Locally Owned Renewable Energy Facilities
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Locally Owned Renewable Energy Facilities

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Locally Owned Renewable Energy Facilities

Locally Owned Renewable Energy Facilities

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Locally Owned Renewable Energy Facilities Locally Owned Renewable Energy Facilities Document Transcript

  • Locally Owned Renewable Energy Facilities A Publication of ATTRA - National Sustainable Agriculture Information Service • 1-800-346-9140 • www.attra.ncat.orgBy Cathy Svejkovsky This publication discusses locally owned renewable energy facilities—the benefits they provide to localNCAT Energy Specialist economies and potential challenges of developing such a facility. It describes common business models,© 2007 NCAT profiles several successful facilities, and provides resources for more information.Contents IntroductionIntroduction ..................... 1 Farmer-owned renewable energy facili-Economic Benefits ......... 2 ties—such as ethanol and biodiesel plantsBusiness Models ............. 3 and wind energy farms—are cropping upChallenges ........................ 5 more and more frequently across the UnitedRecommendations ........ 7 States, as farmers look for ways to add valueCase Studies ..................... 8 to their crops and increase their income.References ...................... 10 Ethanol, a renewable alternative to petro-Resources ........................ 11 leum-based transportation fuels, is a type of alcohol produced by fermenting and distill- ing simple sugars from biological sources. While ethanol can be made from sugar- cane, sugar beets, wheat, barley, potatoes, and many other crops, over 90 percent of U.S.-produced ethanol is currently made from corn. Biodiesel is a versatile, clean-burning fuel made from renewable, biodegradable sources. It can be blended with petroleum Ethanol plant. Photo: Warren Gretz. diesel in any proportion and used in die- sel engines without modification, espe- 115 ethanol plants in production, compared cially at low blends. Biodiesel can be made to 35 plants in 1995; 79 under construc- from almost any vegetable oil or animal fat, tion; and seven under expansion. And theFunding for the development through a process that is neither difficult growth is expected to continue.of this publication was provided nor prohibitively expensive. Using biodieselby the USDA Risk Management instead of petroleum diesel reduces emis- However, farmer-owned renewable energyAgency. sions of most air pollutants and greenhouse facilities are increasingly giving way to gases. Biodiesel is biodegradable and essen- corporate ownership. According to RFA, tially non-toxic. The demand for renewable nearly 40 percent of existing U.S. ethanolATTRA—National Sustainable fuels is steadily increasing, providing a plants were farmer-owned as of Septem-Agriculture Information Ser-vice is managed by the National good opportunity for farmers interested in a ber 2006, but farmer ownership accountedCenter for Appropriate Technol- locally owned production facility. for only five percent of those under con-ogy (NCAT) and is funded undera grant from the United States struction at that time. According to indus-Department of Agriculture’s For example, the Renewable Fuels Asso- try experts, this change can be attributedRural Business- Cooperative ciation (RFA) estimates that U.S. produc- in large part to very high oil prices com-Service. Visit the NCAT Web site(www.ncat.org/agri. tion of ethanol reached 5 billion gallons bined with the Renewable Fuels Standardhtml) for more informa- in 2006, an increase of about 28 percent included in the 2005 Energy Policy Act,tion on our sustainableagriculture projects. over 2005. As of April 7, 2007, there were which together provided high returns with
  • Agriculture, Evaluating a Rural Enter- prise, and Adding Value to Farm Products: An Overview.) Farmer-owned renewable energy facilities offer numerous economic benefits to the farmer-members and the larger commu- nity. Such facilities: • Provide a return to farmers on their investment • Create a stronger market for farmer commodities, such as soybeans and corn • Increase local expendituresRelated ATTRA • Create a stronger infrastructurePublications for renewable energyKeys to Success • Improve loca l acceptance ofin Value-Added renewable energy projectsAgriculture • Create jobs Photo: Charles Bensinger.Evaluating a Farmer-owned renewable energy facilitiesRural Enterprise enable farmers to pool their resources toAdding Value to low risk and allowed investment capital to meet startup capital requirements andFarm Products: flow into the ethanol industry. Those funds other costs, while producing an energyAn Overview allowed project developers to develop proj- source that is largely non-polluting andRenewable Energy ects faster than those developed under the thus less damaging to the environment.Opportunities on slower cooperative framework. Cooperatively owned biodiesel and etha-the Farm nol plants offer other benefits too: They Less than one percent of installed U.S. tend to increase local prices for soybeansBiodiesel: wind energy capacity was owned by farm- (in the case of biodiesel) and corn (in theThe Sustainability ers in 2004. This is largely the result ofDimensions case of ethanol). Grower-owners can sell high costs of energy production facilities their own commodities to the plant, andEthanol Opportunities and “discriminatory” tax incentives, struc- are eligible to receive annual dividends.and Questions tured to disqualify most locally owned wind Moreover, biofuel plants provide a hedgeWind-Powered projects (discussed in more detail later). against volatile commodity prices. WhenElectric Systems While local ownership of renewable energy corn or soy prices drop, so do the produc-for Homes, Farms, facilities is shrinking, there are impor- tion costs of ethanol or biodiesel, increas-and Ranches tant reasons to preserve it: Locally owned ing the potential profits from biofuel pro- renewable energy facilities allow rural com- duction. This is not to deny, of course, munities to control and profit from local that there are very substantial fi nancial risks for farmers investing in bioenergy agricultural resources, hedge energy cost production facilities. Energy markets are increases, and help reduce pollution and volatile and unpredictable. dependence on foreign oil. “Since a farmer-owned cooperative ethanol Economic Benefits plant is literally a member of the community, Local ownership is one of the corner- the full contribution to the local economy is stones of any value-added rural enter- likely to be as much as 56 percent larger than prise, and many ATTRA publications dis- the impact of an absentee owned corporate plant.” —Economic Impacts on the Farm Com- cuss the importance of local ownership to munity of Cooperative Ownership of Ethanol farmers and rural communities. (See, for Production example, Keys to Success in Value-AddedPage 2 ATTRA Locally Owned Renewable Energy Facilities
  • A locally owned renewable energy facility • The plant with 50 percent localcan generate economic benefits to a commu- ownership created 191 jobs.nity that are as much as 56 percent higher • The plant with 75 percent localthan facilities owned by absentee compa- ownership created 220 jobs.nies. The biggest component of this 56-percent increase is the multiplier effect—aterm that refers to the way that money cir- “Communities have a strong, sustainable economic life when money and resources are retained within the community. Cooperatives helpculates within a community. Increased local increase a community’s resources because they are often locally ownedincome encourages spending on local goods and controlled. Jobs, profits, and resources stay in the community lon-and services. Similarly, when locally owned ger because the cooperative members who control the cooperative arebusinesses spend money in the community community members.” —Building Sustainable Communitiesfor payroll, member dividends, operations,supplies, etc., those dollars have a multi-plier effect because they are re-circulatedwithin the community several times. Business Models Locally owned renewable energy facilitiesIn general, direct labor needs in renewable are structured under several business mod-energy projects are comparable, regardless els, including cooperative, limited liabilityof whether the facility is locally or remotely company (LLC), and franchise.owned. However, locally owned facilitiescan create more indirect jobs in local com- Cooperative business model. A cooperativemunities. A September 2004 U.S. Govern- exists to serve its member-owners, and thement Accountability Office report studied benefits to cooperative member-ownersthe relative economic impacts of locally depend on how much they use or patronizeowned and remotely owned wind systems. the cooperative, rather than on how muchThe study found that locally owned wind they have invested in it.systems generated an average of 2.3 times A common example of this structure is amore jobs and 3.1 times more local dollar food cooperative: equity capital is raisedimpact than wind systems financed by non- by selling shares to members. In exchange,local interests. This increase in jobs results members can purchase food and relatedfrom accumulation of wealth within the local items at a lower cost through the cooper-economy—the multiplier effect. ative. The co-op is governed by a boardA July 2006 report from Iowa State Uni- of directors and operates as a non-profit,versity found that an ethanol plant in Iowa with profits returned to members based onwould create—either directly or indirectly— patronage. Earnings are taxed once, either133 jobs in the regional economy with as income of the corporation when earnedno local ownership. For each 25-percent or as income of the members when allo-increase in local ownership, 29 more jobs cated to them.are created. A cooperative is a state-chartered busi- ness, organized and operating as a corpora-The report was based on a study conducted tion under applicable state laws. Coopera-by two ISU economists, in which four tives are controlled by a board of directorsIowa plants were studied to demonstrate elected by members. Equity comes fromthe region-wide economic impact of these members, rather than outside investors. If aplants, given their actual local ownership cooperative fails, the liability of each mem-amount. One plant was completely exter- ber is limited to his/her investment. Earn-nally owned; local ownership of the other ings are allocated to members based on usethree was 25 percent, 50 percent, and 75 of the cooperative during the year, not onpercent, respectively. Researchers arrived equity held, and the allocations may be dis-at the following conclusions: tributed in cash or retained as additional • The plant with 25 percent local equity. Members usually receive a combina- ownership created 162 jobs. tion of cash and an allocation of equity.www.attra.ncat.org ATTRA Page 3 View slide
  • Many of today’s cooperatives are structured However, in A Comparative Analysis of Busi- as new generation cooperatives (NGC). An ness Structures Suitable for Farmer-Owned NGC is not a legal structure, but rather a Wind Power Projects in the United States, specific way the cooperative operates, pri- authors Mark Bolinger and Ryan Wiser marily regarding the relationship between maintain that the cooperative business the fi rm and its members and how the fi rm model is not suitable for wind projects. Says is fi nanced. Compared to traditional coop- the report: eratives, an important advantage of an “The primary reason is that cooperatives are NGC is that membership shares include organized around the concept of patronage delivery rights. In the case of an NGC eth- – the cooperative exists to serve its member- anol plant, for example, members have the owners, and the cooperative member-own- right to deliver and sell a certain amount ers benefit based on how much they use or patronize the cooperative, rather than how of corn to the cooperative. This delivery much they have invested in it. In the case right is only available to members, provid- of a farmer-owned wind project organized as ing them with a built-in market for their a cooperative, cooperative members would products. Nearly all NGCs are democrat- invest in the wind project, and benefit by ically controlled through one member/ patronizing the project through purchasingC o-ops offer a one vote. its energy at cost. Patronage would require either cooperation from the local utility or larger com- Fuel-sharing cooperatives operate dif- distribution company (to deliver the wind bined mar- ferently—they are small-scale and non- power to members on behalf of the coop- erative), or the cooperative to act as a com-ket presence than commercial. Biodiesel, for example, is petitive energy service provider, deliveringindividual owners often produced by a cooperative and then power to its members. The latter is not pos-can obtain. Mem- shared among members for their personal sible in the many parts of the country that use. Since members don’t purchase fuel, lack retail electricity choice, while the formerbership benefits can – utility cooperation in matters concerning there are no profits to distribute. Thesebe distributed on the types of cooperatives exist solely to sup- wind power – is perhaps an unlikely pros- pect anywhere in the United States. Further-basis of system pro- ply members with biodiesel, not to sell it more, since it distributes its earnings amongductivity and level of in the open market. As in any cooperative, its members (according to their patronage),investment. member-owners also enjoy a high degree a cooperative itself generally has little or no of control over how and where their fuel tax liability, and thus little or no appetite for is made. tax credits. While taxation of cooperative dis- tributions may occur at the individual mem- Whether the cooperative business model ber level, very few individuals have a suffi- is a good fit for wind energy projects cient amount or type (e.g., passive) of taxable can be debated. For example, according income needed to benefit from the PTC [a federal per-kilowatt-hour tax credit for elec- to Heather Rhoads-Weaver and Jennifer tricity generated with wind turbines over the Grove, of Northwest Sustainable Energy fi rst ten years of a project’s operations] and for Economic Development, the coopera- accelerated depreciation.” tive business model can “provide signifi- LLC Business Model. An LLC is a business cant benefits for wind projects, from aggre- structured as a partnership but having lia- gating hardware purchases and negotiating bility protection similar to a corporation. In discounts with suppliers, to increasing this corporate structure, shareholders of the clout and credibility in the marketplace, company have a limited liability to the com- to building community support. Addition- pany’s actions. ally, co-ops offer a larger combined mar- ket presence than individual owners can LLC members (who are similar to corpo- obtain. Membership benefits can be distrib- rate shareholders) invest money, property, uted on the basis of system productivity and or services in exchange for interest in the level of investment. Members can also lever- LLC. An LLC stands alone as a separate age experience from early pioneers, saving legal entity, and each state has its own money and time by being better equipped set of statutes governing LLCs. It has the to tackle unforeseen challenges.” tax benefits of a partnership and does notPage 4 ATTRA Locally Owned Renewable Energy Facilities View slide
  • require many of the legal formalities of acorporation, such as annual reports, direc- The Minnesota Modeltor meetings, and shareholder require- In the mid-1980s, Minnesota redesigned its ethanol incentive to encour-ments. Profits of an LLC are passed age farmer ownership and provide economic benefits to the state andthrough and taxable to its owners. local communities. Half of the new incentive was a direct payment toLLCs can provide ownership opportunities ethanol producers. To quality for the incentive, the production facility: 1) had to be located in the state; 2) could only receive payments for the firstto non-farmers, providing a means of rais- 15 million gallons of ethanol produced each year; and 3) could receiveing startup capital. More and more locally the incentive for only 10 years.owned renewable energy facilities areformed as LLCs. The legislation, which came to be known as the Minnesota Model, was immensely successful. Today, 12 of the state’s 15 biorefineries are major- ity-owned by Minnesota farmers. Taxpayers benefit from the incentiveChallenges as well: A 1997 state audit concluded that the incentive created jobs,Locally owned renewable energy facilities assisted rural communities, and returned more to the state in taxes than it cost in expenditures.face several challenges. Among the mostcommon are:1. Cost. The energy business is extremely 2. Finding a Market. Wind energy andcapital-intensive. The high cost has often other renewable energy projects that gener-caused renewable energy facilities to revert ate electricity must find a utility to purchasefrom being solely farmer-owned to accept- that electricity. Finding such a market anding outside investors. Outside investors can successfully negotiating a power purchasehelp raise necessary start-up capital. As agreement can be significant challenges.local ownership of these facilities shrinks, Mark Willers, project leader for Minneso-however, so too do the economic benefits ta’s wind energy cooperatives Minwind Iafforded to local communities. –II, recalls that the most difficult part ofFinancing can be a significant challenge developing the Minwind projects was not ain developing a farmer-owned renewable lack of capital—since farmers were eagerenergy facility. Educating and acquiring to invest in the projects—but rather nego-enough investors to meet the high equity tiating a power purchase agreement. Find-requirements (often 45 percent) to qualify ing a utility willing to purchase power gen-for funding is no small task, particularly erated by the Minwind projects took manyfor facilities that cost millions of dollars. months, but was a necessary step before the projects could move forward. Negotia-However, farmers seem willing in many tions failed with the local utility becausecases to invest in such projects. A national of interconnection requirements, cost, asurvey of farmers by the American Corn long-term exclusive agreement the utilityGrowers Foundation found that half of had in place with another power supplier,respondents were willing to invest their and other issues. Minwind officials fi nallyown money in wind power projects. Thirty- reached a successful agreement with Alli-one percent of respondents believe that ant Energy, which resulted in a 15-yearfarmer-owned wind co-ops are the best way contract. Minwind has grown to nine proj-for farmers to capitalize on wind energy. ects. (For more information on MinwindThere are various ways to raise capital projects, see Case Studies).for a locally owned renewable energy facil- Market access can be difficult for biofuelsity, such as selling shares in the facility, producers, as well. For example, large-scalerecruiting investors, tapping government purchasers, such as big refiners, generallygrant and loan programs, or through pri- don’t buy ethanol and other biofuels in smallvate lenders. Financial benefits can also lots. Many farmer-owned projects must thencome in the form of tax credits. A few rely on cooperative marketing companies tofinancing resources are described on secure adequate volume to allow them topage 9. compete in the large-scale market.www.attra.ncat.org ATTRA Page 5
  • 3. Risk. As with any business, renewable on their investment, both of which reduce energy facilities carry financial risk for capital circulating through the community. investors, communities, and facility employ- Proper and detailed business planning can ees. For example, as mentioned above, proj- help minimize risk and the importance of ects that produce electricity must secure an doing so cannot be overstated. agreement for a third party to purchase the electricity. A wind energy facility could 4. Competition from Corporate-Owned Plants. spend tends of thousands of dollars without Most renewable energy facilities coming successfully securing such an agreement, online today are corporate owned and are posing significant risk to farmer owners. It much larger in scale than locally owned is especially important that owners have a facilities. These giant plants can achieve good understanding about when they should better economies of scale than smaller walk away, rather than continue to spend plants, resulting in a number of economic money in pursuit of a purchase agreement. advantages, such as lower production costs. These large plants also create stiff compe- High commodity prices also pose a risk. tition for available feedstocks. And, their For example, the price of corn—the major higher level of production could lead to feedstock for U.S. ethanol—has increased lower prices in the marketplace, making it by $1.50 to $2 per bushel (as of April difficult for farmer-owned facilities to cap- 2007). Such high commodity prices reduce ture a meaningful share of the market. profitability of an ethanol plant and could even put the plant’s capital investment at “It is a critical time for locally owned renew- risk, depending on other factors such as the able energy projects to gain and maintain a prices of ethanol and gasoline. strong foothold in energy markets right now. These industries are moving quickly, and with- Another risk is that it can be difficult for out a growing capacity and infrastructure to farmers to get their equity back out of a develop and operate projects, it will be dif- locally owned renewable energy facility. ficult for farmer or locally owned projects to In the case of farmer-owned cooperatives, remain engaged in the ag energy business… for example, owners are permitted to sell Without having cooperative and locally owned their shares only to farmers, which can be businesses well positioned, they will have a dif- ficult time maintaining significant share over a difficult market. Minnesota Corn Proces- time.” —Midwest Ag Energy Network sors (MCP) is perhaps the best known case of this challenge. When the 4,500 farmer- owners of MCP—the country’s oldest and, at 5. Business and Tax Structure. While new the time, largest ethanol plant—looked for generation cooperatives have evolved a way to cash in the equity they held, their quickly over the past 20 years, the laws that options were rather limited. Ultimately, the support them have not. According to Taking owners sold out to Archer Daniels Mid- Ownership of Grain Belt Agriculture, a report land, already a corporate ethanol giant, from the National Corn Growers Associa- which took over the plant, erasing many of tion, business structures that encourage the benefits of local ownership, gaining yet development of large-scale, complex, and more control of the ethanol industry, and capital-intensive ventures are currently positioning itself to impact supply and price absent, presenting farmers with a signifi- of ethanol. cant challenge. Says the report: And, just as successful (i.e., profitable) “The co-op form can be a high-tax struc- ture for value-added ventures since the facilities can generate significant economic entity pays corporate tax up to 40% on benefits for their communities through the non-patronage source profi ts, then co-op multiplier effect, economic losses of a plant members pay income tax and 15% Social will be felt throughout the community, as Security tax on distributions.” well. Employees of the plant could lose their “Legal and tax obstacles also impede farm- jobs, and farmer owners could lose money ers’ ability to join forces in capital-intensivePage 6 ATTRA Locally Owned Renewable Energy Facilities
  • businesses...Some 35 states retain co-ops duction, MAEN concludes that “the [PTC] laws fi rst drafted in the 1920s, and they are is discriminatory to many potential sources of largely inadequate for today’s new generation capital, particularly community-based invest- cooperatives that are neither supply nor crop marketing ventures. Growers desperately ment capital. This is a barrier that is diffi- need business entities that are tax-efficient cult and frustrating to locally owned devel- and raise capital with ease and offer inves- opment projects. It often limits the amount of tors liquidity.” local equity that can flow into projects, and increases the reliance on external capital.”While an important fi nancial vehicle forwind energy projects, the Production TaxCredit—a per-kilowatt-hour tax credit for Recommendationselectricity generated with wind turbines over Although there are many risks associatedthe fi rst ten years of a project’s operation— with investing in the energy business, locallycreates barriers, too, according to industry owned renewable energy facilities can cre-experts. For example, according to the Mid- ate important benefits for farmers and ruralwest Ag Energy Network (MAEN), the PTC communities. Still, absentee and corporatehas contributed to unstable wind energy ownership is rapidly becoming the normmarkets as a result of being extended for in many parts of the country. MAEN iden-short periods and then being allowed to tifies three essential components to protectperiodically lapse. and encourage local ownership of renewable energy facilities:Some community wind projects have foundways to take advantage of the PTC, but this 1. Entrepreneurial commitment tohas been extremely difficult for most farmers making projects happen;and average citizens since the law requires 2. Strong leadership and vision from ruraleither tax liability attributable to “passive agricultural leaders and institutions;income” or else “material participation” in andwind power production. According to theWindustry Web site, “passive income” is gen- 3. Smart public policy.erally income from a business in which a per- Specifically, MAEN calls for state andson participates only as an investor, and does national policies that would serve to createnot include income from a farmer’s active stable and growing markets, create accessfarming business, wage income, or interest to markets, allow fair competition andand dividend income. IRS Publication 925 access to technical expertise, and allowgenerally defines “material participation” in access to capital and appropriate incen-a trade or business activity as more than 500 tives. For a full discussion of these recom-hours of participation during a tax year. mendations, see the report Locally-OwnedSince many farmers and other individu- Ag Energy: An American Energy Solution atals do not have passive income and do not www.midwestagenergy.net/pdf/local%20ownematerially participate in wind power pro- rship%20whitepaper.pdf Financing Resources to agricultural producers and rural for working capital for any value- small businesses for assistance with added agricultural activity, including Financing a renewable energy facil- purchasing renewable energy sys- renewable energy projects. Eligible ity can be a challenge, but there are tems and making energy efficiency applicants are independent producers, resources that can help. A few are improvements. www.rurdev.usda.gov/ farmer and rancher cooperatives, agri- identified here. rbs/farmbill cultural producer groups and major- Federal Resources ity-controlled producer-based busi- Value-Added Producer Grant Program ness ventures. In the past few years, Farm Bill Section 9006: Renewable The VAPG program provides grants of many ethanol, biodiesel and wind Energy and Energy Efficiency Program up to $100,000 for business planning Provides grants and loan guarantees or feasibility studies, or up to $300,000 Continued on next pagewww.attra.ncat.org ATTRA Page 7
  • Financing Resources, continued from page 7 energy projects have received fund- agricultural businesses in Illinois. network of independently owned ing through this program. Details for The grants fund feasibility studies to and operated credit and financial ser- this program can be viewed at www. expand Illinois’ ethanol, biodiesel and vices institutions that serve farmers, rurdev.usda.gov/rbs/coops/vadg.htm biomass industries, help open markets ranchers, agribusinesses of every size for Illinois products, and find new uses and income range across the country. Tax Credits for the state’s top commodities. CoBank, one bank within the Farm Energy Policy Act of 2005 Credit Service, provides financing to Allows a 10-cents-per-gallon tax credit The Minnesota Community-Based the majority of the nation’s agricultural for each gallon of ethanol produced Energy Development (C-BED) legisla- tion provides higher production pay- cooperatives. CoBank itself is coopera- and sold by small ethanol producers, ments to community wind projects tively owned by its customers. including cooperatives, up to a maxi- mum of 15 million gallons of ethanol for the first ten years in exchange for Green Tags per year. Small producers are defined lower production payments after ten For wind and solar energy projects, as those with a production capac- years. This structure allows project farmers can generate capital by sell- ity that does not exceed 60 million developers to profit and pay off capital ing green tags. Green tags are created gallons of ethanol per year. This law costs within the first 10 years of their when renewable energy is substituted allows cooperatives to pass some or contract without the need for the state for traditional power, representing the all of the small ethanol producer credit incentive payment. real savings in carbon dioxide and through to their patrons. In Missouri, only majority farmer- other pollution that occur as a result The law also extended the wind energy owned ethanol and biodiesel produc- of the substitution. A variety of utili- Production Tax Credit (PTC), providing tion plants are eligible to receive dis- ties and organizations market green a per-kilowatt-hour tax credit for elec- cretionary state tax incentives. tags to businesses and individuals tricity generated with wind turbines who wish to purchase electricity from For more information on tax credits over the first ten years of a project’s renewable, non-polluting resources. and incentives by state, see the Data- operations. The money paid by these customers is base of State Incentives for Renewable then used for projects that reduce fos- State and Local Financing Energy (DSIRE) at www.Dsireusa.org. sil-fuel electric generation. For exam- A number of states and communities Private Lenders ple, Our Wind Co-op has used the capi- have programs to provide funding that tal raised from the sale of green tags When shopping for a private lender, could apply to renewable energy facili- for down payments on wind energy look for those who understand and ties. For example: support agricultural projects. Local systems for member-owners who The AgriFIRST program in Illinois is a lenders will provide a greater impact agree to sell their green tags through grant program designed to help pro- on the local economy than non-local the co-op. For information on green vide planning and construction funds lenders. Farm Credit Services (www. tag marketers in your area, see Center to expand the number of value-added farmcredit.com), for example, is a for Resource Solutions. Case Studies economic benefits to the local community. The projects were structured as two separate Minwind Energy LLCs that required farmer ownership of at least 85 percent—leaving some room for local Project type: Wind non-farmers to also invest—and also required Location: Minnesota that all shareholders be Minnesota residents. Business structure: LLC The group sold shares to 66 investors, rais- Funding: Ownership shares, state production ing $3.5 million in equity capital for the two incentive, federal production tax credit, USDA companies in only 12 days. Once the projects Farm Bill grants, private financing were up and running, the owners successfully Overview: Minwind began as two farmer- negotiated a contract with Alliant Energy to owned wind energy projects, Min- purchase the wind energy. Minwind has beenPhoto: MinnesotaProject. wind I and II, with a goal of generating highly successful—seven additional projects income for farmers while also providing (Minwind III-IX) were added to the projectPage 8 ATTRA Locally Owned Renewable Energy Facilities
  • roster in 2004. All nine projects operate as SoyMor Biodiesel LLCseparate LLCs. Project type: BiodieselFor more information: Location: Minnesota • Minwind I & II: Innovative farmer- Business structure: LLC owned wind projects Funding: Ownership shares, www.windustry.org/newsletter/ private financing SoyMor Biodiesel plant under 2002FallNews.htm Overview: SoyMor Biodiesel began with construction. Photo: SoyMor • Case Study: Minwind III-IX a steering committee looking for ways Biodiesel. www.windustry.org/community/ to add value to soybeans. The commit- casestudyMinwind.htm tee eventually determined that a biodie- sel plant would be feasible and would also benefit both soybean farmers and localMid-Missouri Energy economies. The project was initially struc-Project type: Ethanol tured as a cooperative, but when the initialLocation: Missouri equity raised less than what was necessary,Business structure: it became an LLC to allow non-farmers toCooperative invest. Today, the plant—capable of produc-Funding: Ownership ing 30 million gallons of biodiesel annu-shares, state grant ally—is 72-percent farmer owned, repre-funds, tax credits, senting 608 farmers. The facility purchasesprivate financing Photo: Mid-Missouri soybean oil from crush facilities to produce Energy. the biodiesel, which increases the value ofOverview: soybeans for area farmers. The plant createdMid-Missouri Energy began with a 15- 30 jobs, and has a $2-million dollar annualmember farmer steering committee inter- impact on the economy—$1 million in pay-ested in exploring ethanol production as roll and $1 million in goods and services.a means of adding value to local cornproduction, improving local economies, For more information:and producing a renewable fuel that both • SoyMorprotected the environment and reduced www.soymor.comdependence on foreign oil. Three yearslater, after a feasibility study and anequity drive that raised more than $22 Our Wind Co-opmillion from 729 area producer-mem- Project type: Windbers, the plant began producing ethanol Location: Northwest U.S.at its Malta Plant. The plant produces 52 Business structure: Cooperativemillion gallons of ethanol annually, using Funding: Federal grants, utility fund-17 million bushels of corn. The result, in ing, green tags, foundation fundingaddition to creating a market for corn, Overview: A unique cooperative ofis the creation of some 1,800 jobs and small-scale wind turbines on farms, Photo credit: Our Wind Cooperative.nearly $170 million in economic activ- ranches and public and private facil-ity for the state. The plant exceeded its ities across the Northwest. Through thisproduction expectations, and in March collaborative effort, 10-kW turbines were2006, the company announced an expan- installed at ten rural sites serviced by pub-sion for the plant and a 5-to-1 stock split licly owned utilities. Initially supported byfor owners. The expansion doubles annual grants from the U.S. Department of Ener-production. gy’s National Renewable Energy Laboratory and the U.S. Department of Agriculture’sFor more information: Rural Development program, Our Wind • Mid-Missouri Energy Co-op created low-risk opportunities to www.midmissourienergy.com explore on-farm green power production,www.attra.ncat.org ATTRA Page 9
  • distribution, ownership and marketing mod- allowing Our Wind to use the capital raised els to meet local energy needs. The Bonn- from the sale green tags for down pay- eville Environmental Foundation (BEF) ments on wind energy systems for mem- provided a Green Tags down payment of ber-owners who agree to sell their green $600/kW, representing estimated produc- tags through the co-op. This structure pro- tion for 10 years at 3.5¢/kWh. The envi- vides income for local owners and benefits ronmental attributes of the energy gener- to local economies. ated from Our Wind Co-op turbines are For more information: aggregated, marketed and sold as value- added Green Tags at 10¢/kWh, recoup- • Our Wind Co-op ing the front-loaded BEF payment and www.ourwind.org/windcoopReferencesAnon. June 1997. Co-ops 101: An Introduction to Emergence of the New Generation Cooperative.Cooperatives, USDA Rural Business-Cooperative Ser- www.pellervo.fi/finncoop/material/cook.pdfvice, Cooperative Information Report 55. www.rurdev. Estill, Lyle. October 2006. “Why Biodiesel Takes ausda.gov/rbs/pub/cir55/cir55rpt.htm Coop.” Off-Road Adventures. www.oramagazine.com/Anon. January 2007. “Distillery Demand for Grain to pastIssues/1006-issue/index.asp?article=biodieselFuel Cars Vastly Understated.” Earth Policy Institute. “Green Tags,” Bonneville Environmental Foundation.Anon. December 2006. “Ethanol Takes Center Stage Downloaded January 2007. www.b-e-f.org/GreenTagsin 2006.” Renewable Fuels Association,www.ethanolrfa.org/objects/documents/919/ Hackman, Deanne. December 2001. “What is a Newyearend2006.pdf Generation Cooperative (NGC)?” Agriculture Innova- tion Center, Missouri Department of Agriculture.Anon. “How Do Co-ops Help Build Sustainable Com- www.extension.iastate.edu/agdm/wholefarm/html/munities?” Cooperative Life. Downloaded January c5-112.html2007. www.cooplife.com/sustainable.htm. Morris, David. 2005. The Carbohydrate Economy,Anon. Locally-Owned Ag Energy: An American Biofuels and the Net Energy Debate. Institute forEnergy Solution. Midwest Ag Energy Network. Local Self-Reliance, Minneapolis, MN. 24 pages.www.midwestagenergy.net/pdf/local%20ownership%20 www.newrules.org/agri/netenergyresponse.pdfwhitepaper.pdf Morris, David. February 2006. Ownership Matters:Anon. 2002. “Minwind I & II: Innovative farmer- Three Steps to Ensure a Biofuels Industry That Trulyowned wind projects.” Windustry newsletter. Benefits Rural America. Institute for Local Self-Reli-www.windustry.org/newsletter/2002FallNews.htm ance. www.carbohydrateeconomy.orgAnon. Taking Ownership of Grain Belt Agriculture. Rhoads-Weaver, Heather and Jennifer Grove. MarchNational Corn Growers Association. www.ncga.com/ 2004. “Our Wind Co-op: Exploring Joint Green Tagpublic_policy/takingOwnership Financing and Marketing Models for Energy Indepen-Borst, Al. September 2006. Bring It on Home: Local dence.” www.ourwind.org/windcoop/pdfs/AWEA_Paper.pdfOwnership of Renewable Energy Helps Keep It On the Swenson, David and Liesel Eathington. July 2006.Farm. USDA Rural Development, Co-op Programs. Determining the Regional Economic Values of Ethanolwww.rurdev.usda.gov/rbs/pub/sep06/bring.htm Production in Iowa Considering Different LevelsCook, Michael and Constantine Iliopoulos. Beginning of Local Investment. Iowa State University.to Inform the Theory of the Cooperative Firm: www.valuechains.org/bewg/Documents/eth_ full0706.pdfPage 10 ATTRA Locally Owned Renewable Energy Facilities
  • Tordsen, Craig, Reg Caluse, Mary Holz-Clause. Octo- Institute for Local Self-Relianceber 2002. “Key Considerations Points to Ensure a www.ilsr.orgSuccessful Business Plan for Developing an Ethanol The Minnesota ProjectManufacturing Business,” Value-added AgricultureExtension, Iowa State University. www.mnproject.orgUrbanchuk, John M. September 2006. Economic National Council of Farmer Cooperatives (NCFC)Impacts on the Farm Community of Cooperative www.ncfc.org/infoOwnership of Ethanol Production. LEGC LLC. Rural Cooperatives Magazinewww.ncga.com/ethanol/pdfs/2006/FarmerOwned www.rurdev.usda.gov/rbs/pub/openmag.htmEthanolEconomicImpact.pdf Windustry’s Wind Farmers Network www.windfarmersnetwork.orgResourcesBuilding Better Rural Places Understanding Cooperatives:www.attra.ncat.org/guide/index.html Ag Marketing Cooperatives www.rurdev.usda.gov/rbs/pub/cir4515.pdfCooperative Feasibility Study Guidewww.rurdev.usda.gov/rbs/pub/sr58.pdf Understand Cooperatives: How to Start a Cooperative www.rurdev.usda.gov/rbs/pub/cir4514.pdfCooperative Marketing Agencies-in-Commonwww.rurdev.usda.gov/rbs/pub/rr127.pdf University of Wisconsin’s Center for Cooperatives www.uwcc.wisc.edu/links/altenergylinks.htmlCooperative Ownership of Ethanol and BiodieselProduction Facilities USDA Rural Developmentwww.newrules.org/agri/smalleth.html www.rurdev.usda.gov/rbswww.attra.ncat.org ATTRA Page 11
  • Locally Owned Renewable Energy Facilities By Cathy Svejkovsky NCAT Energy Specialist © 2007 NCAT This publication is available on the Web at: www.attra.ncat.org/attra-pub/localenergyfacilities.html or www.attra.ncat.org/attra-pub/PDF/localenergyfacilities.pdf IP309 Slot 304 Version 080107Page 12 ATTRA