Anyone who has spent any time on the Pacific Northwest beaches and coastal waters would notice the almost constant breeze, often from the northwest in fair weather, the southwest in foul. On a wind map you would see this expressed as a darker color indicating a wind resource that drops sharply just a mile or so inland. The constant wind in this venue of incomparable scenic beauty especially presents a strong mix of opportunity and caution for developing wind as a renewable energy resource.
Many of the coastal communities rely on hydropower from the Bonneville Power Administration, but, after maximizing energy conservation, renewable energy provides a way to wean ourselves from fossil fuels. An important added benefit of community renewable energy projects is the economic return to the com-unity, which occurs through a multiplier effect where goods and services related to a project originate in the community itself. This article focuses on community wind, one configuration of renewable energy that more easily adapts to the context of a location and enables a community to control and benefit more from energy development in its venue.
Community wind is a unique subset of wind energy generation projects and comprised about 5.6% of
the over 5,000 megawatts of wind projects installed in 2010 in the US, according to the American Wind
Energy Association 2010 report released in April 2011. While definitions vary from states and entities,
the basic idea is usually expressed in terms of ownership, size, and benefit to the communities where the
project is located. For example, to qualify as a “community-based renewable energy” project in Maine, the
project must be “locally owned” -- that is, owners must be connected to the state and local ownership must
exceed 50%, and the project capacity cannot exceed 10 megawatts (MW). Even absent local ownership,
and even if not small-scale, community wind may be considered such simply if benefits accrue primarily to
local communities. For example, according to Windustry, even a 50 MW wind project in Texas qualifies as
community-based renewable energy, perhaps because the project involved local contractors and suppliers.
One example of community wind in the Pacific Northwest is the PaTu project near Wasco, Oregon,
located about 30 miles east of The Dalles and about 10 miles inland from the Columbia River Gorge.
PaTu, also known as Oregon Trail Wind Farm, LLC, is a $22-24 million, 6 turbine, 10 MW wind
energy project owned and operated by brothers Jeff and Ormand Hilderbrand, fourth generation farmers
in the area. They anticipate the project to generate local jobs and retail equipment sales along with the 31
million kWh of electricity annually.
Another example of community wind in the Northwest is the Coastal Community Action Program
(“CCAP”) project in Grayland, Washington -- about 70 miles west of Olympia and about 1 mile from the
Pacific Ocean. CCAP is a non-profit social services organization, which undertook the project to fund its
work helping families and local, low-income residents. This project is a $19 million, 4-turbine, 6 MW
project.
A third example of Pacific Northwest community wind is the Lime Wind project located about 40
miles southeast of Baker City, Oregon along I-84 and about 5 miles west of the Oregon-Idaho border along
the Snake River. Developed by long-time area resident and small business owner Randy Joseph and his
family, Lime Wind will be the first example of wind energy generated on public land administered by the
Bureau of Land Management (“BLM”). The project should be operational in November 2011. Lime Wind
is a $7 million, 6-turbine, 3 MW wind energy project.
[Note that it is the “average electric generating capacity” and not the “peak generating capacity”, or “nameplate
capacity”, that determines a “small project” qualifying for review in Oregon. “Average electric generating capacity”
means the peak generating capacity of the facility divided by 3 for wind or solar energy facilities. Projects, like wind
turbines, are often referred to by their nameplate capacity (e.g. a “90 MW” project is referring to nameplate capacity
and means a 30 MW average electric generating capacity project). This is significant in siting because a project that
is 35 MW or more average electric generating capacity, that is, at least 105 MW nameplate, must go through the
EFSC Siting Council process rather than having the option of going through a local process. This aspect of siting is
very significant, and can be very strategic for many projects since the local or county process may be very different
from the state process.]
Another configuration that has community wind qualities of local ownership is the White Creek Wind
Project, the largest public-power initiated wind project in the United States. Four Washington consumer
owned utilities ― Cowlitz PUD, Klickitat PUD, Lakeview Light & Power, and Tanner Electric Co-op,
developed the White Creek Wind Project in Klickitat County, WA. Though only Cowlitz had to meet the
RPS requirement, meeting post 2011-energy needs with non-BPA sources justified the project, which had
become an economically reasonable alternative.
Community wind first developed in other parts of the United States, such as the Mid-western states
of Minnesota and Iowa. Wind energy presented new opportunities for many farmers to make productive
use of the wind on their farms using many different development options. Wind projects come in many
different sizes and styles, and farmers have a range of opportunities to invest in, and benefit from, the wind.
A history of farmer cooperation in the Midwest and the region’s consistent winds may explain the early
development of community wind in the Midwest. Subsequently, Community-Based Energy Development
(“C-BED”) statutes were introduced, which attempt “to develop renewable energy resources in a way that
optimizes local economic development.”
Generally, local owners are not equipped to take on the high, up-front capital costs and large debt
payments that renewable energy projects require. C-BED statutes address this by adjusting the payment
schedule between the utility and the owners: the utility pays a higher rate early on -- while expenses for the
owners are higher, and the utility pays a lower rate later -- while expenses for the owners are lower. The
net present value for the utility remains the same, yet the front-loading makes the project more attractive to
lenders, helping communities secure financing that might otherwise be impossible.
In one example, The C-BED model was created in Minnesota and Nebraska and adopted by other
states and used by Congress in developing wind energy policies. Nebraska is the only 100% public power
state in the country and has the 7th lowest power rates in the country. That C-BED statute provides that no owner may control more than 15% of a project and at least 33% of the revenue goes to the qualified owners
and local community. Qualified owners are Nebraska residents or entities made of Nebraska residents,
which include Nebraska tribal councils. And there is a sales tax abatement of 5.5 % for C-BED projects.
The Minnesota C-BED statute limits ownership to 15% per owner and requires approval from the county
where the project lies -- provisions to reinforce the “community” element of the project.
Renewable energy projects require at the outset enough resource to enable sufficient generation of
electricity. A first priority for a wind energy project of any size, therefore, is to determine wind speeds at
the height desired. An anemometer, a device used to measure wind-speed, is used in projects to determine for the developer and also for financiers whether the wind resource is sufficient at a given site. An
advantage of community projects is that, being generally smaller, that is, covering less geographic area,
they may be sited in places that are not suitable for larger projects. In addition to the wind resources, many
other considerations may make a community project either particularly suitable, or unsuitable. While
all aspects of land-use enter into decisions regarding siting renewable energy projects, concerns that are
especially prominent focus points for impact from wind energy projects are wildlife, including such as
avian species such as sage-grouse and golden eagles, and bats, view shed, and public health, such as noise.
Different states regulate land use with different tools. Some states, such as Washington and California
have a state environmental protection policy (“SEPA”) that requires an analysis like the federal NEPA analysis for an Environmental Impact Statement or an Environmental Assessment for energy projects. See
Washington’s SEPA, codified at Chapter 43.21C RCW. Though the State of Washington Energy Facility
Site Evaluation Council coordinates evaluation and licensing for larger wind energy projects, and ultimately
the Governor approves them, the EFSEC process, while open to smaller projects, is prohibitively expensive
for the community projects. These projects, such as the CCAP wind project process through a county
process, which still incorporates SEPA.
The CCAP wind energy project is located on private land and straddles two counties, Pacific and
Grey’s Harbor, and had to go through two permit processes. The Pacific County was lead agency on the
SEPA, which resulted in a Conditional Use Permit and a Mitigated Determination of Non-significance.
This project is a pilot project for Washington Fish and Wildlife to help get data on impact of wind energy
on birds on the coast. According to the environmental analysis, the agency found this project to be a “compelling and highly beneficial opportunity” to conduct monitoring and an analysis of impacts on
avian and mammal species, such as the Marbled Murrelet, found in that habitat area. A technical advisory
committee reviews this monitoring. According to an interview with Craig Dublanko, CCAP Executive
Director, wildlife impacts were surprisingly low about nine months after the turbines had come on-line.
The project is not in close proximity to residences, while clearly in view from the ocean shore and highway
101, the turbines were not found to greatly impact viewshed, and the project had the full support of the
local community.
Other states, like Oregon, do not have a SEPA, but also regulate energy projects via state or local
processes. In Oregon, ORS 469.320 requires a site certificate issued by the state’s Energy Facility Siting
Council (EFSC) for projects of 105 nameplate MW. Projects below that threshold of jurisdiction generally
proceed through a county process, usually seeking a conditional use permit. A wind project of any size
may be brought through the siting council rather than the county process, and this option is considered
since it gives a statewide body the ultimate decision-making authority. However, the expense of complying
with EFSC’s procedures is generally enough to induce smaller projects to seek county approval in which
case the project is regulated by county ordinances and comprehensive plan. Even where the project is
not wholly subject to county jurisdiction, such as on federal public lands, the process will still take the
county process into consideration. Also, the state process still requires consideration of local concerns, and
therefore local limitations are not avoided by following the state or federal process. Oregon’s 36 counties
themselves have different ordinances, some of which, like those of Harney, Umatilla, and Gilliam County,
apply more specifically to wind energy or other energy development.
Federal and state laws and guidelines impact wind energy siting. Federal law, including the National
Environmental Policy Act, the Migratory Bird Treaty Act, the Bald and Golden Eagle Protection Act,
and the Endangered Species Act, all may apply to a community wind project. Due to the growth in wind
projects, the US Fish and Wildlife Service has published voluntary Land-Based Wind Energy Guidelines
based on recommendations developed by the Wind Turbine Guidelines Advisory Committee on avoiding
or minimizing impacts to wildlife and their habitats related to land-based wind energy facilities. These
Guidelines and a draft Eagle Conservation Plan Guidance for protecting eagles and their habitats from wind
energy facilities are available for public comment until May 19, 2011 (http:www.fws.gov/windenergy).
Developed prior to the federal guidelines, the Oregon Columbia Plateau Ecoregion Wind Energy Siting and
Permitting Guidelines apply to areas within Wasco, Sherman, Gilliam, Morrow and Umatilla counties.
Until separate regional guidelines can be developed, Oregon Department of Fish and Wildlife
recommends using these Guidelines for the entire State as a process roadmap during each step of a
potential wind project’s development, construction, and operation. The Guidelines are the culmination of
a unique collaboration between state and federal resource agencies, wind energy industry representatives,
counties, environmental organizations and consultants. The Guidelines provide recommendations for
siting, designing and permitting wind projects in a manner that supports both the conservation of important
wildlife and habitat resources and the realization of the multiple environmental and economic benefits
of wind energy. Recently the Oregon Public Health Division, in consultation with a steering committee, has finalized a list of research questions looking in to what potential health impacts, if any, wind energy
facilities may have on Oregon communities. Scientists at Oregon’s Office of Environmental Public Health
(OEPH) are now reviewing the best available research in order to answer those questions. OEPH will
release a draft of the report for public comment in the summer of 2011, with a final report due out in the fall
of 2011.
The PaTu Wind Project was sited with a conditional use permit in Sherman County. The Sherman
County Zoning Ordinance allows conditional use permit for wind powered electrical generating facilities.
Nested in the middle of acres, or even miles, of utility scale wind energy production, PaTu adds value to the
family farm with minimal impact given its location on private farmed land.
The financial success of a community wind project depends upon the rate a utility pays for the power
generated. The rate must be high enough to promise investors an adequate return but low enough to be
just and reasonable for consumers. Finding the right rate in the Northwest can be more amenable with
some utility partners than others. The federal Public Utilities Regulatory Policy Act (“PURPA”) directs
states to require utilities to purchase power from “small power production” facilities. 16 USC § 824a-3(a).
These include facilities generating power primarily from a renewable energy source at a capacity not to
exceed 80 MW. 16 USC § 796 (17)(A). A “qualifying facility” or “QF” is, with some exceptions, a small
power production facility generating 80 MW or less, whose primary energy source is renewable (hydro,
wind, solar) or biomass, waste, or geothermal. To be “qualifying,” a small wind facility must meet all
requirements of 18 C.F.R. §§ 292.203(a), 292.203(c), and 292.204 for size and fuel use and be certified as a
QF pursuant to 18 C.F.R. § 292.207.
The Federal Energy Regulatory Commission (“FERC”) directs states to set rates that utilities must
pay QF’s to be based on “avoided cost”, 18 CFR § 292.304(b)(2), that is, the cost a utility would incur
if it obtained the power elsewhere. 18 CFR § 292.101(b)(6). The avoided cost rate applies to investorowned
utilities (“IOUs”) and consumer-owned utilities (“COUs”) alike; however, avoided cost for IOUs
and COUs are not the same. 16 USC § 824a-3(f). The IOU avoided cost are regulated by the Oregon
Public Utilities Commission and must be approved after a process where others may intervene as parties
to give input on the process and result. Federal law regulates rates for the COUs. The Bonneville Project
Act grants COUs a preference over IOUs for federal power through the Bonneville Power Administration
(“BPA”), 16 USC § 832c(a) and due to an expanse of federal hydropower projects in the Northwest, the
BPA rates are much cheaper than the market rates. Because COUs have access to cheaper power than
IOUs, their avoided cost is much less. Therefore, community wind projects attempting to sell power to
COUs are less likely to pencil out.
Oregon and Washington RPSs do not promote partnerships between community wind developers and
COUs. Like Washington’s, the Oregon RPS applies to both IOUs and COUs, ORS § 469A.050. However,
small utilities [those having less than 3% retail market share, including most, if not all, COUs---need to
look up the EPUD], are not required to comply until 2025, and even then, only at a rate of 5% to 10%;
whereas large utilities (at least 3% retail market share, including all IOUs), are already required to comply
at a rate of 5%, and by 2025, at a rate of 25%. ORS § 469A.055 ORS § 469A.052.
A renewable portfolio standard requires that a certain amount of power sold by a utility come from
renewable energy generation. Washington and Oregon both have RPSs, which apply to both IOUs and
COUs, but with important distinctions. The Washington RPS (“I-937”), codified at RCW § 19.285,
requires only large utilities, that is, those serving more than 25,000 consumers, to comply. I-937 calls for
utilities to use non-hydro renewable energy sources for at least three percent of power resources in 2012,
nine percent in 2016 and 15 percent by 2020. The Oregon RPS requires IOUs to provide 25% of their
power through renewable energy resources by 2525 and sets thresholds that must be met before then.
ORS 469A. It also applies to COUs but neither to the same thresholds nor as early. In Oregon, therefore,
not only is there no financial incentive for community wind developers to sell power to COUs (due to
the disparity in avoided cost). However, the CCAP project in Washington is an example of a COU deal.
Grays Harbor PUD, a Washington COU subject to the state’s RPS, entered into a 20-year power purchasing
agreement with CCAP at a rate of 7.5 cents per kWh, a rate, according to CCAP, that is advantageous to the
project, but fair.
The PaTu project in Oregon is an example of an IOU deal. Portland General Electric, an Oregon IOU,
entered into a 20-year power purchasing agreement with PaTu at the standard contract rate. Similarly, the
Lime Wind project has a power purchase agreement with Idaho Power for a rate that supports a forecast of
a reasonable rate of return for that project, in combination with the financing package.
Electricity generated by renewable energy must be integrated into the electric grid in a way that
will maintain and ensure the reliability and security of the grid. Interconnection is the result of adding a
distributed resource, such as a generator, wind farm, or other resource, to an electric power system. In
Oregon, three sets of rules regulate interconnection. Oregon Net Metering Rules will apply if you’re
planning to net meter your project, which is less than 25kW for residential sites and less than 2MW
for commercial sites. Projects less than 10MW that are planning to connect to investor owned utilities
(Portland General Electric, Pacific Power, or Idaho Power) in Oregon and sell the generation to that utility
will follow the Oregon Public Utilities Commission established rules referred to as AR 521. And FERC
Small Generator Interconnection Procedures (FERC SGIP) will govern projects less than 20MW planning
to connect to investor-owned utilities in Oregon, but planning to sell power elsewhere, directly connect to
the Bonneville Power Administration (BPA) will follow FERC SGIP. All projects greater than 10MW will
follow the FERC LGIP procedures. Interconnection entails a contractual agreement with the utility that is
separate from the power purchase agreement.
Transmission is the process of moving bulk amounts of electricity over high-voltage lines. (115-
765 kV). Community scale power might utilize high-voltage transmission lines to transmit bulk power
to substations, where the electricity is converted to a lower voltage. That low-voltage electricity is then
distributed to homes and businesses on separate, lower-voltage distribution lines (generally ≤ 35 kV). Or
smaller generators can connect directly to low-voltage distribution lines; electricity is distributed locally,
without having to be transferred to higher voltage transmission lines. This is referred to as distributed
generation. Transmission service and interconnection are separate processes and agreements, typically
handled by different departments within a utility company. Interconnection and transmission are separate
items and may require separate agreements with the utility providing the service. And in some cases, the
service provided could involve using a utility to “wheel” the power, or use transmission lines to carry the
power through one utility’s service territory, to the utility that is purchasing the power. Transmission also
may require an agreement and a fee that are independent of interconnection and power purchase. This information is included in a very helpful guide for interconnecting energy generation projects
to the grid, including a checklist for the application process and timeline for project development,
available online through the Energy Trust of Oregon
Integrating the generated power into the grid may present challenges for the transmission provider. For
example, in the Pacific Northwest, Bonneville Power Administration expects to be providing transmission
for 6,000 megawatts of wind power by 2013 and is determining a process of “balancing” this power.
The CCAP interconnection was a local distribution line connection. No transmission was required. To
minimize interconnection costs, CCAP set up near existing power lines and substations.
Grants, tax credits, low-interest loans, and other financial incentives are components critical to
financing the majority of renewable energy projects, and this is also true for community-based renewable
energy projects. The final package for each community is unique; there are a number of methods in
structuring the deals, and a host of incentives to choose from. To illustrate the possibilities, consider the
PaTu, CCAP, and Lime Wind projects as examples.
The PaTu financing structure was a standard partnership flip. The partnership flip requires forming
a tax partnership between developer and investor. The investor makes a major, initial investment in the
project, and the investor receives proceeds from the project until reaching a pre-arranged return (often after
all tax benefits are used up). Then the partnership “flips”, and the proceeds start flowing to the developer.
PaTu utilized a federal cash grant, a state tax credit, and a long-term, low-interest loan. PaTu utilized the
1603 cash grant program through the U.S. Department of the Treasury. This grant, for small wind turbines,
equals up to 30% of the cost of the project.
The grant is taken in lieu of the federal Investment Tax Credit (“ITC”). PaTu also utilized the Oregon
Business Energy Tax Credit or “BETC” as it is commonly known. BETC provides a 50% state tax credit
to those investing in “energy conservation, recycling, renewable energy resources, and less-polluting
transportation fuels”. The credit can be taken over 5 years at 10% per year or the credit can be transferred
to a pass-through partner for a lump-sum cash payment. PaTu utilized the Oregon State Energy Loan
Program (“SELP”). SELP provides long-term, low-interest loans for projects that save energy, produce
energy from renewable resources, use recycled materials to create products, or use alternative fuels. SELP
helps borrowers access interest rates based on the state’s credit after the state issues bonds to fund the loans.
Through SELP, PaTu secured a $12 million, 20-year, 6.25%-6.5% loan. Finally, PaTu received,
although did not end up utilizing, an offer from the Energy Trust of Oregon, a non-profit tasked with
administering the Oregon public purpose charge. Energy Trust offered PaTu $1.2 million in exchange for
58% of the renewable energy credits (“RECs”) from the project.
The CCAP project utilized two federal Residential Energy Assistance Challenge (“REACh”) grants
through the U.S. Department of Health and Human Services. REACh grants are awarded to projects that
relieve the energy burdens of low-income individuals. These grants enabled CCAP to conduct feasibility
studies.
The CCAP financing structure was an inverted, or pass-through, lease structure. The developer is the
lessor and the investor is the lessee. The lessee, or investor, sells the power generated by the project and
then pays the proceeds to the lessor, or developer, as rent. CCAP utilized a federal tax credit, two federal
grants, and a state grant. CCAP was the first community wind energy project in the U.S. to utilize the
federal New Markets Tax Credit (“NMTC”) through the U.S. Department of the Treasury.
NMTC provides a tax credit for making equity investments in a designated Community Development
Entity (“CDE”), and the CDE then makes investments in low-income communities. The tax credit totals
39% the cost of the investment made, and is claimed over seven years. CCAP involved two investors
investing in two different CDEs. CCAP utilized a direct state grant of $5 million. According to CCAP’s
Craig Dublanko, this substantial financial assistance may not have been necessary had the wind resource
been better.
The Lime Wind financing structure is an example of “blue-collar financing”. The project is debtfinanced
up front -- there are no outside investors, and none of the financial incentives are available
until post-construction, after the project is up and running. The debt financing came primarily through a
$4.5 million loan for construction costs. Lime Wind secured additional loans through a number of other
financial institutions. Lime Wind utilized a federal grant through the Rural Energy for America Program
of the US Department of Agriculture for $500,000. This program encourages the commercial financing
of rural renewable energy and energy efficiency projects. Like PaTu, Lime Wind also utilized the 1603
cash grant program through the U.S. Department of the Treasury and the Oregon BETC. Finally, Lime
Wind signed an agreement to sell the renewable energy credits produced by the project to the Bonneville
Environmental Foundation (“BEF”).
In addition to producing cleaner energy, key attractions to community wind are the economic return to
the community and the control a community can exercise over a project. Various tools are used to measure
the economic return, one of which, the Jobs and Economic Development Indicator (JEDI) is available
through the Northwest Renewable Energy Laboratory (http://www.nrel.gov/analysis/jedi/about_jedi.html).
While slower to develop in the Pacific Northwest, community renewable energy, including community
wind, is picking up steam in Oregon. (insert CREA map). Agencies in the Pacific Northwest are learning
to distinguish utility scale projects from community projects and are recognizing that these projects provide
an opportunity to learn more about the impact of renewable energy. Between the time it takes to determine
and confirm a wind resource to the time a project actually comes on-line has taken several years in the
cases of PaTu, CCAP and Lime Wind, which are not unique in this way. The Energy Trust of Oregon,
Northwest Sustainable Energy for Economic Development and Community Renewable Energy Association,
and other government and non-governmental organizations can provide support for these projects along the
way. But many of these projects involve a personal commitment of time and capital resources that strain
the community project developers, not to mention substantial sweat equity. The strain may be substantially
lessened with long-term steady policies tailored for community projects in individual states, and at the
federal level. Supportive policies strengthen the opportunity to learn more about renewable energy,
increase the local economic benefits of the renewable energy industry sector, and decrease reliance on, and
carbon emissions from, fossil fueled electric power production.
by Diane Henkels and J. Charles Griggs, Cleantech Law Partners (Portland)
Issue #465 / April 2011
Diane Henkels is an attorney based on the central Oregon coast and in Portland, Oregon. Diane serves clients in
energy conservation, community-scale renewable energy development, and integrating sustainability practices
into organizational structures. As Senior Policy Analyst with the Oregon Department of Energy she focused on
renewable energy in rural Oregon, especially community-based wind, avoided costs, integrated resource planning
analysis, and biomass tax credit rules drafting. Diane serves as an alternate on the Advisory Committee for Carbon
Dioxide Equivalency rules, on the Technical Advisory Panel for the Smart End Use Energy Storage and Integration of Renewable Energy project for Bonneville Power Administration, and is a founding member of the Oregon State
Bar Sustainable Future Section, which leads the country in integrating sustainability into the legal profession. Diane
has practiced law for over 10 years in private practice and as counsel in Indian and tribal law matters, especially in
the Pacific Northwest, and assists the Development and Environmental Law Center—Madagascar. She graduated
from Whitman College, received her J.D. and Masters of Environmental Law and Policy from Vermont Law School,
and is licensed to practice in Oregon state and federal court, New York, and various tribal courts.
J. Charles Griggs: Before joining CLP, Charles clerked for a boutique, energy law firm in Portland, Oregon,
representing large energy consumer groups across the Northwest. Charles also interned for an environmental legal
clinic representing natural resource users and a business legal clinic representing start-up, technology businesses.
In the past, he was an editor for the Harvard Journal of Law and Public Policy at Harvard Law School. Charles
received his J.D. degree from Lewis & Clark Law School in Portland, Oregon, focusing on energy, renewable
energy, and emerging business. Charles was awarded the Dean’s Fellowship for academic performance during all
three years of law school. He also studied international business transactions in Moscow, Russia, and holds a B.A.
degree from Brigham Young University.
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