Contracts value distributed wind -- ABB underwrites 30 MW in 17 projects in US Midwest

An innovative way of making small, dispersed wind energy plant attractive in the Midwest power market has again been found by developer Northern Alternative Energy (NAE). This time, finding a way to reap two subsidies at once, NAE has arranged for $25 million in financing from ABB Energy Capital for 17 scattered wind plant in Minnesota.

NAE will install 46, 660 kW Vestas units at 17 different sites in western Minnesota for a total capacity of about 30 MW. Power will be sold to Xcel Energy, formerly Northern States Power (NSP), under a 30 year power purchase agreement (PPA).

The deal makes the most of the efficiency advantages of dispersing wind plant in a power system, says Bill Grant of the Izaak Walton League in Minnesota, an advocacy group. "It's a marriage of good wind resources with the ability to connect to the transmission system, all at a saving to the system, not a cost to the system," he adds.


The financing arrangement involves 17 contracts, leases and PPAs. "Most lenders would find this structure too complex," says NAE's Greg Jaunich. The key to the deal lies in its ability to capitalise on Minnesota's $0.015/kWh incentive for wind projects under 2 MW built on agricultural land. Combined with the federal Production Tax Credit (PTC), which gives about $0.015/kWh, though adjusted for inflation, the combined production incentive amounts to at least $0.03/kWh.

The wind plant are part of an innovative 350 MW gas-wind contract NAE won earlier this year from NSP in a bidding competition against all other power sources (Windpower Monthly, May 2000). The wind turbines for the contract will be developed in 2001 and the gas in 2002, Jaunich says.

The arrangement of using both PTC and state tax credits is a first for wind in the US, according to Grant. "This is great," he says. "Using the two tax credits allows projects to go forward that otherwise may not have."

ABB aggression

ABB Energy Capital is a subsidiary of ABB Financial Services, a global financier with more than $20 billion in managed assets. Although this is the company's first financing of a US wind project, it is looking "aggressively" at the American market and plans to focus more on distributed generation and renewables, according to ABB's Gregg Haggart.

"There is a tremendous window of opportunity to invest in renewables now and in the future, especially in wind," Haggart says. "From a lender's point of view, wind is a lot less risky now due to improvements in technology."

NAE has also submitted a bid for Xcel's request for proposals for 80 MW of wind -- winners are expected to be announced late this month or early next month. NAE also plans to bid as much as 100 MW in a wind tender released last month by UtiliCorp in Kansas (page 20). "Our goal is to have 150 MW of wind energy on-line by December 2001," Jaunich says.