A concise overview of utility scale wind project development.

1. BAYSIDE ENERGY ADVISORS
Utility Scale Wind Project
Development: 101
prepared by John Chaimanis
April 5, 2012
Bayside Energy Advisors 918 Belmont St Watertown, MA 02472 P: 617.899.7815 E: jchaimanis@twotenthirtythree.com or chaimanis@yahoo.com

2. Wind Development
3
The Five Elements
3
Land
3
Meteorology
3
Permitting / Environmental Analysis
4
Interconnection / Transmission
4
Power Sales
4
Financial Participation in a Wind Project
5
Fundamental Value Drivers
6
Core Components of Value
6
Bayside Energy Advisors 918 Belmont St Watertown, MA 02472 P: 617.899.7815 E: jchaimanis@twotenthirtythree.com or chaimanis@yahoo.com

3. BAYSIDE ENERGY ADVISORS
Wind Development
The Five Elements
Utility scale wind projects are good investments for many stakeholders, produce clean renewable electricity, and help the
local economy. Developing a project can be a complex process, although an understanding of the fundamental building
blocks can help interested parties determine the right level of engagement. Every successful utility scale wind project
that has ever been built posses five elements, all of which must satisfactorily be met. The order of attainment can impact
overall cost and speed of development, therefore a strategic approach is necessary in order to reduce risk and exposure
to costly mistakes. The five elements are land, meteorology, permitting / environmental analysis, interconnection /
transmission, and power sales.
The financial, environmental, and generational benefits of wind projects are great. With the right understanding and
guidance it is possible to turn the idea into reality.
Land
Today, it is common for utility scale wind turbine generators to stand 80m tall, and to have a swept rotor diameter of 80m
- 100m, therefore appropriate site control is required for the optimal energy production and safe operation. Commonly,
land is leased (rather than purchased) from one or multiple land owners by a developer in order to form the project area.
Among other things the topography, zoning, chain of title, and proximity to other stakeholders must all be taken into
account. The objective is a contiguous project site which is reasonably build-able and insurable.
Meteorology
The wind is the fuel source, and therefore it is a key input relied upon by investors as a fundamental driver of economics.
While the wind is a free fuel source, its value is directly related to the frequency, distribution, and average speed.
Scientific measurement, correlation to long term reference data, and sophisticated prediction methods are used by
Utility Scale Wind Project Development
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4. BAYSIDE ENERGY ADVISORS
meteorologists to determine the probabilistic future wind performance. Depending on the size of a project, one or
multiple meteorologic towers are erected during the early stages of development to collect on site data which forms the
basis of the future analysis. In some cases technologies like LIDAR an SODAR can be employed during the
meteorological campaign. The objective is to have complete data which shows a regionally competitive wind resource,
that investors are willing to rely upon.
Permitting / Environmental Analysis
Wind energy is very compatible with farming and ranching which makes it an attractive opportunity to many. However
defining the potential impact to existing wildlife and plant life are an important part of responsible development. In
addition to being a good steward to the environment, projects must adhere to federal, state and / or local regulations.
Interconnection / Transmission
Electricity from the wind project must flow over existing or new transmission lines to a point where it can be used by a
load. Utility scale wind projects must apply for the right to interconnect to the power grid. The process is generally well
documented and prescribes a number of steps which could include financial deposits and evidence of development
progress. The ultimate objective is to obtain a Generator Interconnection Agreement.
Power Sales
Generally, developers of wind projects seek a long term power purchase agreement (PPA) with a creditworthy offtaker.
However, in some circumstances, selling power at the spot price into the market or obtaining a structured offtake
agreement (i.e. - hedge / synthetic PPA) is acceptable. Selling power from wind projects can be a competitive activity,
especially if there is small demand for new power, and there are other developers in close proximity. Understanding the
competitive dynamics, and cost of power are essential steps in developing a successful wind project.
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5. BAYSIDE ENERGY ADVISORS
Financial Participation in a Wind Project
There are many reasons to participate in a wind project, and this sections focuses on the financial benefits across a
spectrum of involvement. As a basic premise, the earlier an individual or entity becomes involved in the process and the
longer they stay in through operation, the greater the financial benefit. The table below outlines three possible levels of
engagement. There are multiple variations the these themes and additional value streams based on owner preference.
Lease Holder Project Originator / Developer & Investor
Developer
Activities Generally passive host for Coordinates all activities up All activities noted for
the project turbines. Some through commencement of Originator plus coordination
additional activities could construction. Requires at of project construction,
include supplying gravel / least one expert who can procurement, and financing
water during construction. manage partners and (including equity, tax equity,
consultants through the and debt). Operation could
process. be in house or outsourced.
Control Minimal High until sale Total
Costs Essentially none. Attorney Depending on the project Development expenses
fees. maturity at the time of sale $1.5M - $3M
between $100K - $3M.
Capital Investment $150 -
$190M
Profit Streams 2% - 6% of revenues once Purchase price payment and All income and tax benefits.
the project is operational. In recovery of expenses at sale Could structure royalty to
some cases an annual fee of project. land as well.
per acre during
Ongoing royalty stream in
development.
some cases.
Value for a 100MW wind $400,000 - $800,000 / year; 1) Recover all expenses Leveraged 20 year equity
project with a $40/MWh $8M - $14M over 20 years 2) $4M - $10M at project IRR of 12% - 17%. Total
PPA and 40% NCF sale (could be less if sold value of tax benefits and
very early) income streams up to
3) $8M - $14M in lease $400M.
royalties - if also the
landowner.
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6. BAYSIDE ENERGY ADVISORS
Fundamental Value Drivers
Core Components of Value
Although a wind project is effected by hundred’s of variables and many of those have implications on overall economics,
there are three core drivers of economic value inherent in a wind project.
A) Wind
B) Power Prices
C) Capital Costs
Wind
Power
Prices
Capital
Costs
Core components of a successful wind project
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