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Want to Finance a Wind Farm Project in Your Community? Try Crowdfunding

September 24, 2013 - 10:12am

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A wind turbine is installed at the Crow Lake Wind project, just east of Chamberlain, S.D. | Photo Courtesy of East River Electric Power Cooperative

A wind turbine is installed at the Crow Lake Wind project, just east of Chamberlain, S.D. | Photo Courtesy of East River Electric Power Cooperative

The Crow Lake Wind project is the largest cooperative-owned wind project in the United States. | Photo Courtesy of East River Electric Power Cooperative

The Crow Lake Wind project is the largest cooperative-owned wind project in the United States. | Photo Courtesy of East River Electric Power Cooperative

A wind turbine at the PrairieWinds South Dakota complex. East River Electric Cooperative funded a portion of a wind project with investments from more than 600 customers. | Photo courtesy of Jeff Nelson, East River Electric Power Cooperative

A wind turbine at the PrairieWinds South Dakota complex. East River Electric Cooperative funded a portion of a wind project with investments from more than 600 customers. | Photo courtesy of Jeff Nelson, East River Electric Power Cooperative

Jeff Nelson, general manager of East River Electric Cooperative, on the day he climbed a wind turbine at the PrairieWinds complex. | Photo courtesy of Jeff Nelson, East River Electric Power Cooperative

Jeff Nelson, general manager of East River Electric Cooperative, on the day he climbed a wind turbine at the PrairieWinds complex. | Photo courtesy of Jeff Nelson, East River Electric Power Cooperative

South Dakota Wind Partners purchased seven of the 108 wind turbines at the PrairieWinds complex. | Photo courtesy of Jeff Nelson, East River Electric Power Cooperative

South Dakota Wind Partners purchased seven of the 108 wind turbines at the PrairieWinds complex. | Photo courtesy of Jeff Nelson, East River Electric Power Cooperative

A wind turbine is installed at the Crow Lake Wind project, just east of Chamberlain, S.D. | Photo Courtesy of East River Electric Power Cooperative
The Crow Lake Wind project is the largest cooperative-owned wind project in the United States. | Photo Courtesy of East River Electric Power Cooperative
A wind turbine at the PrairieWinds South Dakota complex. East River Electric Cooperative funded a portion of a wind project with investments from more than 600 customers. | Photo courtesy of Jeff Nelson, East River Electric Power Cooperative
Jeff Nelson, general manager of East River Electric Cooperative, on the day he climbed a wind turbine at the PrairieWinds complex. | Photo courtesy of Jeff Nelson, East River Electric Power Cooperative
South Dakota Wind Partners purchased seven of the 108 wind turbines at the PrairieWinds complex. | Photo courtesy of Jeff Nelson, East River Electric Power Cooperative

For many writers, artists, designers, and entrepreneurs, crowdfunding is the latest way to get their projects financed. If you have a book you want to publish, a food truck to open, or a film to make and distribute, you reach out to your networks, pitch your project, and market it until you raise enough money to get started. In most cases, investors in crowdfunded projects receive some return for their investment – a copy of the book or film, meals from the food truck, etc.

East River Electric Cooperative, a supplier of electric power for rural areas of South Dakota and Minnesota, has taken this model to a new level. The cooperative wanted to add more wind power to its portfolio, so it crowdfunded from the communities it serves to finance a portion of a wind farm project. With investments from more than 600 East River customers, the co-op purchased more than 10 megawatts of capacity at the Crow Lake Wind project, just east of Chamberlain, S.D.

A Tried-and-True Approach to Financing

The idea of finding investors in their community for clean energy projects wasn’t new for East River: it used a similar model during the 1990s to build a biorefinery to produce ethanol from corn grown in the area. In 2009, the co-op formed South Dakota Wind Partners (SDWP)with the South Dakota Corn Utilization Council, the South Dakota Farmers Union and the South Dakota Farm Bureauto provide its members with an opportunity to invest in wind power. Crow Lake Wind is currently the largest wind project in the United States owned by a co-op.

Jeff Nelson, general manager of East River, said that a key feature of SDWP’s Crow Lake Wind project was that it was funded mostly by residents. Companies were not permitted to invest in the project with the exception of families who had incorporated their farms and were leveraging equity from their properties or farm-related assets.

Nelson said the process started with the partnership contributing $80,000 in seed capital. SDWP then held a series of 27 town hall meetings to share the wind farm proposal with South Dakota residents and offer them a chance to invest in the project. Within 60 days, SDWP raised $16 million in investments and equity for the $21.5 million project.

Wind Investment Pays Off Big 

Each investor in the wind project bought shares at $15,000, with many investors purchasing more than one. The shares work like a bank’s certificates of deposit, offering a 7% return every six months, with additional accelerated depreciation benefits for farmers leveraging assets. The model was so successful that even Nelson’s mother bought two shares of the wind project.

East River’s investment in wind power has paid off in other unexpected ways. SDWP’s turbines have been generating more energy than East River expected. The wind farm operated at a capacity factor of nearly 48% between April 2011 and March 2012, 9% more than what was projected in the original business plan. As a result of the of electricity generated by the wind farm, car manufacturer Chevrolet purchased Renewable Energy Certificates from the partnership as part of its Chevy Carbon Reduction initiative, which seeks to support unique energy projects with local impacts.

In addition to the crowdsourced funding, the Crow Lake Wind project was supported by a $6.7 million grant through the 1603 Program, a tax incentive administered by the Treasury Department and funded under the American Recovery and Reinvestment Act, which offered direct cash payments instead of an investment tax credit for qualified renewable energy projects. While the stimulus-funded 1603 Program stopped taking applications in October of 2012, other U.S. electric co-ops are looking to develop their own community-funded projects using different financing models.

The National Rural Electric Cooperative Association and the Energy Department named East River the Wind Cooperative of the Year Award for its innovative financing strategy and extensive community outreach and involvement.

Interested in finding out if your utility uses wind power as a source of electricity? Contact your local utility to see if they offer green power purchasing programs, which support clean energy sources such as wind. To learn more about building small wind projects on your own property, check out the Small Wind Guidebook on the Wind Powering America website.

How can we make it easier for more communities to use wind power? Lessons can be learned from Wind Powering America’s Wind Cooperatives of the Year winners and their innovative wind projects. Wind Powering America is a nationwide initiative of the Energy Department’s Wind Program designed to educate, engage, and enable critical stakeholders to make informed decisions about how wind energy contributes to the U.S. electricity supply.

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