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August 12, 2008

It Takes a Village to Raise a Turbine: Making the Case for Community-Owned Windpower
    by Francesca Rheannon

Newly public wind development company is bringing energy ownership and economic improvement to communities.

SocialFunds.com -- Wind is taking the lead in renewable energy, at least at this stage of technological development for renewables. In the United States, the dominant model for wind development is centralized, where utility companies build large wind farms in a few places and send the electricity over wires to power homes and businesses far away. Critics charge that a significant portion of energy is lost during transmission, but utilities say they have the economies of scale necessary for such large projects.

Visit the
Prospectus Ordering CenterBut another model exists: community owned wind power. Dan Juhl is a leader in community wind development. His company, Juhl Wind Development (OTCBB: JUHL.OB), is helping communities around the country get power through locally owned wind energy cooperatives. The company has developed approximately one hundred and forty megawatts—several hundred million dollars worth—of community-based wind projects. The company went public on June 25, 2008.

Francesca Rheannon of SocialFunds.com interviewed Dan Juhl for Corporate Watchdog Radio.

Francesca Rheannon: Tell us how your company’s model of community wind development works.

Dan Juhl: We use wind energy as a cash crop and economic development tool by getting the communities involved in ownership. We also bring in equity partners who can use the tax credits. It creates jobs locally, because we use all local contractors in the construction phases of a projects; the local people manage it, work on the wind farm during its operation, and after the project is debt-serviced, the community becomes the majority owner of the project, so it creates a real long-term revenue stream for the community. We also structure the power contracts to provide long-term low cost clean energy to the community.

Francesca: How did you get into this?

Juhl: I've been involved in renewables for over thirty years, mainly involved in the wind business and developing wind farms. I've built wind farms all over the planet and I worked for some of the larger European companies in the early days. And I've seen how the Europeans put together community models.

I brought that back to Minnesota, where we started community based wind development and now it's spreading throughout the country. This last year we've helped Nebraska put in community-based legislation that helps communities get involved in power generation. We recently testified at the Ohio legislature on the benefits of community-based development at a hearing for a renewables portfolio standard. We've advised people in Iowa on how to build community-based projects.

People call us from all over the country to ask how to get involved in community-based development and we help them do that. Also, we’re part of an organization called C-BED (for Community Based Energy Development). It’s a nonprofit organization that helps people understand how to organize their communities and then how to build community based energy projects and create economic development with it.

Francesca: What about efficiency? We all know about economies of scale. Is this something that you give up when you develop community-based wind systems?

Dan: If you're doing it in a one-off scenario, you do lose some economies of scale. But part of the reason we put together Juhl Wind Inc. was so we could put together the resources of several different communities. That way, we can take advantage of economies of scale: we can buy turbines, transformers and wires in larger quantities and get quantity breaks on price. And I think one of the things that separates us on an economic scale from the big players is that they use large corporations as contractors, who all have contingencies if it rains and if it's too windy. When that happens, they have to figure out what to do with their workers, whereas the local contractors we use all live right there. If it's raining, they'll go work on a guy’s cement floor in his garage. So, our cost can be just as competitive as the big players.

Francesca: Let's say a local community contacts you about doing one of these wind projects. How does it work?

Dan: We walk them through the process. We tell them, “You organize your community. We look for a site, we help you figure out where the best places for interconnection into the [energy grid] system, and we do the feasibility phase.” The feasibility phase will put together the numbers and if it looks like it's a good project, it moves into the development phase and we'll start building the project.

Francesca: You talk about how this is a way to develop rural communities. What about suburban or ex-urban communities or even urban communities?

Dan: We have cases where rural communities wanted to put in a wind farm but they were just a very small community and they didn’t have enough economic horse power. So they partnered up with urban communities: they utilized the rural community’s land access but they partnered together on the business model. So it's an urban-rural hybrid economic development. We've looked at that on a larger scale in Minnesota, where the Minneapolis-St. Paul metropolitan area partners up with rural counties to develop community-based wind farms. It becomes an economic proposition for everybody in the state: the metro area gets long-term low-cost energy and an investment vehicle with a decent rate of return and the local economy gets the jobs and the power, plus a revenue stream and an economic return.

Francesca: Are there any subsidies out there to help this happen?

Dan: There’s the federal production tax credit for wind energy that's production based. So if you produce a clean kilowatt hour of electricity you get about a two cent per kilowatt hour tax credit. The problem with that subsidy is that it's more geared to the large C corporations, not to you and me.

The rules of the tax credit are that if you and I want to use it, it would be subject only to passive income and subject to the alternative minimum tax. You get the credit for the energy you sell, but you have to use that against your tax base. And if you can’t use it against your ordinary income, then it really is worthless.

We want to make it so that Americans can invest in their own energy using these tax credits and not just the big C corporations or the multinationals using these credits. That would really catapult community-based development into a real long-term economic development vehicle. So we're working on Congress to change the rules.

Francesca: Are there bills right now pending in Congress that impact on the ability to go forward with these community-based wind systems?

Dan: Yes. We've been working with our Congressmen Tim Walz and Collin Peterson who have introduced a bill in the House that allows the tax credit to be utilized by average Americans. Hopefully this next session after the election we will be able to get that bill out front and center.

Post-interview update:
SocialFunds.com contacted Juhl Wind Development to find out how the company has fared since going public on June 25. Company president John Mitola told us the IPO was $1 per share, went to $2.80 on the second day and currently trades around $4. He said, the $5 million dollars raised so far will boost the sixteen projects currently underway in Minnesota, South Dakota and Nebraska. “Demand is healthy,” Mitola said. “Since the IPO, we’ve been getting two to three calls a day from local groups” interested in community-owned wind development.

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