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Overcoming resistance, North Dakota embraces a wind-driven future

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The Luverne Wind Farm in east-central North Dakota helps Otter Tail provide low-cost electricity to customers.
Source: Otter Tail Power Co.

When Xcel Energy Inc. broke ground Aug. 9 on its 150-MW Foxtail Wind Project in central North Dakota, U.S. Sen. Heidi Heitkamp pointed to the project as an example of the continued growth of wind energy and jobs across the state.

"In North Dakota there is no shortage of wind, & when we can harness this natural force, it powers homes and communities, & creates thousands of jobs as part of a true-all-of-the-above energy strategy," the Democratic senator tweeted after the event.

For many years, North Dakota's "all of the above" energy policy mostly referred to fossil fuels. The state's Republican-controlled Legislative Assembly has, at times, resisted the spread of renewable energy. In recent years, North Dakota lawmakers have attempted to place a moratorium on new wind projects, limit financial incentives for the wind industry and set stricter requirements for wind-farm approvals, with varying degrees of success.

Now, however, North Dakota state officials and businesses are embracing an energy future based not only on abundant natural gas resources, but also on the state's powerful winds.

The state's energy resources are abundant. North Dakota sits atop the gas-rich Bakken Shale and produced 29.1 million tons of coal in 2017. It also is on the northern end of the "wind belt" that runs through the U.S. Plains states from the Canadian border to the Gulf Coast. According to the American Wind Energy Association, North Dakota has at least 394,000 MW and up to 742,000 MW of potential wind generation, depending on the size of the turbines. That is among the highest in the nation. But the state ranks 11th for installed wind capacity, with 3,082 MW of operating wind capacity (up from less than 100 MW in 2005) and another 3,239 MW in various stages of development, according to data from S&P Global Market Intelligence.

"The state is still ripe for development," said Peder Mewis, a regional policy manager with the Clean Grid Alliance, a group that works to advance renewable energy in the Midwest.

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In 2016, gas accounted for about 2.5% of North Dakota's generation mix, and hydropower provided about 5%, according to data from S&P Global Market Intelligence. The two biggest sources were coal and wind, making up a little more than 70% and 21.5%, respectively, of the state's generation. Coal-fired capacity remained nearly flat between 2003 and 2016, according to the U.S. Energy Information Administration, while wind grew from 64 MW of nameplate capacity to 2,828 MW.

Mewis and others attribute the surge in wind growth to the federal production tax credit, the state's developer-friendly permitting process and transmission projects like CapX2020, a $2 billion program by utilities in Minnesota, North Dakota, South Dakota and Wisconsin to upgrade and expand the transmission grid to bring wind from remote regions of the Plains to urban markets.

To continue to attract wind developers, and the local economic benefits that wind farms provide, said Republican Rep. Mike Brandenburg, an early supporter of wind power, lawmakers must avoid the wrangling between wind opponents and supporters that marked the most recent legislative session in 2017.

"In the mix of things, if we all work together, North Dakota can really grow here," he said.

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Leveling the playing field

As more wind projects have come online, feedback from local communities — both positive and negative — has increased, as people see the effects that wind power has on the coal industries and on local economies.

"As those numbers climbed a lot of people started paying more attention," state Sen. Jessica Unruh said.

Unruh has criticized the federal wind production tax credit for hurting North Dakota's coal industry and in 2017 sponsored a bill that would have banned most new wind energy projects for two years. That measure never made it out of the Senate.

"It's important for us to have a balance for renewables and fossil fuels," she said. "The production tax credit passes off the costs so greatly that it's really provided an imbalance to the way that electricity is sold and distributed."

To level the playing field, state lawmakers have attempted to change how wind projects are taxed and to set reclamation and bonding requirements similar to those faced by other energy sources. In the 2015 legislative session, lawmakers restructured a state tax to reflect both the production and the capacity of wind farms, slightly increasing the taxes they pay. Lawmakers also took away a sales tax exemption for wind farms as of Jan. 1, 2017.

Unruh tried unsuccessfully to get support for a bill to direct more money from wind development to the state, by redirecting some revenue produced by wind generation taxes from local governments to the state's general fund and the renewable energy development fund. Brandenburg said that in January 2019, when the next session starts, he plans to introduce a bill that would keep two-thirds of wind energy tax revenue in counties where projects are located and send the remainder to the state. The new structure, which would apply to new wind projects, is designed to counter the argument that wind contributes little to state coffers.

The wind development community is banding together through a coalition called the Wind Industry of North Dakota. Still in its early stages, the group will provide a unified voice to advocate for wind development before state regulators and lawmakers, Mewis said.

North Dakota utility regulators have also put more requirements on wind projects.

The Public Service Commission in May 2017 set new decommissioning requirements for wind facilities and approved a rule giving preference to wind projects that use light mitigation technology to address concerns over constantly blinking red lights atop wind turbines, commission Chairman Randy Christmann said.

Under the decommissioning rules, owners have to file a plan, including cost estimates, before projects starts operating, just as coal mines must be cleaned up once they shut down. Owners of existing facilities had to file plans by July 1. The commission in June approved the first set of plans, signing off on decommissioning plans for 14 NextEra Energy Inc. wind farms.

Christmann said these requirements are "vitally important" for the long-term good of North Dakota,

"We have an obligation to make sure we're not cluttering our landscape with obsolete wind turbines," he said.

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Local windfalls

Advocates point out that the environmental legacy of wind farms is negligible compared to coal mines and hydraulically fractured oil and gas wells. And they point to the windfall that new projects can create for local communities.

A study from North Dakota State University's Department of Agribusiness and Applied Economics found that in 2016, wind energy industry contributed more than $170 million in economic activity in the state. The study, released in September 2017, also said the wind industry paid $7.7 million in property taxes and an estimated $14.4 million to land owners for leases.

Extra income from energy infrastructure like pipelines or wind turbines can be a huge boost for farmers, especially in tough economic conditions. North Dakota's agriculture industry, based largely on soybeans, wheat and corn, has endured low prices, tariffs and uncertainty about the Renewable Fuel Standard and the federal farm bill, said Kayla Pulvermacher, legislative director of the North Dakota Farmers Union.

"To be able to get some extra income through these other means, for some folks, that means the world," she said. "It's keeping them going."

The wind industry's contribution to North Dakota's economy is still far smaller than fossil fuels, especially when it comes to jobs. Operating a wind turbine is not as labor-intensive as North Dakota’s other energy sectors, said Nancy Hodur and Dean Bangsund, two of three authors of the North Dakota State University study.

The study estimated that the wind industry supports 500 direct and secondary jobs, only 136 of which are within the industry itself. The manufacturing of components for wind turbines, however, adds a little more than 1,000 jobs in the state.

Saving customers billions

For utilities, wind power removes uncertainty around future prices for fossil fuels and saves customers money. The Foxtail project is part of Xcel's 1,850-MW Upper Midwest wind expansion.

"These projects will save our customers billions in avoided fuel costs over their operating lives and also help to power North Dakota's local economies," Xcel Energy spokesman Matthew Lindstrom said.

Xcel Energy's planned wind projects will generate an average of $1.2 million in annual property taxes and $1.5 million in annual landowner payments, Lindstrom said, while adding more than 200 construction jobs in North Dakota and 15 full-time jobs. The company's Courtenay Wind Farm and Border Winds Power Project, meanwhile, generate a total of $1.5 million in annual property taxes and $1.7 million in annual landowner payments.

Otter Tail Power Co. has about 250 MW of wind operating, 150 MW of which it owns directly. The Otter Tail Corp. subsidiary owns 48 MW of the Ashtabula Wind Energy Center; 40.5 MW of the Langdon Wind Energy Center; and 49.5 MW of the Luverne Wind Farm. The company will add to its ownership numbers once it buys the 150-MW Merricourt Wind Project from EDF Renewable Development when the project is complete. The project is part of the company's plan to replace expiring capacity purchase agreements and prepare for the 2021 retirement of the 1950s-era 140-MW coal-fired Hoot Lake plant near Fergus Falls, Minn.

Brian Draxten, the company's manager of resource planning, said the primary concern when adding to its generation mix is finding the least-cost resource for its customers in Minnesota, North Dakota and South Dakota. And that often means wind.

"Of course one of the reasons North Dakota is always lowest cost is that it has tremendous capacity factors," he said. "It's a very windy place."