The business side of ‘blowing in the wind’

A new company that specializes in directing investment capital into long-term on-farm wind turbine leases may be the answer for farmers who lack the up-front money to buy or lease a turbine.

United Wind is tapping into the growing market for electricity that is generated and used on site, said chief executive officer Russell Tencer.

He said farmers must typically provide the up-front money when leasing a power generation system, which prevents many producers from exploiting what is sometimes called “free energy.”

“In our business plan, farmers get a 100 percent lease. They pay nothing upfront,” said Tencer.

The program is designed so customers can meet 50 to 100 percent of their electricity demands, he added.

“We arrange project finance bonds to cover the cost of equipment, installation, insurance and on-going maintenance. The landowner commits to a 20-year contract to pay for electricity at a discount compared to what he currently pays to a utility. It saves the average farm over US$200,000 in electricity costs over the 20-year lease.

“It’s more about reducing power that has to be purchased rather than selling back to the grid. For example, instead of paying $1,000 monthly for electricity, we’ll drop your utility bill to $100 per month. We set it up so your combination lease payment plus the reduced monthly utility bill is less than your previous monthly utility bill had been.”

Tencer said there are two business models when it comes to renewable energy.

The model with which most people are familiar is the commercial wind farm, which has 50 to 500 towers that are 300 to 400 feet tall. These are power plants designed to sell power to utilities at a wholesale rate.

United Wind uses the other business model, which is to install only one or two towers at each site, ranging in height from 100 to 150 feet. He said the turbines are more along the line of small to mid-sized consumer scale units.

The client can sell power to the grid, but that is not the intent and the model does not rely on that income.

He said this model relies on reducing the amount of power bought from the utility.

Tencer said his company will cover 20 years of maintenance at no additional cost to the farmer.

“That’s why we only install equipment that we’re sure is high quality and reliable,” he said.

“We own the equipment at the end of the 20 year lease.”

Canadian prairie farmers can expect to see United Wind turbines going up this year.

Tencer said he spends a lot of time studying wind maps, and he thinks the best Canadian wind blows in Manitoba, Saskatchewan and Alberta. There’s been a lot of interest from all those provinces, he added, and all Canadian transactions will be conducted in Canadian dollars.

Start-up money comes from investors, but payback comes from lease payments.

The turbine lease system closely parallels the solar panel lease program which has fuelled the rapid growth of solar power in the United States.

However, federal and state incentives in the U.S. have helped make solar panel lease companies competitive with conventional sources of power generation.

Electricity that is generated where it is used is becoming increasingly popular as all levels of government promote renewable energy and attempt to reduce dependence on the fossil fuel typically used in large scale power plants.

The United Wind plan may resemble that of solar panel leasing schemes, but the parallel to solar power stops there. Tencer said wind power and solar power belong in two different parts of the map.

“When it comes to your return on investment on solar versus wind, it really varies by location. Certain parts of North America have greater solar resources. Wind doesn’t compete well in sunny areas like California, Arizona or New Mexico,” he said.

“But when you get up into the northern parts of the continent, the Great Plains and up into Canada, the wind resource by far outstrips the solar resource. Wind turbines generate electricity at a much lower cost than solar panels. In the northern parts of the continents around the world, wind is the more efficient resource.”

The Distributed Wind Energy Association says one gigawatt of electricity was consumed where it was generated last year, but it expects to increase to 30 gigawatts by 2030.

United Wind, which is based in New York City, recently obtained $200 million from Forum Equity Partners of Toronto. It is said to be the largest-ever single investment in small wind projects. The money will fund 1,000 new projects and allow the company to build upon the 26 test projects initiated since 2013.

The fresh money allowed United Wind to open new offices in Denver and Kansas. The future Canadian office is expected to be in Regina.

For more information, contact Tencer at rtencer@unitedwind.com or visit www.unitedwind.com.

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