Small wind energy producers guide

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Contents Section

Pages

1. Introduction

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2. Wind energy today

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3. Wind turbine basics Components Turbine size Performance Wind speed

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4. Project development Site evaluation Interconnection requirements Wind turbine and dealer selection Electric construction

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5. Interconnection procedures and requirements Net metering Small power producer Community-based Energy Development (C-BED)

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6. Financial analysis Investment cost Operation and maintenance Revenue

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7. Appendices A. Wind resource maps B. Used wind equipment C. Choosing a dealer D. Application for interconnection to Otter Tail Power Company E. Minnesota Small Power Producer Rider

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19 23 26 31 35

1. Introduction The past decade or two have seen electric utilities using increasing amounts of wind generation as a source of electricity for their customers. At the same time, home and business owners who traditionally have purchased electricity from utilities now are taking advantage of small power producer tariffs, purchased power agreements, and other incentives to become producers in the wind generation business and sell energy back to electric utilities.

This document is for customers of Otter Tail Power Company who want to learn more about wind energy and owning and operating a small wind generation system. Items specifically covered include: •

The growth of wind as a power generation resource.

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The development of small-scale wind generation projects.

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Options available for selling wind generated electricity to Otter Tail Power Company.

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Steps needed for interconnection to Otter Tail Power Company’s power transmission and distribution systems.

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Various incentives and options available for wind generation projects.

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Appendices containing more detailed information about important subjects.

This information is presented in good faith and intended to be used as general information only.

Information is supplied upon the condition that the persons receiving same will make their own determination as to its suitability for their purposes prior to use. Information is subject to change without notice. In no event will Otter Tail Power Company be responsible for damages of any nature whatsoever resulting form the use of or reliance upon this information or the product to which information refers.

Nothing contained herein is to be construed as a recommendation to use any product, process, equipment, or formulation.

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2. Wind energy today Capturing the energy in the wind isn’t a new concept. It’s been done for many years to grind flour, pump water, sail ships, and operate machinery. In many undeveloped countries—and in some remote areas of this country—wind power still is being used for these and other tasks.

What’s new is the increasing use of wind energy to generate electricity. In 2006 it was second only to natural gas as the fastest growing source for new power generation. According to the Global Wind Energy Council the wind-energy industry in the United States grew by 27 percent in 2006, with new installed generating capacity of 2,454 megawatts. Growth in 2007 is projected at an additional 26 percent.

The following chart shows the rapid growth rate of wind energy as a global source of electric generation.

Source: Global Wind Energy Council, Press Release, February 2, 2006.

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3. Wind turbine basics Components A small wind turbine typically is composed of the following parts: Rotor assembly The rotor assembly includes the blades, shaft, and hub. The turbine blades are attached to the center hub, which is attached to the shaft. Wind flows over the blades and converts the kinetic energy available in the wind to rotational energy in the rotor assembly. Blades usually are constructed of fiberglass, wood, or reinforced plastic.

Generator The generator produces electricity from the rotation of the rotor assembly.

Gearbox Most turbines above 10 kw use a gearbox to match the rotor speed with the generator speed.

Nacelle The nacelle houses the gearbox and the generating components of the turbine.

Yaw system or tail vane A yaw system keeps the turbine aligned with the wind. Most small turbines use a simple tail vane that directs the rotor into the wind.

Source: American Wind Energy Association, Wind Energy 101

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Control system The complexity of turbine control systems varies greatly. On simpler systems the controls consist of switches and fuses. Because it’s important that a turbine have an automated braking system for protection against severe weather or other emergencies, more complex systems rely on computerized controls for the yaw system and brakes.

Tower The tower elevates the turbine to a height at which wind speeds are higher than those at ground level. Towers must be strong enough to support the turbine in adverse conditions such as extreme winds, hail, and ice storms.

Turbines for small-scale applications typically will use a non-tilt-up, self-supporting tower.

These towers usually feature a lattice or cylindrical structure. Although the towers are strong, setting them often requires a crane or other specialized equipment.

Base The base is the structure that secures and supports the tower. In a proper and safe installation the base will use steel reinforcement rods and heavy-duty anchor bolts specially designed for the application. Be sure to plan for township or county government inspection of the base design, construction, and soil type.

Turbine size The turbine’s nameplate generator capacity will influence other turbine size characteristics including blade length, tower height, nacelle dimensions, and base design and construction requirements.

Typical dimensions Maximum generation capacity Application Tower height Rotor diameter Blade length

10 kw Residential net metering 90 feet 49 feet 20 feet

900 kw Electric utility scale 237 feet 170 feet 83 feet

Performance The output of a turbine is dependent on wind speeds, nameplate capacity of the turbine, and turbine performance. The two key terms that define turbine performance are: Reliability The percentage of time that a turbine is functional and capable of generating electricity, regardless of wind speed or other environmental considerations.

Capacity factor The comparison of actual electric generation from a turbine to the theoretical output had the turbine operated in ideal wind speeds 24 hours a day.

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Wind speeds The average wind speed in your area is critical to the long-term success of your project. Keep in mind that wind power is related to the cube of the wind speed, which means that doubling the wind speed increases wind power by a factor of eight. As a result, two sites with the same average wind speed can have drastically different wind power characteristics causing the output of wind generators to vary widely.

Keep in mind, too, that the average wind speed at any location is height specific. In other words, average wind speeds will increase with height.

It’s also important to note that a turbine will not produce its rated nameplate capacity in all wind speeds. The chart below illustrates the power output of a 20-kilowatt Jacobs brand turbine at different wind speeds. Note that the turbine starts to generate at a seven mph wind speed and gradually increases to its rated power output at a wind speed of twenty-seven mph.

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4. Project development Hard work and due diligence during the project development phases will pay off in later stages when your turbine is operational. Some of the tasks in developing your small wind project will include site evaluation, permitting, interconnection requirements, financing procedures, site preparation, turbine selection and delivery, and utility interconnection.

Site evaluation Factors to include in evaluating a potential site include land ownership, proximity to utility transmission and distribution lines, average wind speeds, and the rules, regulations, and permitting requirements of local governments (most likely counties and/or townships).

Land ownership You’ll realize maximum financial return from your project if you place it on your own land, avoiding a lease agreement with another landowner. It’s also advantageous to own the land around the turbine site.

Local rules and regulations Consult with your county, municipal, or township commission and/or zoning office about licensing requirements that might apply to the design and construction of your project.

Persistence may be necessary because zoning board members may associate your project with similar but much larger projects proposed by utilities and other wind project developers.

Typical issues to be addressed include: •

Setbacks from property lines, road right of way, etc.

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Safety standards for tower and electrical equipment and wiring.

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Noise.

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Interference with radio, television, and telecommunications.

Mick Sagrillo, an expert in small wind-energy development projects whose articles appear in the American Wind Energy Association (AWEA) Windletter, reports that generating positive public relations is the best strategy in dealing with local zoning ordinances.

Some suggestions from AWEA as to how positive public relations can be achieved include: •

Secure all necessary zoning approvals before ordering your turbine.

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Promote your project to neighbors before applying for your zoning permit.

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Use discussions about your project that take place at local churches, hardware stores, restaurants, and taverns to your advantage by being open and positive when you answer questions about your project.

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Work with your local newspaper to write a story about your project or consider writing your own press release.

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Invite any advocates for your project to zoning and permitting meetings.

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Average wind speeds As previously stated, the average wind speed at your site is a primary factor in the success of your project. That’s why it’s so important to select a site with maximum wind speed and no obstacles to block wind from any direction. A two-mile-an-hour difference in average wind speed can yield a 60 percent increase or decrease in energy production from identical wind turbines.

Another indicator of the importance of wind speed is this: Large developers invest millions of dollars in detailed, costly studies to track wind speed, direction, and other data before proceeding with a project. In most cases, the energy production and subsequent revenue stream from a small wind-energy development are unlikely to be significant enough to justify the cash outlay of such a study. However, it would be wise to use one or more free resources available online for more specific information about average wind speeds across Minnesota, North Dakota, and South Dakota. You also can refer to the wind resource maps in Appendix A. Pay special attention to the assumed height for the wind data on each map. Wind speeds vary significantly between ground level and a height of 150 feet. Also note the units of measure used in various resources and keep the following conversions in mind: Feet = Meters x 3.281 Meters = Feet x .3048 Miles per hour = Meters/second x 2.2369 Meters per second = Miles per hour x .44704 Wind speed database for the U.S. Upper Midwest region http://www.undeerc.org/wind Various maps of wind resources in Minnesota http://www.state.mn.us Detailed data on wind speeds at various sites in North Dakota http://www.undeerc.org/wind Wind resource map for South Dakota http://www.eere.energy.gov/windandhydro/windpoweringamerica Site access Construction of a suitable roadway for year-round access to the wind turbine is a necessity for maintenance, both scheduled and unscheduled.

Proximity to electric distribution lines A small wind turbine typically will interconnect to the utility’s distribution system. On the other hand, large utility-scale wind farms are more likely to require interconnection to the utility’s high-voltage transmission system. Be sure to work with your utility early in the project to determine the most suitable location for your turbine’s interconnection to the utility’s electric distribution system.

Interconnection requirements Working early in the process with your utility on procedures and requirements for interconnection to the utility’s electric distribution lines will be critical to the success of your project. Otter Tail Power Company has a set of procedures, processes, and standards that you must follow to qualify your small wind generator for interconnection to its electric distribution system. Otter Tail Power Company’s interconnection processes and procedures are further detailed in Section 5, Interconnection procedures and requirements.

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Wind turbine and dealer selection When shopping for a turbine you likely will select from one of two basic drive types, direct drive or gear driven. As with any other purchase it’s important to ask the dealer about the pros and cons of each type and select the one that’s right for you.

Because the market for turbines is relatively new and constrained, be prepared to wait up to 150 days after your down payment for product delivery.

Used turbines Be well informed before buying a used or rebuilt wind generator. Because generators are highly engineered mechanical devices with parts that wear out over time, they often require rebuilding.

And because they operate in an environment 100 to 150 feet in the air, access for repairs and maintenance is difficult.

The following information from the November 2002 monthly newsletter of the American Wind Energy Association contains key points for inspecting and rebuilding a used wind generator.

Appendix B: Used wind equipment contains the complete article.

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Check all mechanical components for wear or fatigue.

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Replace all bearings and bushings regardless of their age, function, or condition.

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Replace all bolts and fasteners regardless of age, function, or condition. If any bolts or fasteners have broken because of fatigue or vibration, identify and correct the problem.

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Check all electrical components and windings for integrity. When in doubt, re-insulate windings before putting them back into service.

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Sandblast and cover all metal parts with top quality paint.

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Rebalance the blades as a set with the rotor hub. Also, repaint the blades with a marine or automotive grade finish. Replace the leading edge tape on the blades after painting.

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Check used towers for any rusted or bent parts. Replace any bent components—do not attempt to straighten.

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Obtain a set of blueprints for the tower anchors and, if the used tower requires new anchors, have them fabricated to original specifications.

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Ask about warranties.

Choosing the right renewable energy dealer for your project is important. Appendix C, a publication from the State of Minnesota Department of Commerce, will provide you with questions to ask potential dealers and a list of dealers in Minnesota. The proper due diligence on parties selling used equipment and their qualifications to sell such equipment can save time and money in the long run.

Electric construction It’s always important to hire a licensed contractor to complete all electrical work to pertinent codes. This is especially important if you plan to interconnect to Otter Tail Power Company’s distribution and/or transmission system because the company will require that your system pass all national and state electrical code requirements.

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5. Interconnection procedures and requirements It’s Otter Tail Power Company’s policy, in accordance with federal and state regulations, to permit customers and other qualifying facility (QF) owners to operate their generating equipment in parallel with the company’s electric system whenever this can be done without adverse impact on the general public, or to company equipment and personnel.

The interconnection process is dependent upon several factors, including the generating capacity of your turbine, the location of the generator (state), and whether or not you intend to sell energy to Otter Tail Power Company through a process called net metering. This manual will guide you through the process if you interconnect and sell energy from your small wind generator to Otter Tail Power Company under net metering, small power producer tariffs, or an agreement negotiated through a Community-based Energy Development (C-BED) project. This information does not address interconnections made to the transmission system (i.e., 41.6 kV and greater) or projects that are beyond the size limitations noted below.

Net metering Net metering is the term used to define state legislative requirements for a customer’s host utility to pay the customer what the utility charges for electricity at times when the customer’s wind generator makes more electricity than the customer is using.

Availability The net metering tariff is available to customers operating in Minnesota and North Dakota only.

Refer to the Otter Tail Power Company web site www.otpco.com for updated net metering tariffs.

Application of the net metering tariff is accomplished through use of bi-directional metering technology capable of metering electricity to determine your payment to or from Otter Tail Power Company based on your energy consumption and production from your wind generator.

Generator size The net metering tariff for Otter Tail Power Company is limited to generators rated at 40 kw and under in Minnesota and 100 kw and under in North Dakota.

Process Once you have determined that you want to interconnect your small wind generator to Otter Tail Power Company’s transmission and distribution system, you must take the following steps: 1. Contact Otter Tail Power Company’s generation interconnection coordinator at 800-493-3299 or send an email to IdeaCenter@optco.com.

2. Complete the Application for interconnection to Otter Tail Power Company. A copy of this form is available in Appendix D. Part of this process requires proof of an insurance policy valued at $300,000 for each occurrence for units 40 kw and smaller.

3. Complete the Federal Energy Regulatory Commission (FERC) Qualifying Facility Application available from Otter Tail Power Company’s generation interconnection coordinator at 800-493-3299 or IdeaCenter@otpco.com.

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4. Upon FERC approval of your Qualifying Facility Application, submit your approval number to Otter Tail Power Company’s generation interconnection coordinator at: Generation Interconnection Coordinator 215 South Cascade Street PO Box 496 Fergus Falls, MN 56538-0496 5. Obtain the Uniform Statewide Contract for Cogeneration and Small Power Production Facilities Agreement with Otter Tail Power Company.

6. Pending approval of zoning applications you should be ready to start turbine construction.

Small power producer Availability The Small Power Producer tariff is available to customers operating in Minnesota, North Dakota, and South Dakota.

Generator size The small power producer tariff for Otter Tail Power Company is limited to generators rated at 100 kilowatts and under for Minnesota, North Dakota, and South Dakota. Insurance requirements are $1,000,000 for each occurrence for turbines between 40 kw and 100 kw.

Process The steps to follow for interconnection of a wind generator under Otter Tail Power Company’s Small Power Producer tariff are similar to the steps for the net metering interconnection process.

For more details contact the generation interconnection coordinator at 800-493-3299 or IdeaCenter@otpco.com.

Community-based Energy Development Availability The Community-based Energy Development (C-BED) statute is public policy adopted by the Minnesota legislature in 2005. The goal of C-BED is to optimize local, regional, and state benefits from wind-energy development and to facilitate widespread development of communitybased wind-energy projects throughout Minnesota. Because C-BED is a result of Minnesota legislation, the statute applies only to projects in Minnesota. For more information visit www.c-bed.org.

Generator size Payment schedules under the C-BED statute are available to qualifying owners regardless of project size. No individual can own more than 15 percent of a project larger than two turbines.

Process The process is dependent upon the size of your C-BED project. For details contact the generation interconnection coordinator at Otter Tail Power Company at 800-493-3299 or IdeaCenter@otpco.com.

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Projects with an interconnection at voltages of 41.6 kv or higher will require you to file a request with the Midwest Independent Transmission System Operator, Inc (Midwest ISO) and follow necessary Midwest ISO procedures.

The Midwest ISO is the nation’s first Regional Transmission Organization (RTO) approved by the Federal Energy Regulatory Commission (FERC). The Midwest ISO’s role is to ensure equal access to the transmission system and to maintain or improve electric system reliability in the Midwest. Based in Carmel, Indiana, the the Midwest ISO spans 15 U.S. states and the Canadian province of Manitoba and is responsible for monitoring the electric transmission system that delivers power from generating plants to wholesale power transmitters (the entities that deliver power to distribution companies that, in turn, deliver power to residential and commercial customers).

If your C-BED project will require interconnection to Otter Tail Power Company’s system at less than 41.6 kv, contact the generation interconnection coordinator at Otter Tail Power Company at 800-493-3299 or IdeaCenter@otpco.com regarding interconnection procedures and requirements. Whether the interconnection can be completed under the Otter Tail Power Company process or must follow the Midwest ISO process depends upon its potential impacts to the transmission system.

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6. Financial analysis The return on your investment in a wind turbine is dependent upon several factors including the upfront project costs, future maintenance costs, revenue from energy sales, tax credits, and other incentives.

Investment cost Expect the installed cost of a small wind-energy system to be about $1,000 to $3,000 per kw of generator capacity. When contracting for the installation of a small wind turbine, be sure to include the following costs above and beyond the cost of the turbine: • • • • • • • • • •

Tower Excavation and anchoring and base structures Zoning permits Site inspections Electrical inspections Turbine delivery Electrical construction Utility interconnection Insurance Access roads

Operation and maintenance costs Insurance costs are an important factor in operation and maintenance costs. Interconnection to Otter Tail Power Company’s transmission and distribution system will require a $300,000 insurance policy for generators with capacity of less than 40 kw. Generators of 40 kw to 100 kw require a $1,000,000 policy. Check on rates for specific policy requirements and plan for these expenses in your financial analysis.

Be sure to budget adequate costs for maintaining your wind turbine. Planning for labor, materials, equipment, and all other expenses needed to maintain your wind turbine over its expected life cycle is imperative. Perhaps the most important thing to remember is that tower height is as important a consideration in maintenance as it is in efficiency. A tower that places the turbine lower than the surrounding trees or buildings will subject it to turbulence, thereby shortening its productive life.

The American Wind Energy Association (AWEA ) recommends the following guidelines for planning the maintenance budget of your wind turbine: Direct-drive turbines You should budget 1 percent of the installed cost of your wind generating system for each year of operation and maintenance over the life of the system. For example, if the installed cost of your wind turbine was $80,000, you should plan for approximately $800 per year in operation and maintenance costs.

Gear-driven turbines

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Gear-driven turbines have more moving parts than direct-drive turbines. Consequently, they have more wear points. AWEA recommends budgeting 2 percent of the installed turbine cost for each year of operation over the life of a gear-driven turbine.

Revenue Assuming you interconnect your wind generation resource to Otter Tail Power Company’s electrical transmission or distribution system, you’ll be eligible to sell energy to the utility. The revenue you receive from your investment will depend on: 1. How much energy your turbine produces.

2. The rate you receive for each kilowatt-hour of generation.

Energy production The energy production from your turbine will depend on the unit’s nameplate capacity, how often the turbine is available to generate power, its level of maintenance, and the average wind speed at the turbine site.

Electric rate Otter Tail Power Company operates under tariffs for small power producers. The appropriate rate for your project is dependent on several factors, including the state in which your turbine is located and the generating capacity of your turbine. Conditions and rates for the three states served by the company appear below.

Minnesota customers are eligible for net metering of interconnected wind generation systems that are below 40 kw in capacity. With net metering, a bidirectional meter will measure both the energy you use and the energy your turbine produces. The rate for the energy you generate will be the same as the average cost per kwh for your customer class.

Small power producer tariffs also are in place for projects with up to 100 kw of generation capacity. Projects over 100 kw in capacity are subject to rate negotiations. See Appendix E for the 2006 Small Power Producer Rider. Tariff language is subject to change. Contact the generation interconnection coordinator at 800-493-3299 for current information.

C-BED payment structures are available for facilities that qualify under the statute (MN Statute §216B.1612). Minnesota also has the distributed generation tariff for up to 10 MW. North Dakota customers are eligible for small power producer rates for generators up to 100 kw in capacity. Net metering also is available for qualifying facilities up to 100 kw in capacity. Projects over 100 kw in capacity are subject to rate negotiations with Otter Tail Power Company based on the utility’s avoided costs of generating incremental kilowatt- hours of energy.

South Dakota customers are eligible for small power producer rates for generators up to 100 kw in capacity. Net metering does not apply. Projects over 100 kw in capacity are subject to rate negotiations with Otter Tail Power Company based on the utility’s avoided costs of generating incremental kilowatt-hours of energy.

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Incentives Federal incentives Under present law, an income tax credit of 1.5 cents a kilowatt-hour (adjusted annually for inflation since 1992) is allowed for the production of qualified wind-energy facilities and other sources of renewable energy. The current value of the credit is 1.9 cents a kilowatt-hour of electricity produced. The credit originally was created under the Energy Policy Act of 1992. It has been renewed several times since then, and presently is available to installations operational before January 1, 2009. Consult with a proven tax expert about eligibility of your specific project for the federal production tax credit.

Minnesota incentives Wind and Photovoltaic Systems Property Tax Exemption In 1992 the Minnesota legislature enacted MS2000 272.02(21) and (23) to exclude the value added by photovoltaic and wind-energy systems rated at less than 2 MW from property taxation.

Partial exemptions apply to larger systems.

Current rules state that wind systems between 2 and 12 MW of rated capacity are about 90 percent exempt from property taxes, and projects over 12 MW are about 75 percent exempt.

In Minnesota utilities face higher property tax rates than private companies, so exempting a portion of a project’s value from the property tax creates a competitive advantage for independent power producers. This statute applies to the residential, commercial, and utility sectors for the life of the system. However, because the property tax valuation is determined at the time of initial installation the wind exemptions apply to a decreasing tax as the property depreciates. This is important to consider in calculating life-cycle costs.

Wind-energy generation grants Minnesota has been unique in offering payments for energy output, placing a premium on project production rather than providing investment credits for rated capacity which may or may not be fully utilized once installed. As enacted in MS2000 216C.41, Minnesota offered a payment of 1.5 cents per kilowatt-hour for electricity generated from new wind-energy projects less than 2 MW in capacity. Qualifying projects received payments for ten years, extending beyond the current eligibility expiration date of January 1, 2005. Projects were admitted to the program on a first-come, first-served basis until new wind capacity installed under the program statewide totaled 100 MW. While funding for grants under MS2000 216C.41 presently is not available, check with the State of Minnesota in future years for continued availability.

Wind-Energy Equipment Sales Tax Exemption Under MS2000 297A.25-68&72, wind-energy equipment used as an electric power source—as well as all materials used to manufacture, install, construct, repair, or replace the systems—are exempt from Minnesota state sales tax.

For more information on state wind incentives, contact: Lise Trudeau, Engineer, Renewable Energy and Advanced Technologies Minnesota Department of Commerce Energy Division 85 7th Place E., Suite 500 St. Paul, MN 55101-2198 Phone: Toll Free: Fax: Email: Web:

651-297-1178 800-657-3710 (Minnesota only) 651-297-7891 Energy.Info@state.mn.us http://www.state.mn.us 16

Value-added Stock Loan Participation Program This low-interest loan program, administered by the Minnesota Department of Agriculture through the Rural Finance Authority (RFA), was created in 1994 as MS2000 41B.046 to assist farmers wishing to buy into wind-generation cooperatives. The maximum project size is 1 MW, and the RFA will provide up to $24,000 and 45 percent of the loan principal over 8 years under the current rules. Individual financial institutions issue these “participation loans” and the RFA subsidizes the interest rate. The result is interest rates averaging 4 percent. The program is funded through a revolving account and is available for residential and commercial sectors.

Agricultural Improvement Loan Program for Wind Energy This low-interest loan program, administered through the RFA, provides loans to farmers for improvements or additions to permanent facilities up to 45 percent and up to $100,000 of the loan principal with payment terms up to 10 years. Wind-energy conversion equipment was added to the legislative definition of agricultural improvements (MS2000 41B.043) in 1995. Like Minnesota’s Stock Loan Program, these are participation loans, whereby individual financial institutions working with the RFA make the loans. The Rural Finance Authority has a Master Participation Agreement—governing the responsibilities of the various parties in such participation loans—with 365 financial institutions throughout the state.

For more information on state loan programs contact: Wayne W. Marzolf Minnesota Department of Agricultural Rural Finance Authority 90 West Plato Boulevard St. Paul, MN 55107-2094 Phone: Fax: Email: Web:

612-297-3557 612-296-9388 Wayne.Marzolf@state.mn.us www.mda.state.mn.us/AgFinance/stockloan.html and www.mda.state.mn.us/AgFinance/improvement.html

North Dakota incentives Geothermal, solar, and wind tax credits (corporate and personal) In 2001 the North Dakota State Legislature enacted a statute (ND Century Code 57-38-01.8) that allows any individual or corporate taxpayer to claim an income tax credit of 3 percent per year for five years for the cost of equipment and installation of a geothermal, solar, or wind energy device. As of January 1, 2001, taxpayers have been able to claim this 3 percent credit in the year of installation and four consecutive years. If the eligible device is part of a hybrid system that uses other energy sources, only the portion of the system that uses geothermal, solar, or wind energy is eligible.

Georthermal, solar, and wind property tax exemption North Dakota statute (ND Century Code 57-02-08(27)) exempts from local property taxes any solar, wind, or geothermal energy device. Qualifying systems can be stand-alone or part of a conventional system, but in the case where the solar, wind, or geothermal system is part of a conventional energy system, only the renewable energy portion of the total system is eligible.

This exemption is applied only during the five-year period following installation. To apply for this exemption, which is applicable to commercial, industrial, and residential sectors, system owners must contact their local tax assessor or their county director of tax equalization.

For more information visit: Division of Community Services: http://www.state.nd.us/dcs/Doc/energy.pdf Office of the State Tax Commissioner: http://www.state.nd.us/taxdpt/ 17

South Dakota incentives Property tax exemptions South Dakota statute (SD Codified Laws 10-6-35.20) exempts from local property taxes renewable energy systems on residential and commercial property. The exemption applies to the entire assessed value of residential systems and 50 percent of the installed cost of commercial systems, and may be taken for three years after installation. This exemption is not allowed for systems that produce energy for resale.

Financial analysis template You can use this template for financial evaluation of your wind-energy project.

Investment 1 2 3 4

Turbine Tower and anchors Grid interconnection system Total equipment costs

Turbine costs

5 6 7

Installation Fees and other charges Total installation costs

All electrical, construction, and other installation costs

8 9 10

_______ kwh at $._______/kwh Tax credit at $._______/kwh Total revenue

Estimated generator production X applicable energy rate

11 12

Estimated annual insurance costs

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Insurance Maintenance Total operation and maintenance

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Revenue less expenses

Subtract line 13 from line 10

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Simple payback

Divide line 7 by line 14

Tower and anchor costs Interconnection fees and costs Add lines 1, 2, and 3

All legal fees, permitting costs, and other charges Add lines 4, 5, and 6

Estimated generator production X applicable tax credit rate Add lines 8 and 9

Estimated annual maintenance costs Add lines 11 and 12

For more information about your small-scale wind-power project, contact Otter Tail Power Company’s Idea Center at 800-493-3299.

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Appendix A Wind resource maps Minnesota, North Dakota, and South Dakota

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Minnesota wind resource map by wind speed at 30 meters

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North Dakota wind resource map

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South Dakota wind resource map

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Appendix B Used wind equipment American Wind Energy Association, November 2002

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Buying used wind equipment Have you ever considered buying a used wind system for installation at your home or farm? At first glance, these offers might seem like bargains compared to the cost of a new wind system.

However, the buyer should beware that sometimes the extra installation and maintenance costs can eat away all the up-front savings.

Occasionally, wind systems are advertised in the classified ad section of the local newspapers, in the ad sections of renewable energy magazines like Home Power or Solar Today, on internet sites like eBay, or on e-mail list-serves that cater to the self-generation crowd, such as aweawind-home@yahoogroups.com.

You should consider any used wind turbine as a rebuilding project, and not as something you will merely install on a tower. While wind turbines are relatively simple mechanical devices, they are highly engineered, and the mechanical parts wear out. This doesn’t mean that you shouldn't consider buying a used wind generator. But you most likely won't be able to just install a used turbine on a tower without doing anything to it.

I wouldn't consider installing any used wind turbine without completely rebuilding the entire machine prior to installation. Remember that wind generators live 80 to 120 feet in the air. That makes them relatively inaccessible for most major repairs that might be required. Inspections and minor service work are easily performed atop a tower, but replacing bearings, for example, might be impossible.

All mechanical components should be checked for wear or fatigue. Any part that is even questionable should be replaced. Order original replacement components from the manufacturer if it is still in business. If the manufacturer is long gone, which is more likely with used equipment, find a wind system dealer who has a reputation for being proficient with your particular turbine. As a last resort, you may be able to find a local machinist to make whatever parts you require.

Bearings and bushings should all be replaced, regardless of their function or condition.

Replacements should be of at least as good a quality as the originals. While these parts might seem to be in good condition, you have no way of testing them under the dynamic stresses they experience during operation. It's far easier to replace them on the ground in your shop than to wrestle with them on top of the tower.

All bolts and fasteners should also be replaced, regardless of condition. Do not skimp on quality replacements. Welds should be inspected for integrity. If they have broken due to vibration or fatigue, determine what went wrong and rectify the problem. If you are not proficient at welding, find a professional who is.

Electrical components and windings should also be checked for integrity. Wire insulation should be tested for breakdown. When in doubt, reinsulated windings before putting them back into service. Small motor rewinding shops often specialize in this type of service.

Finally, sandblast all metal parts. Prime and paint these with an excellent grade of paint. A good job done now will pay for itself in the years to come.

This is also the time to rebuild the blades, which usually show the most visible wear on the entire system. Rebalance the blades as a set with the blade hub. Repaint the blades with automotive or marine grade finishes, both of which are expensive, but are formulated to withstand the harsh environment that a wind turbine experiences. The leading edge tape on the blades will need to be replaced after painting. This material is available from companies who specialize in wind turbine rebuilding.

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If you have purchased a used tower with the wind generator, pay particularly close attention to its condition. Replace all used components that show any sign of rust. Bent components must also be replaced, not straightened. The stresses resulting from a bend could seriously jeopardize the integrity of a vital component. Welds must be inspected for stresses and fatigue breaks.

All tower fasteners must be replaced with quality parts of at least as good a specification as the originals. If you have a guyed tower, carefully inspect all guy cables, turnbuckles, and hardware, and replace anything with even the hint of rust, damage, or fatigue. The tower is one area where you really do not want to cut corners. Doing so could result in a catastrophe.

Used towers rarely come with anchors, as these are usually left in the concrete at the tower's original home. Obtain a set of blueprints for the tower anchors and have them fabricated to the original specifications. This will include having them galvanized for a long life in the ground.

Occasionally, someone advertises a "remanufactured" wind system for sale. Be especially wary of such equipment. While there are a few companies doing business who are qualified to remanufacture wind turbines, the vast bulk of these turn out to be what I call "rustoleum rebuilds". That is, someone shot a fresh coat of paint on the machine and put it up for sale.

I know of someone on the west coast who bought a "rebuilt" wind generator through the Internet from a party several thousand miles away. The seller literally painted over dirt and grease. While it was true that the machine was rebuilt, the seller failed to specify exactly how long ago that took place. Inspection of the unit after it was purchased indicated that it likely had at least 10 years of service on it after it was rebuilt. This was never disclosed. The buyer, having no recourse, ended up having a bona fide wind turbine remanufacturer completely go through the machine, essentially paying for this twice.

If you find a remanufactured wind turbine for sale, closely investigate the party selling the system and their qualifications for rebuilding such equipment. If they have no reputation that you can unearth, proceed carefully. A few "satisfied customers" may be no more than shills set up by the seller. However, this is a small industry, and word gets around as to who is doing quality work and who is not. Keep digging until you find the information you need to help you make an intelligent decision.

If the remanufactured wind machine does not come with a warranty, be even more cautious.

Remember the old adage: "If it sounds to good to be true, it probably is." While quality remanufactured equipment is available, it will likely not be purchased at "bargain prices". It takes time and money to correctly remanufacture a wind turbine, to say nothing of putting a warranty on it.

If all of this sounds like I'm trying to steer you away from used and rebuilt wind equipment, I am, to an extent. Just make sure you understand what you're getting into. I know of a few people who have successfully rebuilt and installed a used wind system. What they all shared in common were excellent welding skills, machining ability, and a familiarity with mechanical systems. This doesn't mean, however, that you cannot also be successful. Just be prepared for a long and involved, albeit rewarding, project.

--Mick Sagrillo, Sagrillo Power & Light [Editor’s Note: The opinions expressed in this column belong solely to the author.]

First Published: November, 2002

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Appendix C Choosing a dealer

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Appendix D Application for interconnection to Otter Tail Power Company

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Appendix E Minnesota Small Power Producer Rider 2006

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Otter Tail Corporation d/b/a OTTER TAIL POWER COMPANY Fergus Falls, Minnesota

Volume I, Sheet 70 Rate Designation P-01M, Page 1 of 2 Twenty third revision ELECTRIC RATE SCHEDULE

SMALL POWER PRODUCER RIDER (Net Energy Billing Rate) AVAILABILITY: Available to any qualifying facility with generation capacity not exceeding 40 kW. METERING CHARGE: $1.40 per month PAYMENT SCHEDULE: Payment per kWh for energy delivered to utility in excess used.

Energy Credit Rate Code Rate Zones Residential 6.485¢ per kWh 40-910 1&9 -IFarm 5.809¢ per kWh 40-930 9 -IGeneral Service 7.617¢ per kWh 40-940 1&9 -ILarge General Service 5.339¢ per kWh 40-960 1&9 -ISPECIAL CONDITIONS OF SERVICE: The customer will sign a contract, agreeing to terms and conditions specified for small power producers. The minimum term of the contract is 12 months.

REGULATIONS: General Rules and Regulations govern use under this schedule.

TERMS AND CONDITIONS: The use of this rate requires that special precautions be taken in the design of associated metering and control systems. The following terms and conditions describe these precautions and shall be followed on all customer-owned small qualifying facilities (SQF).

1. The customer will be compensated monthly for all energy received from the SQF less the metering charge. The schedule for these payments is subject to annual review.

2. If the SQF is located at a site outside of the Company's service territory and energy is delivered to the Company through facilities owned by another utility, energy payments will be adjusted downward reflecting losses occurring between the point of metering and the point of delivery.

3. A SQF must have a generation capacity of at least 30 kW to qualify for wheeling by the Company of the SQF output. In the event that the SQF desires, and qualifies for, wheeling by the Company of the SQF output, arrangements will be made subject to special provisions to be determined by all utilities involved. This also applies to SQF's outside the Company's service territory.

MINNESOTA PUBLIC UTILITIES COMMISSION Docket No. Filing Date: December 27, 2006

EFFECTIVE for bills dated on and after January 1, 2007, in MN Bernadeen Brutlag Manager, Regulatory Services

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Otter Tail Corporation d/b/a OTTER TAIL POWER COMPANY Fergus Falls, Minnesota ELECTRIC RATE SCHEDULE

Volume I, Sheet 70 Rate Designation P-01M, Page 2 of 2 Twenty third revision

SMALL POWER PRODUCER RIDER (Continued) TERMS AND CONDITIONS: (Continued) 4. A separate meter will be furnished, owned and maintained by the Company to measure the energy to the Company.

5. The SQF shall make provision for on-site metering. All energy received from and delivered to the Company shall be separately metered. On site use of the SQF output shall be unmetered for purposes of compensation.

6. The customer shall pay for any increased capacity of the distribution equipment serving him and made necessary by the installation of his generator.

7. Power and energy purchased by the SQF from the Company shall be under the available retail rates for the purchase of electricity.

8. The customer's 60 hertz generator output must be at the voltage and phase relationship of the existing service or of one mutually agreeable to the Company and the customer.

9. The customer will provide equipment to maintain a 100% power factor (+ or - 10%) during periods of generator operation.

10. The Company reserves the right to disconnect the customer's generator from its system if it interferes with the operation of the Company's equipment or with the equipment of other company customers.

11. Prior to installation, a detailed electrical diagram of the generator and related equipment must be furnished to the Company for its approval for connection to the Company's system. No warranties, express or implied, will be made as to the safety or fitness of the said equipment by the Company due to this approval.

12. The customer shall execute an electric service contract with the Company which may include, among other provisions, a minimum term of service.

13. Equipment shall be provided by the customer that provides a positive means of preventing feedback to the Company during an outage or interruption of that system.

14. The customer shall install, own, and maintain all equipment deemed necessary by the Company to assure proper parallel operation of the system.

MINNESOTA PUBLIC UTILITIES COMMISSION Docket No. Filing Date: December 27, 2006

EFFECTIVE for bills dated on and after January 1, 2007, in MN Bernadeen Brutlag Manager, Regulatory Services

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