Producing Renewable Energy: Wind

alternative practice names:

Wind Turbines; Wind Project; Small Wind Energy System

Wind turbines can be used on dairy farms to produce renewable energy and reduce electricity costs. While solar panels are a far more popular method of on-farm energy production, wind energy can be a viable alternative for farms with the right conditions.

Important considerations when considering an on-farm wind project include the average wind speed at the farm, land availability, local ordinances that may prohibit tall structures, the distance between the project site and the electric grid, electricity costs charged by the utility company, and the farm's willingness to take on a large capital expense and/or long-term loan to finance the project.

REGIONALITY

When used, in what regions in the U.S. is the practice found:

Northwest, West, Upper Midwest, Southwest, Northeast, Southeast

FARM SIZE

When used, typically found on farms of the following sizes:

All Sizes

Practice Benefits

Reduced operating costs: The economics of wind projects vary based on factors such as the installed cost, current electricity rates paid by the farm, and the farm's ability to utilize tax credits and system depreciation. Additionally, farms may choose to have a third party own and operate a wind project, purchasing electricity at a fixed rate through a power purchase agreement. Despite these variables, on-farm wind projects typically lead to lower electricity bills and can offer a quick payback, especially if the farm is in a high-wind area, pays high rates for grid electricity, and benefits from tax credits.

Fixed electricity rate: Wind projects offer stable and predictable electricity costs for the project's lifespan (typically 20 to 30 years) since the generated electricity is immune to utility rate increases. Although electricity prices are difficult to predict, they generally rise by at least 1-3% annually, sometimes more. This stability can result in substantial cost savings over the project's life.

Implementation Insights

Site-specific or Farm-specific requirements

Area: Farms interested in producing on-farm renewable wind energy need a suitable installation site, which is typically a minimum of one acre. Roof-mounted systems are also possible but are not common due to the size limitations of the wind turbines.
Average windspeed: The first step in determining if a wind project is feasible for a farm is to assess the available wind resources at the prospective project site. It is typically recommended that the site have an annual average wind speed of at least 10 mph (4.5 m/s) at a 30-meter height.
Interconnection point: Another crucial factor is the distance from the nearest interconnection point to the electrical grid. Most farm wind projects are tied to the electric grid, and a long interconnection distance can significantly raise project costs.

Required Capital Expenditures (CapEx)

Wind turbine costs: The purchase and transportation of wind turbines represent a major capital expenditure, including the cost of key components such as towers, blades, nacelles, and control systems.
Design and engineering: Farms incur costs for site assessment, feasibility studies, and the design of the wind energy system by a wind project developer or an engineering, procurement, and construction (EPC) company. It is advisable to obtain at least two quotes from reputable wind project development companies to compare their prices and services. Farms may need to invest in the installation of measurement equipment, such as anemometers, to assess wind potential and determine site suitability before proceeding with the project.
Installation and construction: The installation and construction process involves labor and equipment expenses needed for setting up the turbine, constructing foundations, and assembling the components. These costs may include cranes, heavy machinery, and specialized personnel.
Interconnection: Connecting the wind turbine to the electric grid requires investment in cabling, transformers, and other associated electrical infrastructure. These costs can be significant, particularly if the installation site is located far from the nearest grid connection point.
Project management and consulting fees: Wind project developers or EPC firms charge fees for managing the execution of the project and ensuring regulatory compliance. Wind project proposals typically include a 20- to 30-year financial pro forma that shows the project cash flow for each year, accounting for the value of the electricity generated, ongoing expenses (e.g., loan payments, insurance, etc.), and tax and depreciation benefits, if applicable. Financial pro forma statements from wind vendor proposals should be reviewed by an independent third party, such as the farm’s tax advisor or another consultant or fiduciary familiar with renewable project economics, which will likely add to capital expenditures.
Lease negotation and legal fees: If the farm owner leases the land to a wind power developer, the owner avoids direct capital costs associated with the installation and maintenance of the turbine. However, there may be costs related to lease negotiations and legal fees to formalize the agreement.

Required Operational Expenditures (OpEx)

Maintenance: Most maintenance can be performed without skilled labor, but it is recommended to ask the wind project installer about operation and maintenance (O&M) costs; sometimes, wind project vendors provide these services free of charge or have an O&M add-on package. Routine maintenance involves tasks such as checking oil and lubrication levels and inspecting various components, including bolts, bearings, air filters, the gearbox, generator, and brake system, to ensure proper functioning.
O&M packages: Some vendors provide operation and maintenance packages, which can either be included in the initial agreement or offered as an add-on service. These packages may help reduce the farm’s overall maintenance-related expenses.
Insurance: Wind turbine projects incur ongoing insurance premiums to protect the investment and cover potential risks.
Annual inspections: Costs are associated with conducting annual inspections to verify that the wind turbine is operating efficiently and safely.
Component replacement: Wind energy projects may incur expenses for replacing failed components, such as gearboxes and blades. Gearboxes, in particular, might need to be replaced 1-2 times over the turbine's estimated 20-year lifespan, making it important to consider the manufacturer's warranty period.
Energy monitoring system: Depending on the system setup, there may be costs associated with an energy monitoring system that tracks the electricity generated by the wind turbines.

Implementation Considerations

Planning process: The most challenging aspect of implementing a wind turbine project on a dairy farm is navigating the site-specific considerations and vendors to determine the best solution for the farm. There are many variables and farm-specific considerations that come into play when pursuing a wind project, which can be overwhelming. One way to reduce the up-front time investment of the farm is to seek out trusted wind project vendors who are experienced with dairy farm installations and obtain two or more project proposals to compare. Given the differences in renewable energy project rules and regulations from state to state, it is also advisable to speak with local university extension and state department of agriculture contacts to seek out unbiased local expertise when considering a wind project.
Site-related issues: Inadequate average wind speeds at the project site (less than ten mph) or inadequate land to support the installation of wind turbines (typically 1-acre minimum).
Permitting challenges: Issues related to environmental permitting or problems with interconnection to the electrical utility, including lack of access to three-phase power, long distances between the installation site and grid access, and the electric utility's inability to approve additional distributed generation projects on the substation serving the farm.
Vendor and system components: Choosing a disreputable or inexperienced wind project vendor can result in numerous problems, such as using low-quality components with no warranty, inability to contact the vendor once the project is installed, or inaccurate project financial modeling. Another factor to consider is stray voltage, which can occur with improperly installed systems.
Financing and project economics: It is important to scrutinize lifetime financial pro forma and consider assumptions such as the loan rate, annual utility electricity cost “escalator” (the assumed annual percentage cost increase of grid-supplied electricity), and the treatment of tax credits. It is best to present the financial pro forma to the farm’s tax accountant or other fiduciary experienced with renewable energy project economics to get an unbiased opinion, particularly in terms of whether the farm can take advantage of the federal investment tax credit (ITC), renewable energy certificates (RECs), accelerated depreciation, and other state/local tax benefits.

Financial Considerations and Revenue Streams

TAX INCENTIVES AND DEPRECIATION

Virtually all wind projects take advantage of the federal investment tax credit (ITC), whether directly or indirectly. If the farm is profitable and pays taxes, there is an opportunity to take advantage of the federal business ITC, which currently allows businesses to claim 30% of their wind turbine system cost as a tax credit. The 30% ITC will last until at least 2033 when it will drop to 26%. Tax credits are a one-for-one reduction in income tax and can be rolled over into future years if the farm can’t take advantage of them in the year of installation. Additionally, wind projects can be depreciated over a 5-year period (or less in some cases), which can help to improve project economics and lower the farm’s tax burden. If a farm cannot take advantage of tax credits or depreciation, it may be able to work with a wind project developer to reduce the project cost (where the developer or another entity monetizes the tax credit).

RENEWABLE ENERGY CERTIFICATES

Renewable energy projects typically generate renewable energy certificates (RECs). Wind project owners receive 1 REC for each megawatt-hour (1,000 kilowatt-hours) of electricity generated by the wind turbines. These RECs can then be sold to buyers who want to utilize them for carbon offsets (see Offsets and RECs, EPA). There are many complexities surrounding RECs, and the value of RECs and ability to sell them varies from state to state. It is recommended to ask the wind vendor about how the project RECs can be monetized by the farm.

PROJECT FINANCING

Most farms opt to finance wind projects using a 15 to 20-year loan to reduce up-front costs. The loan term and interest rate have a dramatic impact on project economics, so it is important to seek out the best terms available. There are specialized loans available through state government, electric utilities, or non-profit organizations that offer lower interest rates. Additionally, there are federal programs such as REAP that offer loan guarantees.

OTHER GRANTS AND INITIATIVES

Before purchasing equipment or incurring other expenses for a wind project, it is critical to investigate grants and incentives available through local, state, and federal sources to ensure that the project remains eligible. It is common for grants and incentives to require that an application be submitted, reviewed, and/or approved before making equipment and labor purchases.

CARBON CREDITS

This practice is commonly credited in carbon markets. The practice can generate inset credits.

Notes:

Opportunity may be limited if a utility company has already claimed the renewable energy credit.
This would be quantified and negotiated in each individual corporate program, including how long a producer could claim the benefit.
Generally, a producer would need to start using this practice to qualify.
These rules may also change by location subject to a state utility commission.

FINANCIAL RESOURCES, TOOLS, AND CASE STUDIES

Additional Resources

Article: Farmers' Guide to Wind Energy: Legal Issues in Farming the Wind (Farmers' Legal Action Group)

Article: O&M Best Practices for On-Site Wind Turbines (Pacific Northwest National Laboratory)

Article: Small-Scale Wind Energy on the Farm (ATTRA Sustainable Agriculture)

Factsheet: Wind Turbines & Farm Stray Voltage (Midwest Rural Energy Council)

Guidebook: Small Wind Guidebook (U.S. Department of Energy)

Tool: Wind Energy Maps and Data (U.S. Department of Energy)

Environmental Impacts

REDUCES FARM GREENHOUSE GAS EMISSION

On-farm wind energy production reduces a farm’s greenhouse gas (GHG) footprint by providing renewable electricity that offsets fossil fuel use and emissions associated with grid power, contributing to long-term carbon reductions.

REFerences

Schnepf, R. D., Resources, Science, and Industry Division. (2007, March). Agriculture-based renewable energy production. Congressional Information Service, Library of Congress.

Alignment with FARM Program

FARM Environmental Stewardship (ES) V2-V3 Alignment

FARM ES enables users provide information about wind energy production and use, which is taken into account in the greenhouse gas intensity footprint.

Practice Overview