Editor’s note: This article is part of the Insider’s ongoing coverage of wind power development and communityscale
wind. For background on community-scale wind development, please refer to Diane Henkles and J.
Charles Griggs’ article “Community Renewable Energy Projects With Focus on Community Wind in Issue #465
(April 2011). An updated version of this article is available online. Next month, we continue our community wind
coverage with a look at ongoing community wind power policy and financing developments in Oregon.
The primary purpose of this article is to outline a new strategy for energy investment that has the
potential to revolutionize and return “public ownership” to a grass roots level. This investment strategy
allows individuals a straightforward way to invest in renewable energy projects in their community.
The Importance of Local Ownership
A feeling of ownership is vital for those living in close proximity to wind farm developments. Local
residents can be left with the feeling of wearing the visual burden of wind farm development that more
than meets the power requirements of the immediate community. This is especially the case in larger
developments, where the energy generated from a wind farm in the area may meet the local community
needs hundreds of times over. This invariably leads to claims of “wind turbine syndrome.”
Some European countries have developed an alternative model of wind power development that may
be applicable to community-scale wind power development in the Pacific Northwest and across the country.
One-fourth of the wind generating capacity in Denmark, equivalent to an investment of more than one
billion Euros, has been developed by windmill guilds (vindmølleaug) or cooperatives, with approximately 5
percent of the Danish population directly investing in such cooperatives.
The same has occurred in Germany, where more than 200,000 people own a share in local wind farm
cooperatives. This local investment and community benefit from wind turbines has gained a much higher
level of acceptance for wind turbines in Northern Europe than in other locations.
A Fresh Approach to Local Development
The purpose of this article is to develop a similar idea to these cooperatives. There are two key features
however, that will distinguish this new approach. The first is that these investments will be federally
backed in a manner that will benefit the government, investor and developer. This will be explained below.
The second is that anyone can invest in such projects at zero risk, without having to have any particular
knowledge with regard to the project financials or chosen technology.
At the outset, the government would establish a federally backed investment mechanism that allows
users to easily make contributions toward the development in their local area. Those with registered
addresses in the same zip code as the proposed wind farm (or any accepted renewable development) – or
in zip codes that are on the immediate boundary to where the proposed wind farm is to be located – may
directly invest in the local wind farm and receive a favorable rate of return.
These investors will be termed Locally Favored Renewable Investors (LFRIs), as opposed to those
who live outside the region in question, who will be termed External Renewable Investors (ERIs). The
additional return for local investors is to compensate them for the visual burden that the wind farm may be
deemed to have placed on the immediate region. Developers could elect to use these funds as a portion of
their wind farm finance option, and may elect to obtain the remainder of the required funds elsewhere, be
that from the bond markets or any other source. The investment system would be entirely online from the
outset and would operate in a similar fashion to an online bank account/share registry.
Funds deposited in such an account would be backed by a body similar in nature to the Federal Deposit
Insurance Corporation – for the sake of the example, it will be referred to here as the Renewable Investment
Commission (RIC). The RIC would act as the investment vehicle for all locally invested funds. The RIC
takes a cut on the investments, which would be kept as reserve in the case where a wind farm could not
make its repayments or became insolvent. In the event of insolvency, the RIC would repay the investors in that particular project to the full value of that share, less the capital repayments that had already occurred to
date.
Predicted wind resource for Big Valley Wind Project (Lakeview, OR). Analysis performed using several sets of data collect in the general vicinity of the project.
The money invested would return an annual interest payment on the LFRI share (made in annual or
quarterly installments) at a rate equivalent to the 80 percent of the rate at which the money is lent to the
developer/primary owner of the wind farm. For the ERI shares, this rate would be at a 60 percent rate. Such
return percentage would be open for review and would be dependent upon the historical success rate of all
previously backed projects, which would ensure that the system remained profitable for the government,
but also insure maximized returns for the investors.
These dividend payments would be a combination of interest and capital repayment, amortized over
a 15-year period. The selection of a 15-investment period is based on the average 20 year design life (as
per IEC 61400-1) of most wind energy generation devices. A 15-investment period helps reduce risk and
exposure to the RIC.
LFRI shares would be issued initially at $1000 per unit. Shares may be traded at any time on a live
open market, where bidding will occur. Any individual (or entity) may bid for such share. LFRI shares may
only be traded amongst individuals qualifying as LFRI’s, i.e. they must either reside in the same zip code of
the wind farm development, or those directly bordering such.
Any individual living outside the development may also elect to invest in the wind farm by purchasing
a number of $1000 shares. However, these shares would receive a reduced rate of return: 60 percent of the
rate at which the money is lent to the developer/primary wind farm owner. Capital repayments and interest
payment to these ERIs would occur over the same 15-year period as for LFRIs. The ERI shares may also be
traded at any time by any resident in the country, regardless of whereabouts in such country they reside.
Should the owner of a LFRI share change their address from the location sharing the same zip code,
or neighboring zip code, as the wind farm, then they have 12 months to dispose of the LFRI shares on the
LFRI exchange, or risk having them downgraded to ERI share value and status for the remainder of their
repayment schedule. Once converted to ERI status, a share may not be returned to LFRI share status. This
is done to ensure that only those living in the immediate region receive additional payments on their shares
to compensate for the visual burden, and encourage continual real estate investment within the region of the
wind farm.
Shares may either be traded on the LFRI/ERI exchange. Every share will have a market value based on
its face value, return rate and the supply/demand in that applicable LFRI/ERI. If the share value of a LFRI
share falls below that of an ERI for some reason (i.e. every one leaves the community for no particular
reason), they may be traded openly at ERI share rates.
Conclusion
A review board will be developed to analyze the wind project financials to (A) determine the feasibility
of the project in question, (B) determine a risk profile (C) set an interest rate and (D) establish the a
position on the exchange for investors to purchase LFRI’s or ERI’s for the particular project. Any project
approval must meet strict local content rules in order to encourage, where practicable, the use of local civil
contractors, and the production of all major components within North America. Once approved by the RIC,
it would then be the domain of the developer in question to market this investment product in their local
community.
In summary, the proposed investment system may be seen as a mechanism to achieve the following:
• Encourage community support and engagement with community level renewable energy
development.
• Compensate in an active manner the local community for the visual burden of renewable
energy generation.
• Allow all members of society to directly invest in federally backed and socially responsible
projects.
• Create a pool of funds for renewable energy developers to access for project creation.
• Encourage regional investment and manufacturing.
Community Renewable Energy Projects
A Strategy for Investment
by Thomas Mills and Kirk J Slack, PE, Oregon Community Wind (Portland)
Thomas Mills originally began in the wind industry performing energy assessments and site suitability work in Australia and New Zealand
for a major turbine manufacturer before moving to the US in 2005 to continue similar work in the North American Market. Since arriving
in the US, Thomas has been involved in further siting analysis of thousands of megawats of turbines, along with technical due diligence,
technical representation at public hearings, regional policy development and future product initiatives. Thomas is a believer in the fact that
community involvement from a financial perspective is key to the future growth and success of renewable energy.
Kirk J Slack began his work in the wind industry at Vestas Wind Technology, the largest wind turbine manufacturer in the world. While there,
Kirk reviewed every potential Vestas project across North America. Kirk used data collected on each site to analyze turbine tower loading,
fatigue stress, and extreme temperature considerations. This review was used to determine Vestas’ total risk exposure associated with
selling turbines to a client. Kirk was also responsible for providing support during permitting, transportation, erection, and commissioning of
projects.
Kirk also has an extensive background in project management, construction management, and civil engineering design practices. He has
played a major role on many large and complex public works projects including three urban light rail expansion projects and several bridge
projects. Kirk has experience in all stages of project management, including conceptual design, final design, plan reviews, bid package
preparation, contract negotiation, construction management, office engineering, and final contract closeout.
Kirk and Thomas have been working together since 2007 to advance the concept of community renewable projects in Oregon and beyond.
