but if electric rates rose in Lincoln to offset the cost of higher-priced wind energy from Nebraska, that would harm economic development in Lincoln.

That argument might be slightly different for NPPD and OPPD, which have customers in Burt County and much larger areas of rural Nebraska.

The NPPD board will receive a report Wednesday on the expected economic benefits from the Burt County project and about nine other proposed wind farms in Nebraska. The projects, if built, would generate a combined 1,700 megawatts of energy from wind, nearly four times what is now produced in the state.

Frank Christensen of Oakland, an NPPD board member who is Graham Christensen’s father, asked for the analysis. Graham Christensen said that while his father shares his belief that local investors and farmers ought to reap the benefits of wind energy, he has no personal stake in Burt County Wind.

The NPPD board has the latitude to buy higher-priced wind energy, said Dave Rich, the utility’s renewable energy developer, but the board also has the responsibility to do what’s best for all utility customers.

If the board wants to buy power from Burt County Wind or other wind projects, it probably can’t make a formal decision until its October meeting.

Wednesday’s report is for information purposes only, and the board would have to declare an emergency to take action immediately.

Mike Jones, an OPPD spokesman, said the Omaha-based utility is evaluating several wind projects, and economic development is one consideration.

Graham Christensen said he hopes both utilities are looking closely. He said Omaha banks could benefit by providing the financing for the Burt County project, as could Omaha contractors.

“This is an investment opportunity for all Nebraska,” he said. “If we do it right, there’s really a lot of money to be made from our natural resources. We could have a really cool energy structure that would be mostly Nebraska-based.”