This project had produced, by November 1997, a number of striking and important lessons for the utility and renewables industries and for the advocacy community:
By working for years to create an atmosphere of support for renewables in the state legislature and among the citizenry, the advocacy community laid the groundwork that made this project possible. The co-ops cited both pressure from legislators and interest among their customers as their primary reasons for undertaking this initiative. Satisfying customers was the driving force for the co-ops.
Striking an appropriate balance and crafting an acceptable program were not easy. Ultimately the advocacy community believed that although a green pricing offering of renewables is not perfect energy policy, they valued a sincere effort by the co-ops to begin developing renewables and worked diligently to shape and then support it.
Indeed, if the advocacy groups were not willing to support a flexible and incremental program, they would have hurt the chances of acceptance by the co-op Boards. Moreover, if replicated sufficiently broadly, projects of this kind will help stimulate renewables markets overall and accelerate technology development and price reductions.
Along with being willing to compromise on key issues that allow a project to proceed, it is important to minimize adverse effects. The uncertainty in the number of subscribers who choose to participate from year to year runs at odds with the need for certainty in power contract revenues to obtain project financing. This, in turn, will raise the cost of capital and the cost of the project, reduce participation, and reinforce negative preconceptions. The longer and more stable a commitment customers can therefore be encouraged to make, the better. At the same time, it is clearly unrealistic to expect customers to commit to participation for the full life of a project.
In this case, subscription commitments were for one year. This means that the co-op itself must be prepared to make a commitment that involves some level of risk. Initially in this project, the co-ops proposed a 10-year contract with options for an additional 5 and 10 years. This resulted in premiums that were unacceptably high, however. Eventually, the distribution co-ops made a 15-year commitment to the G&T co-op, which then made the same commitment to project developers.
Another problem with this type of effort is its small scope. Small projects are burdened with proportionately higher development and transaction costs, which can make them considerably more expensive than larger, broader-based efforts. These high costs can then perpetuate the perception that renewables are too expensive and may discourage policymakers and others from proposing aggressive renewables efforts.
The ability of renewables project developers to put together cost-competitive projects at small, flexible sizes will therefore be an important indicator of the potential for expanding green pricing offerings among smaller utilities. If small project sizes produce excessive price premiums, then modest green pricing initiatives will be discouraged.
Alternatively, it may be possible to increase the size of projects. One rationale for the existing multimember co-op structure is the ability to benefit from the economies of scale in generation that are enjoyed by aggregating load from several communities. In the context of distributed resources, such economies would come not from aggregating load but from minimizing transaction and other costs.
With confidence gained and lessons learned from this project, other co-op systems may be able to expand beyond a pilot project from the outset. With experience, it may also be possible for a co-op to own and operate the generation equipment itself, rather than entering a power purchase agreement. Both these options would tend to lower the cost of cooperative wind projects, and reduce the premium charged.
Since the project champions within the co-op involved the advocacy community before full organizational approval had been obtained, it was essential for advocates to avoid publicity until the co-op Boards had approved the idea. Their success in this approach was important in two major ways. First, it allowed the champions to develop ideas and receive approval for the new project without outside interference. Second, the advocates built considerable trust within the co-op by their actions in this early stage of the project.
In the early stages of this project, co-op staff needed technical and market consulting support to develop their ideas efficiently. By consulting with the project staff through a highly credible professional, UCS and MN SEED added considerable value to this effort. Steve Smiley was able to provide valuable help on what kind of equipment to select, how to structure the wind procurement RFP, and how to develop and market the green offering itself.
The utility and advocates in this project had much less in common than the advocates might have hoped. Nevertheless, it was possible to lay a sufficient foundation on which to build a solid program by identifying and emphasizing the shared interest in renewables sparked by both political and popular considerations.
MN SEED's capabilities in marketing this program were enormously important to the project. Its willingness to canvass and otherwise contact supporters in the Dakota Electric Association service area assured all participants that the co-op members most likely to adopt such a program would hear about the idea from a highly credible third party. This type of "endorsement" was very helpful.
At the same time, advocates must be aware of and deal with subtle and complex political pressures and issues and make hard decisions -- about when, and at what price, to support green offerings; about how to distinguish between good and bad products; and about how to communicate their decisionmaking principles to the public.
There were many occasions during the development of this program when miscommunications could have occurred and misunderstandings could have developed between the advocates and the co-ops. Regular, open communications early on between the co-ops and UCS and later between the co-ops and Clean Water Action helped the project stay on track.
The advocates and co-ops in the project had very little experience working together constructively prior to this project and, in most instances, had been adversaries. This history made the process of developing trust between the parties difficult but absolutely critical to the project's success. The lesson here is that honesty, flexibility, and a willingness to listen are key elements to success for projects of this kind.