Wind Power Update December 2006:

Wind Power Update December 2006:

    In May 2006, Sou= thern Minnesota Municipal Power Association (SMMPA) rejected the Community Based Energy Development (C-BED) proposal we had submitted on the grounds of the purchase price we had proposed for electricity generated by wind turbines at Gustavus. Under the proposal, SMMPA would have purchased ALL of the electricity generated by turbines owned by Gustavus. The price we submitted was based on our current usage charge of 4.88 cents per kwh. Any lower propo= sed price and Gustavus would be better off directly using electricity generated= by the turbines and protecting ourselves against future price increases. = An advantage of selling the electricity was the possibility of having an equity partner who could potentially offset some (~10%) of the initial project cos= t.
     After the = C-BED proposal was rejected, we decided to pursue a scenario where Gustavus would directly use electricity generated by the turbines and sell only the excess power to SMMPA. (At times, under high wind conditions, the turbines w= ill generate more electricity than Gustavus demands.) In August 2006, the wind committee met with SMMPA representative, Larry Johnston, to discuss th= is scenario. Mr Johnston offered to pay us a seasonally adjusted price for the excess power minus various backup and resource adjustment charges. The seasonally adjusted price averaged 2= .8 cents per kwh, from = which the additional charges would be subtracted.
     At this ti= me, a representative from Clipper Wind (our likely turbine vendor) suggested we contact a wind energy advocacy group to help us deal with SMMPA. This eventually led us to talking with Larry Schedin= , a private consulting engineer with vast experience in the utility industry.&n= bsp; We hired Mr. Schedin to guide us in negotiation= s with SMMPA. After examining our project, Mr. Schedin<= /span> suggested that we first negotiate an Interconnection Agreement with the Cit= y of St Peter to utilize their infrastructure to transport our electricity on campus. SMMPA would also be a signatory on the Interconnection Agreement. Our major financial benefit from the wind turbines will be offsetting our curre= nt 4.88 cents per kwh u= sage charge, so this seemed to make sense. An Interconnection Agreement was drafted with the power purchase agreement for the excess power as one of the appendices. At this time, a verbal agreement has been reached between Gustavus and the City of St Pe= ter on the Interconnection Agreement. Mr. Schedin and the City's attorney negotiated the agreement. Our wind attorney, Kevin Walli, could review the final agreement i= f we choose. We have also agreed in principal with SMMPA who will now purc= hase the excess power at a rate of 3.2 cents per kwh with NO backup charges or other adjustments. We will also apply for federal Renewable Energy Producti= on Incentive (REPI) payments which are currently 1.9 cents per kwh if fully funded. We had thought we we= re ineligible to receive REPI, but learned that Carleton receives REPI payments (Carleton's are currently 60% funded) despite not seemingly meeting the fed= eral requirements. We confirmed with REPI representatives that we would in= deed be eligible for the payments and learned that electricity we SOLD would be eligible for REPI payments. We are working on an application (Due Dec= 31) to the REPI program and will push to receive REPI on all electricity produc= ed by the turbines.

Financial summary: (see attached spreadsheet for more details)
The annual electric production from two Clipper C93 (2= .5 MW) turbines is estimated (based on several years of wind data) to be between 1= 3-15 million kWh. Gustavus current= ly uses around 16 million kWh. We estimate that we could reduce what we purchase by about 10.5 million kWh to around 5.5 million kWh and save approximately $534,000. The excess electricity from two tu= rbines can be sold to SMMPA for about $135,000.&n= bsp; We should also be able to receive REPI fund for the excess amounting= to between $48,000 and $80,000 (60% to 100% level). While we do not have a firm quote = or contract for pricing on the turbines we have been told that the total cost = will be very close to $6 million. =

The scenario for= one turbine is not exactly just half of that for two turbines due to the variability of production. We estimate that we could save about $380,000 by not buying about 7.5 million = kWh of electricity. Our excess wo= uld be only about 440,000 kWh returning $14,000 in revenue. REPI funds would range from about = $5,000 to $8,300. Purchase and installation is the only thing that is truly cut in half to $3 million.

Permitting will = either be through Nicollet County Environmental services, for one turbine, or the state of Minnesota, for two. Although both proces= ses will be similar, the state regulations are less stringent than the county’s. Both require a public hearing and a comment period before the final permit will be issued.