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When devising the massive Hale Community Energy project, a quartet of wind farm developers must have been channeling the old adage that everything is bigger in Texas. The 1.1 GW project – which is currently in pre-construction development in Hale County – was the brainchild of community wind managers working on four separate projects, explains Tom Carbone, president of Dallas-based developer Tri Global Energy, which, at the time, was a developer-consultant to each of the four community wind projects.

Realizing that their respective wind projects could theoretically cannibalize each other during the grid-interconnect process, the four managers had theorized that their collective efforts could be maximized by working together as opposed to developing the wind projects one at a time. Therefore, Hale Community Energy LLC – a limited liability company (LLC) made up of the original four wind farm LLCs and Tri Global Energy – was formed last September.

An LLC is a corporate entity owning the wind farm, and individual investors can buy shares of the LLC. The investments are used to fund project development activities. This structure provides legal protection to the investors in case of financial problems or accidents at the wind farm. In this type of structure, gains and losses are allocated to the shareholders for tax purposes.

The Hale Community Energy partnership includes Cottonwind Farms, Lakeview Wind Farm, Hale County Wind Farm and East Mound Renewable Energy Project. Each wind farm is an LLC, with its own board managers, members and project development assets.

The consolidated project, which spans 120,790 leased acres of privately owned farm and ranch land, including 349 landowners, is being planned in five phases.

The first phase – a wind farm between 240 MW and 300 MW – is expected to start construction in 2015, notes Carbone, who explains that the project is an example of the whole being greater than the sum of its parts.

“It’s a way to lower the cost of development and share the various development risks across each wind farm owner,” he says. For example, working alone, each project entity would have been looking at as much as $5 million in pre-construction development costs, and Carbone notes that wind measurement campaigns, environmental assessments and interconnection studies done pre-construction require plenty of upfront money. By pooling their collective resources and focusing their efforts on the initial phases of the project, the owners in the new LLC are able to greatly reduce pre-construction development costs – as much as 50%, in some instances.

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“We’re treating the wind farm as one homogenous land development split into different phases,” explains Carbone. He adds that each development area has been optimized based on capacity, turbine layout and tax districts. In Texas, property taxes can be a major determiner of project success. Therefore, district tax abatement programs can go a long way toward easing project economics.

According to Carbone, Tri Global facilitated joint development discussions among individual management teams and found that the stakeholders overwhelmingly supported the project and saw a real economic development opportunity to get in on the ground floor.
“The unique aspect of the project was really borne out of the community,” says Carbone, adding that project stakeholders foresaw the potential to revitalize the agrarian community that has been ravaged by drought and hard economic times.

 

The community wind model

So-called community wind projects, such as Hale, are labeled as such because of the ownership structure. In community wind, ownership can take many forms. Unlike traditional utility-scale projects, which are developed on land that is leased from landowners, the landowners have complete or partial ownership of a community project.

According to the website of Windustry, a Minneapolis-based non-profit, ownership in a community wind farm allows landowners the opportunity to reap greater rewards (and less risk) than owning the turbines themselves. As joint investors, landowners are part owners of a wind farm. The entire investment group is responsible for developing and managing the wind farm.

In addition to the gains provided by the wind farm, the ownership group stands to benefit from a development fee, a standard feature contained in most financing packages. Developer fees, generally speaking, can range from $50,000 to $100,000 per megawatt depending on the financial strength and completeness of the project.

According to Carbone, the goal is to reinvest the proceeds from the development fee back into the project so as to ensure the project’s viability, as well as to provide the LLC’s members a long-term annuity.

Together, Carbone says, the landowners in the surrounding community have invested more than $5 million in development capital for the Hale project. On average, he estimates, each community member invested between $30,000 to $40,000. He says the upfront money helped to assess and monitor wildlife habitat, secure tax abatements, perform site design and layouts, and prepare for construction financing.

Although Woodstock, Minn.-based Juhl Energy and Brooklyn, N.Y.-based OwnEnergy employ similar community-wind business models, Carbone estimates that Hale is unique based on the scale of the project and the volume of landowners involved. In fact, some in the local media have taken to calling Hale the world’s largest community-sponsored utility-scale wind energy project.

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Interconnection agreements

Due to its proximity to the Southwest Power Pool (SPP) and the Electric Reliability Council of Texas (ERCOT), a lot of the effort thus far has gone into securing methods to grid-connect the output from Hale, Carbone notes. In fact, in May, the LLC executed a generation interconnection agreement for 478 MW of capacity with SPP and Southwest Public Service Co., an Xcel Energy subsidiary. Carbone notes that requested interconnection amount is enough to satisfy two phases of the project.

Carbone says that Hale also stands to benefit from upgrades under the recently completed Competitive Renewable Energy Zone (CREZ) project, a $7 billion transmission line build-out within the ERCOT footprint designed to alleviate congestion on the wires as wind energy is transported from the Panhandle and West Texas to state load centers. Fortunately for project stakeholders, the CREZ build-out resulted in a substation located adjacent to the project and near the existing SPP TUCO substation. Carbone says the new CREZ substation will save project owners from needing to lay a 25-mile-plus generation tie to the ERCOT system. At the time these projects were formed, SPP was the closest interconnection at the TUCO substation. However, thanks to nearby transmission upgrades, interconnection within ERCOT is now possible. (For more information about ERCOT and the Texas wind market, see “Should Lone Star Wind Owners Brace For Texas-Sized Trouble?”.)

According to Carbone, Tri Global Energy has completed screening studies with ERCOT and has initiated full interconnection studies for the project’s interconnection to the ERCOT market. For his part, Carbone notes that having the option to interconnect within the SPP and ERCOT markets offers project stakeholders tremendous exposure to off-takers within both markets.

Finally, although it is a bit premature to talk specifics about possible turbine suppliers, Carbone says that Alstom is a likely candidate to land the contract. For starters, the turbine maker already has a supply agreement for 29 Alstom ECO 110/122 wind turbines that will power Tri Global’s 79.5 MW Fiber Winds project, located in Crosby County. Additionally, because of the slowdown felt by all turbine manufacturers globally, Alstom’s plant in Amarillo could use the work – action that would prove to be yet another local benefit of a community wind project. w

Project Profile: Hale Community Energy Wind Farm

Everything In Texas Is Bigger – Even The Community Wind Farms

By Mark Del Franco

Texas wind developers have pooled their collective forces and are planning to build a 1.1 GW utility-scale community wind project.

 

 

 

 

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