HOW TO BUILD A SMALL WIND ENERGY BUSINESS. LESSONS FROM CALIFORNIA. Karin Sinclair family decided to build a new house, they made sure they. took their …

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How to Build a Small Wind Energy Business: Lessons from California
Preprint
K Sinclair
To be presented at the ASES SOLAR 2007 Conference Cleveland, Ohio July 713, 2007

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NREL/CP-500-41504 July 2007

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HOW TO BUILD A SMALL WIND ENERGY BUSINESS LESSONS FROM CALIFORNIA
Karin Sinclair National Renewable Energy Laboratory National Wind Technology Center 1617 Cole Blvd Golden, CO 80401 Email: Karin_Sinclair@nrelgov

ABSTRACT Incentives for small wind turbine installations, either residential or non-residential, are currently available in a number of states The purpose of these incentives is to stimulate the market for this technology and provide financial assistance for early adopters Without such incentives, small wind systems are not likely to be cost effective, depending on the local utility electricity rates and the available wind resource While incentives can stimulate the market, local permitting requirements are also a key factor in whether systems can be easily installed Reducing barriers to small wind turbine system installations can also contribute to localized economic development This paper highlights the experience of one installer, whose business is focused in one county in California As a result of a number of factors converging, the installer has been instrumental in installing over 1MW in small wind system capacity in just over 6 years, growing his business
from 1 full-time equivalent FTE to 675 FTE The purpose of the paper is to highlight market expansion factors, not to endorse any particular turbine product Testimonials from local customers provide insight into why over 100 turbines have been installed in one county since 2000, including economic, environmental, and national security reasons 1 INTRODUCTION Approximately 11 states currently provide financial incentives for small wind turbine installations see Forsyth, et al These incentives include rebates, tax credits and

grants Table 1 In California, residential customers installing small wind turbine systems are eligible for a state buy down rebate of 21,150, which could amount to 40 of initial project costs Coupled with high local utility rates, above average electricity consumption, and efforts to reduce permitting costs and time, an independent PV and small wind system installer identified local opportunities resulting in over 100 installations as of March 2007 These systems have helped the owners offset, or in some cases eliminate, their dependency on electricity from the local utility TABLE 1 STATE FINANCIAL INCENTIVES STATE CA HI MA MT NJ NY NC OH UT VT WI SWT INCENTIVE
Rebate Tax Credit Rebate Property Tax Exemption, Tax Credit, Revolving Loan Program Rebate Rebate Tax Credit Grants Tax Credit Rebate Productivity Incentive, Grants

Source: DSIRE, as of 4/13/07

This paper will explore the impact state incentives, streamlined county permitting requirements and a willing installer, coupled with high electricity and high utility rates, can have on both facilitating system installations and, ultimately, the positive economic development benefits derived by the local county

2 BACKGROUND Within the Department of Energys DOE Wind Program, goals have been set for the Distributed Wind Turbine DWT Program that require gradual increases in the number of small wind systems installed nationwide Table 2 At present, DOEs goal is to expand the number of small distributed turbines deployed in the US five-fold by 2015, from a 2007 baseline Some criteria needed to facilitate these goals currently exist, such as high utility rates and individual customer interest On the other hand, limited financial incentives and permitting barriers make it more difficult In order to meet these goals, incentives will be necessary and barriers to installation will need to be
reduced TABLE 2 DOE DWT PROGRAM GOALS Fiscal Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 Distributed Wind Units1 22002 2706 3328 4094 5035 6194 7618 9370 11524

Eventually gaining approval to install his wind turbine, he expanded his construction business to include small wind turbines As a distributor for Bergey Windpower Company, he began installing the 10kW model in two California counties, Riverside and San Bernardino

1 Current DOE goal, subject to change 2 Base year count is still being validated

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The case study highlighted in this paper illustrates how turbine installations can be increased when all the necessary factors for success are in place Replication of the success highlighted here will be paramount in ensuring DOE meets its DWT goals 3 NUMEROUS FACTORS CONVERGE AT THE RIGHT TIME Several factors have come together to fuel and develop what began as a personal interest into a prosperous business Combining personal interest, high local utility rates/high customer electricity consumption, state incentives, local permitting requirements, and customer needs to satisfy economic, environmental and national security interests, Joe Guasti has grown an
interest into a thriving small wind turbine installation business 31 Personal Interest Joe Guasti has long been interested in small wind turbines Photo 1 After purchasing his first Bergey 10-kW turbine, he encountered issues with the local permitting agency

Photo 1 Joe Guasti shows off one of two turbines on his property 32 High Local Utility Rates/High Electricity Consumption Southern California Edison SCE provides service for residential customers in San Bernardino and Riverside Counties Electricity consumption is relatively high, in large part due to summer air conditioning needs In addition, many residents are all electric SCE has implemented a 5tier residential rate structure Table 3, aimed at encouraging conservation from its customers In addition to reducing residential electricity consumption, many SCE customers seek to reduce their dependency on the utility by installing small wind turbines to generate some or all of their own electricity SCE also has a net metering program, which further benefits the customer Reconciled annually, customers often produce more electricity than needed to meet their own needs, especially when the utility is faced with peak summer air
conditioning demand By feeding excess generation back into the utility grid, the utility limits its need to utilize very expensive, fossil-fuel based peaking generators and

customers bank kWh, to be used when the wind is not sufficient to meet their needs TABLE 3: SCE RESIDENTIAL RATE COMPARISON cents/kWh
Dec 05 Tier 1 Baseline allotment Tier 2 1-30 more than baseline Tier 3 31-100 Tier 4 101-200 Tier 5 More than 200 over baseline Current Authorized Deferred 118 137 228 352 475 Jan 07 118 137

territories of SCE as well as Pacific Gas Electric, San Diego Gas Electric and Bear Valley Electric, with the first 75 kilowatts kW eligible for 250/watt and an additional 150/watt for installed capacity between 75kW and 30kW All customer classes are eligible ie, residential, commercial, institutional such as schools, agricultural, and industrial TABLE 4: SMALL WIND TURBINE SYSTEMS INSTALLED, BY YEAR YEAR 2001 2002 2003 REBATE Range 16,325 to 16,870 16,325 to 23,498 16,325 to 25,125 21,450 at 50 rebate; 2004 19,590 to 15,870 21 UNITS INSTALLED 6 18 16 NOTES Rebate 50 system cost Rebate 50 system cost Rebate 50 system cost CEC changed basis for incentive; 5 installs in 2004
carryovers from orders placed in 2003 and eligible for the 50 rebate CEC decreased incentive twice Maximum CEC rebate Maximum CEC rebate Total systems installed to date

118 118 137 137 166 223 198 312 198 312

The baseline kWh allotment is set by the CPUC, and varies by climate zone Law currently freezes baseline and tier-2 rates Rates will be determined when 2007 forecasts are final later this year Implemented levels likely will be lower than those originally authorized because of above-forecast 2006 revenues SCE has proposed applying to 2007 costs

33 State Incentives In 2000, the California Energy Commission CEC adopted incentives, in the form of buy down rebates, for small wind systems With incentives in place, Guasti Constructions requests for system installations took off Table 4 summarizes the number of systems installed by year Table 4 also shows the associated rebate available in each year These data reflect the level of activity to Guastis business as a function of the amount of the rebate During the period 2001 2003, the rebate was 50 of the total system costs Customers decision to install, if influenced by the rebate amount, is not easy to tease out from these data
Beginning in 2004, the CEC formula for calculating the incentive changed, and was based on the size of the project In addition, the amount of the incentive began decreasing, from 19,590 2004 to 17,730 late 2004, and to 13,870 at its lowest in early 2005 Several factors caused the amount of the rebate to vary Between 2001 and 2003, although the rebate was 50 of total system cost, the system cost varied due to differences in the height of the tower ranging from 60 to 120 ft/18 to 36 m as well as increased prices by the manufacturer Although the calculation for the rebate was held constant at 50, the absolute amount of the rebate increased With the decreasing incentive, small wind turbines were not likely to be installed except by those who had ample discretionary resources available Guasti and others went to the CEC to testify, encouraging the Commission to increase the incentive Much to their delight, the CEC increased the incentive to its current level of 21,150 The two-tiered rebate for grid-connected small wind systems is available to customers in the utility service

2005 2006 2007

17,730 to 14,010 21,150 to 21,450 21,150

11 17 13 102

Approximately 8 turbines were ordered at
each of the 3 incentive levels during 2004 2005 Once the incentive increased to 21,150 2006, orders increased over 50 from 11 in 2005 to 17 in 2006 Table 5 summarizes the percentage change in orders placed Based on the number of systems ordered thus far in 2007 13 through March, Guasti Construction is on schedule to install over 50 systems, an estimated 3-fold increase between 2006 and 2007

TABLE 5: PERCENTAGE INCREASE IN TURBINE SYSTEMS ORDERED, BY YEAR Time Period 2001 - 2002 2003 2004 2005 2006 2007 Total System Ordered 24 12/yr avg 21 16 11 17 13 52 annual estimate Percentage Change over previous yr 75 -24 -31 55 206

Although the asking price made it the highest priced home ever sold in the neighborhood, and the real estate agent tried to convince them it was too high, the Mitchels wanted the house They knew the energy costs for the existing pool, hot tub, and the expected air conditioning costs would be high, and they hoped the existing wind turbine would help defray those costs Two years later, they now look forward to replacing the blades with newer blades that are expected to generate significantly more energy As homeowner Andrea Mitchel says we paid a premium to get
the wind turbine It was the best investment we could have made Our electricity bill is 2/3 lower than they would be if we didnt have the wind turbine

34 Permitting Requirements Guasti Construction has been installing small wind systems since 2000 Based in San Bernardino County, California, a few of their initial small wind system customers were located in Riverside County However, due to a significant difference in permitting requirements between the two counties, both in terms of cost and time, 99 out of 102 wind systems installed to date have been installed in unincorporated San Bernardino County While installing small wind turbines in San Bernardino County is permitted on a case-by-case basis, the process is fairly streamlined Joe Guasti developed stock plans for different tower heights 60, 80, 100 and 120, however each proposed installation is reviewed specific to the lot Set back concerns are evaluated Notices of intent to install a turbine must be sent to all neighbors adjoining the proposed site The review of each project takes approximately 5 weeks Permitting costs in San Bernardino County are also well established These include a planning permit 495, stock plans 247 when
a 100 tower is used, torque inspection 69, and a pre-site permit 50 60, totaling under 1,000 Understanding what is required, what the process is, and how much this aspect of the project will cost provides certainty for the installer for both time and cost that can be passed on to the customer Other jurisdictions are not so transparent In Riverside County, for example, the process may take a year or longer and cost upwards of 6,000 The process is not well defined and the costs not necessarily aligned with the project These barriers limit the number of small turbines installed, especially when compared to San Bernardino County 35 Economic Driver When the Mitchels were looking to purchase a home, the neighborhood they were interested in had several to choose from, but only one with a wind turbine Photo 2

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Photo 2 A Mitchel with J Gausti - This homeowner looks forward to replacing blades to increase output even more Another homeowner, Marc Schambers, also had a wind turbine installed to offset his utility bill When he and his family decided to build a new house, they made sure they took their wind turbine with them When asked why, Marc said I was taking the wind
turbine purely for the economic benefit The savings are so substantial - I love this wind turbine Marc also said two of the 10 most pleasurable things to see is when your meter runs backwards and when you get a bill from the utility and it has a credit The Schambers are spending about 12,000 to reinstall their turbine on their new property 10,000 to move the turbine and another 2,000 in cables, an investment they are more than willing to make Kelly and Lisa Maxwell recently installed a wind turbine Photo 3 and 4 With seasonally variable electricity loads, the Maxwells opted to sign up for SCEs average billing plan, which resulted in 1,500/month bills The wind turbine has significantly reduced their bills, by an estimated

50 The Maxwells are looking for opportunities to further reduce their dependency on the local utility, and want to produce their own electricity from environmentally friendly technology After purchasing the adjoining undeveloped lot, they decided to install a second turbine However, they are facing some permitting barriers, which require a structure on the property They continue to examine what opportunities they may have, which may include installing PV panels
on a shed they plan to build But their preference is for a second wind turbine

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Photo 3 Wind turbine at the Maxwells 10-acre compound 36 Environmental Drivers One of the issues brought up by some homeowners is the aesthetic intrusion of small wind turbines As seen in Photo 5, viewshed intrusion is a subjective issue In more developed areas, many obstructions may already exist in the surrounding viewshed The turbines themselves are often hard to see unless pointed out In this example, a very large and expensive home is nestled in a landscape surrounded by transmission towers and basked in smog The surrounding neighborhood supports 20 small wind turbines

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Photo 5 Viewshed intrusion is a subjective issue In one neighborhood, a few homeowners banded together to try to influence the Planning Department to impose stricter regulations for approving the installation of small wind turbines There concern was aesthetics They gathered 300 signatures in support of stricter requirements, telling one neighbor Gary Samples that the changes would result in making him take down his wind turbine On the other side of the issue, those in favor of the wind turbines
gathered 3000 signatures In the end, Gary kept his wind turbine, but the Planning Department did add a few additional requirements, including notifying neighbors of intent to install a turbine As Gary put it, maybe Im not doing much, but Im making a contribution in the right direction His turbine has produced 27,334 kWh over a 24-month period, averaging a little more than 1,100 kWh/month The turbine provides for all the homeowners electricity needs

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Photo 4 The Maxwells are considering installing a second wind turbine, and possibly a PV system to further offset energy needs

37 National Security Driver For some, national security is a real concern Bob and Laura Breitel viewed installing their own wind system as one way they could contribute to reducing US dependency on foreign oil But when they decided to subdivide their property, giving half to their son, they were told that due to existing permitting rules they would have to give up their turbine The existing wind turbine would be too close to the new property line However, after some discussion with their original installer they found out that they could have it moved The cost to relocate the turbine closer to
their home, and retain its benefits was 7000 Photo 6

Bernardino County Since these systems have only been installed for a short period of time 7 years, data on other decision criteria would be useful to get a better understanding of what factors will play a key role in expanding this market For example, data on long-term reliability including inverters, production, and safety over time would be valuable Information on other environmental factors, including wildlife including avian impacts and noise would be beneficial Return on investment and homeowner payback calculations would also be useful in understanding the basis for homeowner decisions to purchase small wind turbines 5 ECONOMIC DEVELOPMENT IMPACTS How does a local company stimulate economic development? Joe Guasti installed 6 systems in 2001 - his business is on track to install over 50 systems in 2007 In this case study, in just a few years, what started as a oneman operation with some administrative support from his wife in the evenings has now evolved into an opportunity for 675 FTE staff, expanding the participation of 275 FTE additional family members and 3 FTE additional installers While numerous factors contributed
to the growth of this business, without state incentives and a well-defined permitting process, other factors would probably not have been sufficient to accelerate the growth in this business 6 NEXT STEPS The small wind turbine industry can contribute to economic development, both at the county level and at the state level NREL is currently in the process of adapting the Jobs and Economic Development Impacts JEDI model which was originally developed to estimate the economic impacts from large wind farms to model the economic impacts from the small wind industry It is anticipated that modifications to the JEDI model will be completed by the end of 2007, at which time we will conduct an analysis for San Bernardino County Using assumptions based on this case study, JEDI will help us understand the direct, indirect and induced economic impacts resulting from a localized small wind industry We also anticipate conducting a second analysis to estimate what the potential economic development impact could be on a statewide basis 7 CONCLUSION

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Photo 6 The Breitels with Mr Guasti these homeowners paid to relocate the turbine on their property after they subdivided it 4 OTHER
ISSUES TO CONSIDER This case study focused on some of the key reasons homeowners are opting to invest in wind turbines in San

The success of one installers small wind-turbine business is the result of both state rebates currently at a maximum of 21,150 per system in CA coupled with a more streamlined

permitting process in San Bernardino County especially when compared to the installers experience in Riverside County and has resulted in a year round demand for new systems High electricity consumption combined with high utility rates provide further incentive for homeowners to seriously consider installing their own wind turbine Generally, these customers monthly electricity bills previously ranged from 200-400 and up to 600 for some customers However, with their load now being met by small wind turbines, these customers now have annual electric utility bills ranging from 0 to a few hundred dollars 8 ACKNOWLEDGMENTS The author would like to thank Joe and Beverly Guasti for sharing their experiences and data In addition, the author thanks all the small wind-turbine owners who contributed information for this paper, including Bob and Laura Breitel, Kelly and Lisa Maxwell, Andrea
Mitchel, Gus Sansone, Marc Schambers, and Gary Samples 9 REFERENCES 1 2 Database of State Incentives for Renewables and Efficiency DSIRE: http://wwwdsireusaorg/ Forsyth, T and I Baring-Gould, Distributed Wind Market Applications Draft, National Renewable Energy Laboratory, 2007, NREL/TP-500-39851 in press Jobs and Economic Development Impact JEDI: http://wwweereenergygov/windandhydro/windpoweri ngamerica/economicsasp Southern California Energy: http://wwwscecom/CustomerService/RateInformation/ 2006rateupdates/faqshtm

NOTICE This report was prepared as an account of work sponsored by an agency of the United States government Neither the United States government nor any agency thereof, nor any of their employees, makes any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of any information, apparatus, product, or process disclosed, or represents that its use would not infringe privately owned rights Reference herein to any specific commercial product, process, or service by trade name, trademark, manufacturer, or otherwise does not necessarily constitute or imply its endorsement, recommendation, or favoring
by the United States government or any agency thereof The views and opinions of authors expressed herein do not necessarily state or reflect those of the United States government or any agency thereof

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How to Build a Small Wind Energy Business: Lessons from California; Preprint

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This paper highlights the experience of one small wind turbine installer in California that installed more than 1 MW of small wind capacity in 6 years

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