Tackling the challenges of small and community wind

By Larry Flowers

As the U.S. wind powerindustry continues to put in thousands of megawatts annually, contributing 35 percent of the nation's new electric generating capacity on average since 2007, two segments of the industry—distributed (also known as small) wind and community wind—continue to grow and evolve, with both benefits and challenges in each of those segments.

Given that they have grown in size and stature, it's appropriate that the American Wind Energy Association's Small and Community WINDPOWER Conference & Exhibition has turned into a full-scale event with top programming and an impressive exhibition.

The conference, which this year will be held in partnership with the Distributed Wind Energy Association (DWEA), takes place September 15 to 17 in Des Moines, Iowa. It promises to tackle the big issues in the small and community wind arena.

Of these two industry areas, community wind is perhaps the one that is somewhat less understood. Let's take a look at this ever-evolving area of the wind industry and some of the issues that have emerged as community wind grows.

Historically, wind development can be characterized as an evolution from the corporate third-party developer/owner (i.e., independent power producer) structure to a variety of other models that have emerged through the years, including the more recent emergence of community participation in project ownership and control. Ironically, this model has developed as the wind market has grown from 2,500 MW in 1999 to more than 45,000 MW today, with project sizes increasing from mere tens of megawatts to hundreds.

Somewhat countering this trend of bigger projects is community wind. Projects that can be characterized as community wind are typically on the smaller side, ranging from a single turbine up to several dozen megawatts. AWEA estimates that 5.6 percent of the year-end 2010 utility-scale wind market consisted of community wind projects.

The main benefits of community wind that are driving the market are increased local economic development and local control. When the owners are (at least partially) local, the project revenues flow primarily to local people, businesses, and institutions. The direct, indirect, and induced income streams from the construction and operations of community wind projects are up to three times those of conventional third-party, out-of-state owned projects.

Other benefits include both the tangible and intangible. Projects, for example, allow communities to realize significant water savings, given that wind farms use no water for generation, unlike conventional power plants. Beyond that, communities gain the intangible satisfaction of producing some of their own energy—a reality that instills a greater sense of contribution and independence. With community wind projects, communities also have the knowledge that they are contributing to improved air quality, both locally and globally.

Community wind power also comes with its advantages from a development perspective. Because of community wind's smaller scale, projects can avoid the need for expensive and time-consuming transmission upgrades and often can be connected to the distribution grid with minimal upgrades.

As for challenges, community wind projects, given their smaller size, sometimes have a hard time competing with larger projects because they obviously do not take advantage of pre-development, turbine purchasing, construction or operations scale.

As is the case with conventional wind, both federal and state policies are important drivers. While the Production Tax Credit (PTC) has had limited value to community wind, the more recent 1603 Treasury incentive has been particularly effective in helping community wind remain competitive, and the 30 percent Investment Tax Credit (ITC) has broader application to community wind, as locals can make better use of it than the PTC.

In addition to these federal incentives, the USDA/REAP program, through grants and guaranteed loans, has been very effective in reducing the pre-development and installation costs of rural community wind projects.

At the state level, community wind has benefitted from some of the policies that have helped drive the wind industry as a whole. Some 30 states now have renewable portfolio standards that require utilities to include a percentage of renewables in their portfolios, although such RPSs generally do not call for a certain portion of the standard to be met with community wind.

However, in the early part of the last decade, Minnesota led the way in community wind with a requirement for Northern States Power (now Xcel) to purchase a total of 100 MW from community wind projects that were no larger than 2 MW in size (projects were much smaller back then). Since then, several states have incentivized community wind through Community-Based Energy Development (CBED) legislation.

Today, interest in community wind is spreading across the country as stakeholders seek more direct involvement in wind energy and its future. Local business leaders and officials see community wind as a means of generating local economic development while stabilizing energy prices and improving the local and regional environments.

For community wind to reach its enormous potential, progress must be made in several areas, including the development of effective policies on siting, ways of improving competitive economics and further development of utility demand. Such hot-button issues are sure to be tackled at the Small and Community Wind Conference & Exhibition.

Larry Flowers is deputy director, Distributed and Community Wind, for the American Wind Energy Association (AWEA).

July/August 2011

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Tackling the challenges of small and community wind