How a wind project is financed is usually a function of who owns the project and if tax incentives will be utilized. Historically, tax incentives in the form of tax credits and accelerated asset depreciation were essential ingredients in making a DW project financially viable. As the industry has matured and technology has advanced, these financial instruments have become less crucial for making a project pay back over its useful life. The incentives are still often worth pursuing for a cooperative considering having ownership stake, and they will inevitably be leveraged if the co-op chooses to contract with a third party owner.
Cooperatives sometimes avoid tax incentives altogether and seek grants or government loans for wind energy financing. Alternatively, creating a taxable subsidiary allows a co-op to participate in asset ownership and utilize tax incentives to maximize value.
Please visit Section 3 (when available; coming soon) and/or the RADWIND Finance Options Report on the RADWIND project page for more detailed descriptions of the finance and ownership options here.
Full Co-op Ownership
A co-op can use traditional private lending, US government lending, and grant programs to fund a DW project in their territory. While the co-op takes on operations and maintenance responsibilities, this mechanism allows for direct control of the project and avoids sharing the distributions with partners.
Partial Co-op Ownership
Lease arrangements, community-cooperative shared ownership, and tax equity partnerships are all structures where the co-op--or a subsidiary thereof--can own part of a DW project or delay full ownership until partners in the deal have utilized tax incentives to their fullest.
Third Party Owned (Non-member)
Co-ops can work with third party developers to create right-sized DW projects in their territory and then sign a Power Purchase Agreement (PPA) that contracts for the energy at a locked-in, long term rate. The co-op's role is simplified by putting the financing responsibility on the developer and its partners.
Members who wish to have BTM wind energy to offset portions of their energy use or who seek off-grid generation usually finance the project themselves. That said, a co-op could explore alternative ways of assisting members with these projects such as owning or co-owning an asset on the member's property.
On-bill financing (OBF) is another mechanism that has successfully funded energy projects in cooperatives nationwide. OBF allows a utility to lend money to its members (or pass other lenders' money through to members) for energy-related projects. Members pay this money back directly on their energy bill.