Wind Energy - Despite obstacles, state wants mroe plants

EMS refurbishes wind turbine gear boxes out of its faciltiy in Howard, SD.

Randy Sherman, a technician at Energy Maintenance Service, works on refurbishing the gearbox in the nacelle of a 1985 turbine at the company's location in Howard.

Learn more about the wind energy projects in Miner County.

Despite obstacles, state wants more plants
Power lines, homegrown project, coal plant are options

Reprinted from The Sioux Falls Argus Leader
March 28, 2006
By Ben Shouse
bshouse@argusleader.com

From his office on the edge of Minnesota, Joe Kolbach can look out on the Buffalo Ridge, where 450 wind turbines rise from the prairie.

But once his view arrives at the South Dakota border, he sees only the one he built himself in 2002.

Kolbach brought his wind turbine business to Gary, a town of 231 just west of the border, confident he could coax more of the enormous machines into his native South Dakota.

"It's going to happen," he said.

That statement is common enough, though when others say it, it's often based only on the belief that the state with arguably the nation's best wind potential really should have more than one wind farm.

But Kolbach, president of Energy Maintenance Service, bases it on 20 years of experience in an industry where progress has been the rule.

"You can put up one machine today that will replace 100 just from the technology," he said.

Developers are poised to build one or two more wind farms in South Dakota next year - more than doubling the state's output of wind energy - though congested electric transmission lines loom as a major obstacle to further growth.

There are many potential solutions, including expensive new power lines, homegrown turbine projects, unconventional use of the electric grid, even a new coal-fired power plant. But there is little consensus on how best to break the logjam.

Boost by outside companies

At stake is the nation's ability to harvest some of the best renewable energy anywhere, and farm states' ability to turn their wind into dollars.

"We have to do something different in rural America to be sustainable and viable in the future, and we've got to look at things different than we did before," said Randy Parry, executive director of Miner County Community Revitalization in Howard.

With the help of Kolbach, a Howard High School graduate who learned the turbine trade in southern California, Howard became the only city in the state to own its own turbines.

South Dakota is trying to expand on Parry's philosophy, in part by attracting new wind farms. But exporting the electricity requires changes to a transmission system that was designed to serve local markets, not distant urban centers.

That will mean allowing outside companies to get the ball rolling, Kolbach said.

"Some of the locals think, 'Oh, we're giving it away,' " he said. "But in a sense, that has to happen first in order to get the transmission dam broke. I definitely think you'll see that happen - it's just been happening for two or three years in Minnesota."

Wind advocates say South Dakota could get started even before the dam breaks, with unconventional use of the nation's electric grid.

Most of the space on the grid is parceled out in blocks of "firm transmission." That means it is available to the buyer all the time, regardless of whether it is being used.

Wind energy does not fit well into that system. Because wind farms generate their maximum output less than half the time, they cannot get the full value out of firm transmission.

The system also leaves a lot of unused transmission capacity when demand is low. In North and South Dakota, for example, the high-voltage lines heading east only reach their limit for a few hours each year, according to a study by the federal Western Area Power Administration.

Thus, advocates say, developers could sell more wind power using "nonfirm" transmission rights. In other words, they would buy space on the grid with the understanding that they might lose it during brief periods of peak demand.

But innovative marketing only can do so much. Eventually, building new wind farms will mean expanding the existing grid. Xcel Energy is pouring $160 million into transmission upgrades, including a new high-voltage line into White. That project will help a 150-megawatt wind farm, 50 megawatts of which are proposed for South Dakota. A megawatt of wind energy is enough to power 250 homes.

At least three other groups have proposals for new high-voltage transmission lines. Xcel is part of CapX 2020 - a group of eight utilities looking at $1.5 billion in improvements by the year 2020.

A group that includes Basin Electric Power Cooperative, which supplies power to rural South Dakota and eight other states, is even floating a proposal for the government to spend about $3 billion per year on a "national transmission grid" modeled on the interstate highways.

But many are skeptical of such ambitious proposals, including Ron Lehr, a former Colorado utilities commissioner now with the American Wind Energy Association in Denver.

"It's nice to have those ideas out for the long term," he said, "But I work for wind developers who can put up a wind development in six months to two years."

One way to do that without straining the transmission grid is called "distributed generation."

The idea is to scatter several small wind farms over a wide area, so power would flow mostly to local demand, known as "load" in the business.

"If it's distributed, it will basically begin to feed local loads and displace and actually free up some transmission," said Bob Gough of the Intertribal Council on Utility Policy, based in Rosebud. The group plans to build a string of 10-megawatt projects on Native American reservations, including several in South Dakota.

Local ownership: The 'flip'

A South Dakota Senate panel killed a bill this year that would have given a financial incentive to wind farms up to seven megawatts in size. That bill aimed to enhance opportunities for average citizens to own wind turbines. But even wind farms involving large corporate developers can lead to local ownership.

One method is called the "flip," in which the wind farm is owned by the developer for 10 years, then reverts to the landowners. That allows the project to take advantage of the production tax credit, a federal incentive that requires a large pool of tax liability.

A group of 45 farmers near Trimont, Minn., recently pulled off a project that consultant Earl Cummings said has the best of both worlds.

Landowners who lease land to developers usually get income through lease payments of perhaps $3,000 per megawatt. But this group got more by organizing themselves, said Cummings, of Mankato, Minn. That helped the developer, PPM Energy of Oregon.

"Basically, it's one-stop shopping, so the turnaround time for the developer to do this project is nominal," Cummings said.

That, in turn, meant benefits for the landowners, including a share of the revenue without the risk of owning it themselves, Cummings said.

"I think the business model might be a little bit ahead of its time, but the model we have - there is no reason that it can't work in Colorado or South Dakota," Cummings said.

Local ownership also helps muster support for transmission improvements. Otherwise, getting permission from multiple landowners along the route of new power lines can take years.

New coal plant could help wind

That support was evident when Xcel proposed its upgrades to carry wind from the Buffalo Ridge, said Michael Noble, executive director of Minnesotans for an Energy-Efficient Economy.

"There was no local controversy or push-back on the siting and routing, because one of the conditions that the Public Utilities Commission established for approving the power lines was that local projects have an opportunity and full access," he said. "That model should be replicated again and again."

North of the ridge, near Milbank in South Dakota, a consortium of seven utilities is proposing a very different tool for building more wind turbines: coal.

Led by Otter Tail Power Co., the utilities want to build a new coal plant called Big Stone II, next to the existing Big Stone plant. To help their cause and to help meet Minnesota's renewable energy goals, they are proposing to build excess transmission capacity, which could be available to wind farms.

Public Utilities Commissioner Dusty Johnson called the project "the biggest news we've had in the last year from a transmission perspective."

Utility companies and some wind developers say building new coal plants is necessary to deliver a cheap, constant supply of energy. Wind cannot directly replace coal because it is not "dispatchable" - it cannot be turned up or down to follow demand.

"You have to have some other resource with it," said Scott Parsley, assistant general manger for East River Electric Power Cooperative. "We don't apologize for coal at all, and we continue, with any new development we have, to employ the newest and best technology available."

But Noble said South Dakota's effort to land the Big Stone II project - and possibly another in either Mobridge, Pierre or Yankton - is counterproductive.

"In South Dakota, we don't have any coal. What we have is this other vast resource that is declining in cost, has huge economic benefits locally - vastly more economic benefits than coal plants - and it has zero pollution," he said.

"The reason the wind industry is growing so slowly in South Dakota is that both investors and policy makers are betting on the wrong horse."

But many in the power industry say they have to back both horses.

"I think this country has to look at all energy solutions. We have too much hunger for electricity," Johnson said.

He said the utilities that want to build Big Stone II risk violating federal reliability standards if they do not build it. And there is no reason the state can't do both.

Xcel Energy provides examples

Wind advocates counter that wind farms can also improve reliability and that power lines can be built just to carry wind power.

Beth Soholt of Wind on the Wires - a Minneapolis advocacy group - points to Xcel's new power line to southwest Minnesota. That state required the utility to build extra wind power on the same timetable.

Although it might be tempting to look across the border for solutions, the situation there differs in several ways.

For one, Minnesota has a policy that regulates the mix of energy resources its utilities use. And its geography and existing transmission infrastructure allow wind to compete more readily.

For example, the Minnesota Department of Commerce told Xcel Energy to study building more wind energy because it would be cheaper, Soholt said.

"Xcel wanted to do a small amount of wind," she said. "And the Department of Commerce came out and said, 'No, what's really going to be best for the ratepayers is triple what you guys looked at.' So it's not 500 or 600 or 700 megawatts of wind, it's 1,600 or 1,700 megawatts of wind."

Wind not only has policy advantages in Minnesota, it has political ones.

"Minnesota is pathetically blessed with a wealth of groups working on renewable energy issues, and you don't have that in South Dakota," Soholt said.

South Dakota might have a harder row to hoe, but Johnson said the state also has the better crop. Its wind resources are ranked first or second in the nation, so the state could be the lowest-cost producer.

Johnson said that means turbines soon might march into South Dakota, drawn by a powerful force:

"The market. As the economics of wind get better and better, wind is going to pay for itself," he said. "If you had a farm that was selling wheat for half the price of the guy three states over, they would build a road to your farm."

South Dakota has made several important tax changes in recent years, and this year, the Legislature passed two new laws to boost wind.

Johnson said there is more to do but that South Dakota is on the right track to bring in several new wind farms in the next five years.

Kolbach commends the Public Utilities Commission but said South Dakota has missed other chances to promote wind.

The City of Howard managed to build its own turbines through a mix of outside grant money and sheer willpower. He said others have not followed suit because "South Dakota refuses to look at any form of a net metering law."

Net metering allows owners of small power generators to sell their power to the grid at retail rates. Howard only gets wholesale rates, and Canova and Carthage get even less.

Kolbach said that "has been very frustrating for us, because we do business here in South Dakota. ... All our money is everywhere but South Dakota."

Some say net metering is unfair, since it pays small power owners the same rates as utilities, even though utilities provide crucial services such as transmission and distribution.

Kolbach said he also has referred other companies in the wind power industry to the governor's office, but his still is the only one that has chosen to build a facility in South Dakota.

"We're 10 years behind everyone else, and we could definitely be more aggressive," he said.

"You can't just wait for something to happen."

Reach Ben Shouse at 331-2318.

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