Announcing the Wind Farmers Network's second Question and Answer session!

Edit: The Question period has been extended! Given the commotion of the holiday season, we thought everyone would appreciate a few extra days to submit questions; and we'll appreciate a few more days to post the answers. The new deadline to submit questions for Sean Middleton is 9 am on Monday, January 10th.

Starting in November, the Wind Farmers Network began hosting a series of Question and Answer sessions. This is your opportunity to ask questions to individuals who have expertise in various areas of utility scale wind projects, with an initial focus on community wind projects.

Our second panelist is Sean Middleton, Manager of Engineering at Illinois Rural Electric Cooperative in Pike County, Illinois.  Sean has been the driving force behind IREC's installation of a Vestas 1.65 MW turbine in western Illinois. Illinois Rural Electric will be the first Illinois rural electric cooperative to own and operate a utility scale wind turbine when it is commissioned in early 2005.  Please have a look at these two articles before sending your questions to Sean so we can ask him some about some aspects of the project that he has not previously addressed: Wind Turbine FAQ (small ~37 KB), Country Living Magazine Article (huge ~3.3 MB).  You'll need Microsoft Word and Adobe Reader, respectively, to open these documents.

 

Sean Middleton, P.E. is the Manager of Engineering at Illinois Rural Electric Cooperative, a mid sized coop serving approximately 10,000 meters and 3000 miles of line in west central Illinois. He currently is responsible for all new technology applications at the cooperative including engineering, staking, mapping, SCADA, AMR, and IT. Middleton received his bachelor's degree in electrical engineering from Bradley University in 1996. He currently is a member of the Institute of Electrical and Electronic Engineers (IEEE) including the Power Engineering Society (PES). Middleton also is a member of the National Society of Professional Engineers (NSPE) and the Illinois branch (ISPE). Additionally he sits on the Automation, Telecommunication, and Information Technology (AT&IT) Task Force which is a division of the Cooperative Research Network (CRN) branch under the National Rural Electric Cooperative Association (NRECA).

Please submit your questions to Sean using this link: info@windfarmersnetwork.org.

We will post both the questions and answers on the forum Tuesday, January 11, 2005.

This message has been edited. Last edited by: Sarah Johnson,

It took a little while to start receiving questions for Sean (perhaps our members had other things occupying their time over the holidays), but after we extended the due date we ended up with a great response!  We caught up with to Sean to discuss your questions earlier this week and are pleased to share his perspectives with the members of the Wind Farmers Network.

These are exciting times for wind energy, especially in Illinois where we continue to see a lot of 'firsts' coming online.  We'll be sure to keep our members posted regarding the date for Illinois Rural Electric's ribbon cutting ceremony when construction finishes up this coming spring. Thanks for all your time and insight, Sean!

Note: Some of your questions have been edited/combined for the sake of brevity and clarity.

 

FINANCING AND GRANTS

 

Question (WS): How much did the project cost? 

Answer (Sean): The total cost of our project is $1.878 million, up from $1.796 million I wrote in our USDA grant. The increase was due to extra voltage upgrades and the increase in the price of steel.

Note (WFN): Approximately $300,000 will be spent to upgrade IREC’s distribution system to accommodate the turbine.

Question (SW): How much did you receive in grants?  Did you receive funding from the USDA Section 9006 grant program? Was the Illinois state money you received related to a state sponsored Sustainable Development Fund program?

Answer (Sean): Our project received a total of $886,544 from three sources, two of which I would consider grants.  Those amounts were:

• $438,544 from USDA Section 9006

• $250,000 from the IL Department of Commerce and Economic Opportunity

• $175,000 from the Illinois Clean Energy Community Foundation

It’s important to note that the Illinois Clean Energy Community Foundation amount was not a grant but actually a purchase of green tags for the first ten years of operation. None of these would be considered a state sponsored sustainable development fund program.

Question (SW): Was the term financing you obtained through the USDA’s loan program or fulfilled through a local bank? If so, what process did you go through to have the bank approve the loan?

Answer (Sean): The USDA Rural Utility Service’s (RUS) wind generation loan program provided term debt financing at capital municipal rate. The total amount financed through RUS was $1.3 million; that includes about $300,000 worth of upgrades to our distribution system and putting in a feeder line for the turbine.  As an electric cooperative, we took the view that the distribution feeder is a general upgrade to the system and we didn’t count the system upgrades into the cost of the wind project.

Note (WFN): For more information, visit http://www.usda.gov/rus/electric/renewables/.

Question (SW): It was stated that the project would not have been possible without grant funding, what would have been your investment payoff period if you did not have grant funding?

Answer (Sean): That’s right; we wouldn’t have done the project without the grants. Now, it will pay for itself well before the 20 year life of the turbine, closer to ten years.

Question (WS): How long did it take you to apply for the USDA 9006 funds?

Answer (Sean): We had 6 weeks to submit, I’d say it took 3 to 4 solid weeks during that time. That doesn’t include all the follow-ups. It seemed like I didn’t do anything else during that time.

Question (PM): What advice would you give to a client's attorney who is reviewing the concept and the paperwork?

Answer (Sean): Read the fine print on everything, there’s lots of it. For grants, there are tons of reporting requirements.  The only things we ran through a lawyer were the land purchase and the ordinance.

Question (SW): Can you provide more detail on the electrical generation limitation in your distribution contract? Is this type of limitation typical for other buyers of wholesale power, for example municipal utilities?

Answer (Sean): The limit in our wholesale power contract is generating 5% of our total peak load; this turbine will be a little over 4%. This is very typical. The current contract won’t let us do a second turbine, but if we get a new contract or find a different way to use wind there are some options.  Our distribution contract would not prevent us from producing hydrogen from wind power for example.

Question (SW): Can you provide additional detail in comparing the cost of energy from the wind turbine with your wholesale cost of energy?

Answer (Sean): With the RUS loan, 2 grants and the ICEF money for the sale of the tags, we’ll generate power at a price for just less than our wholesale power contract rate (~6.5 cents), assuming the 30% capacity factor.

Question (SW): Are you working with a third party marketing company on the sale of Green Tags?

Answer (Sean): The Illinois Clean Energy Foundation already purchased the green tags for the first ten years, after that, we don’t know. This worked well for us because we already have expensive electricity, so marketing them to our customers might not make sense.

 

PROJECT CHALLENGES

 

Question (PM): What unanticipated problems have you encountered?

Answer (Sean): Well, we knew there would be lots of environmental critique, so that wasn’t a surprise, but what I really didn’t anticipate was the time it would take to complete all these studies. Some agencies took 3 months to respond. Meeting all the USDA 9006 requirements were the worst. Another unanticipated issue was how it is to deal with local governing bodies that don’t have familiarity with wind or expertise in permitting wind turbines. We’re still working with our county. Local zoning boards are new to wind, so there are lots of hoops to jump through as they get educated. I think it would be smoother if rules were designed before projects were designed. But there just wasn’t much expertise on these ordinances in Illinois two years ago when we started this.

Question (PM): What were the greatest hurdles for this project?

Answer (Sean): I’d have to say the biggest hurdles we encountered were finding wind and an interconnect point, dealing with county ordinances and putting together the financing.  We did a wind study to see what was out there, but getting the grants was an absolute necessity.  We wouldn’t have touched this project without getting the first grant (USDA Section 9006), but others were still necessary.

 

INTERCONNECTION

Question (SH): Are you having any difficulties with the interconnection process?

Answer (Sean): Our process was very easy compared to a lot of other projects. We didn’t have to do a transmission interconnect because we’re connecting at the distribution level. Since we [Illinois Rural Electric Cooperative] are a distribution utility, we’re really just feeding into ourselves. So the interconnect agreement is very short, I’m just agreeing to take power from myself. Part of this is showing other small utilities that you can successfully interconnect a wind turbine at the distribution level. Having your members use your power is a big benefit.

Early on we had discussions with transmission suppliers, but they didn’t really want to mess with a one turbine project, and it became apparent that wasn’t going to be a good option. A lot of the big utilities don’t have experience with wind, which doesn’t make it easy for a small project. We had other distribution options too, and we went with the one that was most cost effective. This was a huge part of the siting process. You have to have wind, but you also have to have a place to interconnect. Great wind isn’t really a great resource unless you have access to market.

Question (DC, BA): An interconnection study for our proposed single 1.5 MW GE turbine is currently underway. A firm outside of the interconnecting utility is being asked to study the flicker issue. Could you elaborate on what that might entail. The line that we will be connecting to is a 20.8kv line. What are typical system parameters (such as system loading characteristics, X/R ratio, distribution feeder length, etc...). What analysis tools are typically used?

Answer (Sean): When I was working with Micon/Vestas engineers, one advantage of me being an electrical engineer was that I able to do some that work in house. Plus I knew a lot about my own system. Basically, I sat down with one of their turbine engineers, and he set up an in house model based on the parameters I gave him. This allowed me to determine if we should upgrade the feeder line, do voltage stabilization, or work on flicker issues. But I don't think there really are typical X/R ratios...it really depends on your existing system. In some situations where we didn't know the numbers exactly we used SCADA data to make estimates. I'll have to say that one turbine is much easier to study than a whole wind farm. And there is some pretty sophisticated software that is used to model the larger windfarms. One thought might be the Utility Wind Interest Group (www.uwig.org). I know they have some downloadable modeling tools available to their members that might be helpful on the smaller projects.

Question (DC): Do you consider $10,000 to be a reasonable amount for an interconnection study?

Answer (Sean): Well, I didn’t need a formal study because I knew my system, but $10,000 doesn’t seem an unreasonable amount. And interconnection gets expensive fast. You might be able to get some grant help for this kind of thing.

Question (BA): What happens if the distribution grid is not robust enough to accept the new wind generation?

Answer (Sean): One of our issues was having enough load on the windiest days to make sure you have some place to put the electricity. As it turns out, some of the potenially windiest days happen in the spring when our load is lightest. This can be a real problem if you have to backfeed the power. In our situation, the transmission operator will take it, but when that power gets redistributed we have to pay for it again. So, we’d have to pay for power we generate ourselves, which we don’t want to do.

Question (BA): How would the protection scheme for a wind turbine differ from other forms of distributed generation systems such as coal fired, natural gas or diesel?

Answer (Sean): We are using essentially the same equipment for our wind turbine as for any other kind of distributed generation. The intermittent nature of wind power is really somewhat overstated. The newer machines are designed to come up and sync with the grid automatically.

 

TURBINE SELECTION

 

Question (GF): How do I get detailed information on a Micon 1.65 MW wind turbine explicit enough to base a business plan on? I live in Northfield, MN.and Carleton College erected a Micon 1.65 MW turbine last summer but I can't find data on it.

Answer (Sean): We’re putting in the same machine. I found the NEG Micon, now Vestas, sales representative to be a wealth of information for us. I recommend calling up the manufacturer as the quickest and best way to get information on the full features of these units. We worked with Jesper Michaelsen; you could send him an e-mail or give him a call.

Note (WFN):     Jesper's contact information:

Jesper Michaelsen

Business Development Manager

Vestas American Wind Technology, Inc

2850 W Golf Road, Suite 405

Rolling Meadows, Illinois 60008

Phone: (847) 806-6225

jmichaelsen@vestas-awt.com

 

 

Question (WA): Did you consider a GE Turbine?

Answer (Sean): Yes we did. Our first contact with turbine suppliers was through meetings and conferences. NEG Micon has done well with smaller projects and we formed a good relationship with them. We included GE in our turbine bidding process, but I don't think they took a very hard look at us. In fact they didn’t even return our bid on it. Maybe that was because NEG Micon had already done so much leg work. Perhaps if GE had been our first contact it might have worked out differently.

 

Question (GF): What kind of KWH production rates do you expect at what average wind speed?

Answer (Sean): We’re projecting that our V82 turbine will produce 4.3 million kWhrs per year, assuming a 30% capacity factor and an average windspeed of 12-15 mph.

 

Note (WFN): The V82 is the Vestas name for the former NEG Micon NM82 turbine, rated with a nameplate capacity of 1.65 MW.

 

EASEMENTS

 

Question (RM): What do you consider is the fair amount of compensation for the landowner-farmer, to site a turbine?  Is it adjusted at predetermined intervals or based on a percentage of the electricity generated?  What’s the going rate?

Answer (Sean): Well, for our project, we actually purchased land, so we own the dirt. If we do any more turbines, the farmer that sold us the ground would like us to lease the land. I understand for a turbine this size, the landowner would receive a few thousand dollars per year.  But those kind of deals vary and I’m not sure I’m entirely current on that issue.  One good idea I’ve heard is that farmers who host turbines should sign on to be maintenance contractors, either for money or in exchange for some future stake in the project. If the farmer has a vested interest in making sure the turbine’s taken care of, the turbine will produce energy and work better longer.

Note (WFN): Prices paid for leasing land for wind turbines vary considerably from region to region, developer to developer and based on factors such as turbine size, land value, and electricity prices. Leasing land for turbines typically yields significantly more per acre than most crops. For more information, visit www.windustry.org/opportunities/lease.htm and watch for new materials posted on the Wind Farmers Network.

Question (RM): Wouldn’t some people say you’re destroying valuable farm land?

Answer (Sean): As part of our grant obligations, we were required by the Illinois Department of Agriculture and USDA to take as little land out of production as possible. It’s tricky to balance that with the local setback requirements.  We are meeting all of the setbacks except for the distance to the property line where we are a little bit under.  Also, we’re talking to the neighboring farmer to make sure as much as possible of the land surrounding the turbine is farmed.  We’ll be pouring our foundation soon and that plus the 200 ft access road we have to put in will take up about half an acre. We may end up taking a little more room later to set up educational facilities, such as interpretive signs or a kiosk. We want this to be a field trip destination for renewable energy education.

 

JOB MARKET IN WIND

 

Question (MM, RW): What does the future job market look like in wind farming? How much you think this project will affect your local economy?  As an electrical engineer, how do you think locally owned wind turbines compare with large developer projects?

Answer (Sean): A main thrust of our project is to see economic growth for our area. We want our turbine to attract other wind developers and demonstrate that wind works here. We calculated that a 100 turbine wind farm in our county would create $5-9 million in local economic development through jobs, tourism, support businesses, etc. For our turbine, it may or may not mean that we hire a new person but we’ll have one or two guys in house trained to do the maintenance.  I’ve heard that it takes 2-4 turbines to support one full time maintenance person. We consider our project a spring board.  For electrical engineers, there really is not so much work on a community scale project.  I worked together with the Vestas Engineer and we finished it in a couple of back and forths.  On medium and larger projects there is a lot of opportunity, especially working with a developer on analysis, design, installation, optimization and maintenance.

 

PRODUCTION TAX CREDIT

 

Question (GF): Could you please discuss the Federal production tax credit and how it works. I understand that Congress extended it into 2005. Does that mean that if a wind turbine were to be placed into service in 2005 that for each KWH of electricity produced in 2005 a 1.8 cent tax credit would be available to the owners for that year and for nine years following based on each years production. Once started are you guaranteed ten years of tax credit?

Answer (Sean): As a non-profit we can’t use the PTC. A major thrust of our project is to demonstrate that you can make a project work without it. We had to come up with other incentives. If you can use the PTC, by all means do, but it’s possible to replace it.

Note (WFN): To use the PTC, you have to have a tax liability or partner with a person or entity that does. George is correct in saying that the PTC is currently extended through the end of 2005 and is available as a 1.8 cent/kWhr produced tax credit for the first ten years of turbine operation. Any project coming online through December 31, 2005 will be eligible to use the tax credit for a full ten years.

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