By Nick Hanson
ST PETER — St. Peter schools might be getting into the wind-energy business.
The school district has recently applied for no-interest federal government bonds in connection with a proposal to invest in a wind energy project organized by Johnson Controls Inc., the district’s energy efficiency contractor.
If the deal works out, the district will receive an additional revenue stream while simultaneously promoting clean and renewable energy.
Under the federal Clean Renewable Energy Act, the district is requesting $3 million in no-interest bonds to invest in a wind farm.
If those bonds are approved, St. Peter will purchase a wind turbine on a yet-to-be-built southwest Minnesota wind energy farm constructed by Johnson Controls.
While the district would ultimately have to pay the bonds back, Johnson Controls guarantees the turbine will generate plenty of money before it begins construction.
“What we commit is that our detailed engineering will show that there will be enough revenue to pay for it,” said Michael David, a consultant for Johnson. “The only variable is if the wind stops blowing, which obviously isn’t going to happen.”
According to conservative company projections, the St. Peter School District would net about $30,000 of profit per year from a wind turbine for 15 years. After that — once the bonds are paid off — it’s estimated the district will rake in at least $125,000 per year.
“It’s really a win-win situation,” David said. “Districts are looking for additional sources of money.”
“If the detailed sketching shows that it won’t generate enough money, then (districts) owe nothing,” David said. “In the event that we can’t make this thing cash flow, we’ll scrap it.”
That would be the worst-case scenario for Johnson, which would lose the money it invested in the extensive research. Preliminary investigation shows positives signs for the project working in wind-rich southwestern Minnesota.
“We structured it in such a way that it should be risk free (to districts), which is why the response was so favorable,” David said.
Why invest?
The easy answer is money.
“(The profit) will go back into our general budget,” said Terry Morrow, St. Peter School Board chairman.
And the no-interest bond rate is an essential piece of the puzzle, he said.
Besides the obvious financial incentive, St. Peter, like other districts, find the environmental implications of wind power enticing.
“I think we’ll look back on this in five years and everyone will say this was a win-win situation,” Morrow said. “As a public institution, the district believes clean renewable energy is going to be important for our region and the nation.”
Morrow stressed that at this point, there is no permanent commitment to invest in the wind farm by St. Peter or any other district. “We have a window to examine the deal further and to answer questions that everyone has,” he said. “We have to weigh the risks and concerns.”
If a scrap of doubt rises between now and June 15, the district won’t hesitate to back out, Morrow said.
“There is a chance that in the next couple of months, after we conduct due diligence, we may determine there are too many unanswered questions,” he said.
St. Peter Supt. Jeff Olson says the revenue stream from the project might help mitigate other rapidly rising costs. “With our fuel costs going up drastically, we’ve got to look at other sources of energy and ways of cutting our energy cost.”
Last year, Olson said, district energy cost went up 60 percent.
“It’s huge,” he said. “You start talking about $100,000 in increased energy cost. This is a way to kind offset that cost.”
Another benefit is the educational component of a wind farm.
Johnson intends to wire live data from the wind farm into district classrooms. They’ll also have live Web cams on site and allow frequent student field trips.
Realistically, though, money is probably the key.
“For managing the project Johnson is going to get piece of the pie, too,” Olson said. “They’re not doing this totally out of the goodness of their heart.”
Energy expert weighs in on project
Although he doesn’t know all of the specific details surrounding the school districts⁄Johnson Controls Inc. wind farm partnership, Mark Lindquist’s initial reaction is optimistic.
The energy policy specialist works for Minnesota Project, a nonprofit that works to advance rural development through environmentally sound practices such as renewable energy.
“Generally I think this is a really positive move,” he said. “We’re bringing new people into the wind industry, and we’re creating more opportunities that make our (public) institutions financially sound.”
Similar wind projects between energy companies and school districts have garnered positive results in Iowa, he said. And Lindquist said he believes Johnson Controls Inc.’s interest is in the happiness of its longtime customers.
“Johnson Controls Inc. is a big corporation that has long-term relationships working with districts,” Lindquist said. “I’m presuming that Johnson wants to make sure they’re offering their customers good deals.”
Wind technology is not a terribly risky endeavor either, Lindquist said. It’s a technology that has been developing and proving results for more than 2 1⁄2 decades.
“Win turbines are very reliable. They operate for a long time.”
New energy law opens wind power doors
A plan for St. Peter schools to consider an investment in wind farms comes from a new law. Under the Clean Renewable Energy Act of 2005, President George W. Bush called for industry leaders to examine new forms of energy, and the federal government put out $500 million in no-interest bonds for public entities.
Johnson Controls Inc. seized the opportunity as a chance to capitalize on construction of a new wind energy farm in Minnesota.
The large corporation went to its public school district customers across the state — where its main task is to help manage energy efficiency in areas such as lighting, heating and ventilating — to outline its plan.
Besides St. Peter, Johnson Controls Inc. convinced 14 Minnesota school districts (including Faribault, New Prague and Northfield) to apply for $2 million to $3 million in bonds. The company needs a minimum of six district requests fulfilled to proceed with construction of the farm. Approved bonds will be announced June 15.
If more than six district bonds are approved, Johnson will start a several month research project to make sure the wind farm will generate money and then attempt to lock districts into contracts with energy buyers.
Only a few districts approached by Johnson opted out of bond application process, consultant Michael David said. Districts that become a part of the project would form a joint-powers agreement to help run the wind farm. Johnson has a similar project brewing in Wisconsin among 19 districts.
And if all goes well, David said the farm will be running in about 19 months.
