What's behind a wind deal? Northumberland County situation being closely watched

Ongoing coverage of Northumberland County's attempt to come to terms on a wind farm lease deal have resulted in international attention. Many of the renewable energy Internet trade sites have noticed our debate, and are closely watching the outcome.

(This was written prior to Wednesday night's public meeting, so we're not aware of the latest developments.)

Specific examples of this attention can be viewed at a number of Web sites, including iStockanalyst, which provides up-to-date analysis on stocks, commodities and businesses worldwide. The story was also carried by PA NewsLine, Reading Eagle, PennLive, Renwablesbiz, WindAction, National Wind-Watch, Energy Central and The Carbon Capture Report, to name a few.

Hard to believe that Northumberland County has made such a stir in the global renewable energy news, or is it? Many of the major wind power developers are closely watching situations such as ours to get a feel for what type of policies local municipal officials are developing.

Why is the next move by our county officials so important? We can look to a recent article in the Kennebec Journal, Augusta, Maine, to help with the answer. The article discusses Maine's Utilities and Energy Committee, which would set a fee that wind power project developers would pay to the communities and counties that host projects. A proposed bill would require that developers pay a "constituent" amount in every community, something proponents say offers tangible benefits for residents.

Likewise, our situation could mean boon or bust for a county that is desperately in need of economic revitalization.

Following is some data that might make the complicated world of renewable energy, and specifically wind power, a bit easier to understand.

Typically in a wind energy deal, there several variables and factors that play a role in developing an agreement between the landowner and the developer. Although other factors come into play, let's stay to the basics.

A wind energy development company will first identify plots of land that have good potential to produce energy from wind. The developer will enter into a first lease agreement to allow set up of a meteorological tower to get real-time data on the properties that are being considered for the wind farm. The towers typically collect data for one year. The data is then used to decide if the property is viable for a wind farm, and will also allow the developer to decide what size turbines (number of megawatts, mw) would be most appropriate.

Once this data is in hand, the developer can decide on how to proceed. The size of a typical wind turbine is 1.0 mw to 2.5 mw. The rating of the turbine is called the name-plate rating. In the case of Northumberland County, the most likely size for the wind farm being considered is 1.5 mw.

Other critical factors of consideration in a lease agreement with the county would be the Power Purchase Agreement (PPA) and the Renewable Energy Credits (RECs).

The PPA is a legal contract between the energy producer and the electricity purchaser. In other words, the wind farm developer will be paid a certain amount by the electric utility for the electricity sold. Renewable power such as wind energy is more desirable now because Pennsylvania passed a law requiring 18 percent of all energy carried by the utilities to be renewable by 2021. If the utilities do not make the renewable power themselves, they must purchase it from entities such as wind and solar farms.

RECs are financial credits that are produced and certified when a renewable energy project begins producing power. One REC represents one megawatt hour (mwh) of renewable energy that is physically metered and verified from the generator of the renewable power. RECs are typically sold separately as commodities in the marketplace and, depending on the market conditions, can be worth from $10 to $90 mwh. These credits, along with the PPA, are extremely valuables.

In its most simplistic form, any county contract should include a standard land lease payment, along with a piece of the PPA and the RECS generated. In some instances, landowners become the developer and/or owner and keep 100 percent of the RECs. A straightforward calculation using a name-plate rating of 1.5 mw and building 10 wind mills on the land at today's current PPA and RECs would result as follows:

One wind windmill at 1.5 mw would produce approximately $328,500 per year if the power generator received an average price of 10 cents per kwh. Over a 20-year lifetime of the windmills operating without accounting for inflation or increase in the PPA, a wind farm of 10 windmills could generate gross revenues of $65,700,000 just for the PPA.

The total RECs created by a single wind mill in the project would be 3,285. Multiplying 3,285 RECs times an estimated value of $10/REC would generate $32,850 per year per windmill. An operating farm of 10 wind mills at minimum could generate $328,500 per year or $6,570,000 over a 20-year lifetime.

Taking the PPA and RECs combined over 20 years for a 10-turbine farm with each windmill having a name-plate rating of 1.5 mw would realize gross revenues of $72 million.

Recognizing that there are building costs and operating expenses for the wind farm, the owner/developer would not realize a profit of $72 million, but net revenues do stand to be potentially in the $10s of millions of dollars over the lifetime of the farm.

Clearly, the developers stand to make quite a bit of profit over the lifetime of this project, otherwise why do it? Northumberland County, a financially distressed government entity that has cut government services, laid off workers and raised health care premiums, needs to carefully weigh its actions on renewable/alternative energy decisions such as this one.

The world is watching.

(Bartos is renewable/green energy coordinator for the lower anthracite region through the office of state Rep. Robert E. Belfanti Jr., D-107. "Green Light" appears every other Thursday.)