During 2008, wind energy projects were spawned at a record-breaking pace all across the country with enough new installations to generate 8,359 megawatts of electricity. Venture capital investors put $4.7 billion dollars into wind energy in 2008, but the financial market freeze took its toll on the industry because fourth quarter investments were down 44 percent from third quarter figures.

Minnesota ranks as the fourth largest wind energy state in terms of its current installations, with 1,752 megawatts of electricity generated. To put this figure into perspective, one megawatt can power about 800 mid-sized homes. At the moment, Minnesota trails Texas, Iowa and California, but it could soon be surpassed by Washington, Colorado and Oregon, because there are not any new projects currently under construction in the state.

There are plenty of proposals for new projects in Minnesota, but the regulatory body responsible for reviewing them, the Midwest Independent System Operator (MISO), has not approved any more developments. MISO believes the power-transmission system is unstable and that the proposals do not have sufficient financing.

Efforts are underway to plan a build-out of the electric transmission grid. Eleven utility providers have created a joint initiative called CapX 2020 which aims to build new transmission lines from Bemidji to Grand Rapids, Fargo to St. Cloud to Monticello, Hampton to Rochester to La Crosse and from Brookings County to Hampton. It is clear there is a need for expansion because Minnesota must have 5,000 megawatts of renewable energy capacity by 2025 to meet the state’s aggressive Renewable Energy Standard (RES). Several public meetings have already been held on the need to expand the grid, but there are still obstacles to overcome to get the project started in 2012, as planned. CapX 2020 which includes companies like Xcel Energy, Great River Energy, Minnesota Power, Otter Tail Power Company, and Missouri River Energy Services, filed its Certificate of Need application with the Minnesota Public Utilities Commission (PUC) for most of the lines in August 2007 and for the Bemidji to Grand Rapids line in March 2008. The PUC is expected to issue its decision sometime this spring.

Meanwhile, Minnesota’s wind energy policy is on the cutting edge. In 2005, the Minnesota Legislature transformed its 1.5 cent per kilowatt hour production tax incentive payment into a utility tariff called Community Based Energy Development (C-BED). C-BED requires local ownership and removes the need for owners to go to the legislature for appropriations for production payments. C-BED tariffs allow developers to front-load payments for the first ten years of a twenty-year power purchase agreement so that they do not have to compete for state-funded production incentive payments. One problem with the 2005 legislation was that it did not require a minimum number of owners, so some turbines were owned by only a few investors with each investor having a large cash outlay and a large revenue stream after the project was complete. To alleviate this problem, C-BED was refined in 2007 to require at least 51 percent of revenue from wind-generated electricity to be distributed among local owners or entities. In 2007, C-BED was also expanded for implementation into other renewable energy projects.

During the past few weeks, a couple of bills have been introduced at the Minnesota Legislature which make it possible for school boards to form “business entities” for the purpose of constructing and operating wind energy projects. This would allow them to sell the excess electricity on the grid and generate revenue for schools. Another pair of bills that have been introduced in the Minnesota House and Senate would modify the wind energy production tax. A different Senate bill allows taxpayers to get up to a $2,500 credit for installing a small power generator on their property. This bill will be heard before the Minnesota Senate Committee on Energy, Utilities, Technology and Communications on February 10th. A House bill proposes to build a wind energy and ethanol fuel training facility in Marshall. Another bill proposes to remove wind energy production tax revenue for purposes of calculating local government aid.

Even some local governments are responding. City officials in Woodbury are evaluating a proposal to install a wind turbine at East Ridge High School and plan to make a recommendation to the City Council. The Woodbury City Planning Commission will hold a wind energy meeting on February 17th.

In addition, several companies are preparing for future wind energy expansion. 3M just announced it has created a Renewable Energy Division, building on its strength in adhesives to produce new products like a protective tape for sealing wind turbine blades. In Governor Tim Pawlenty’s recent State of the State Address, he praised Moventas, a Finnish wind turbine gearbox manufacturer, for its decision to locate its new facility in a Job Opportunity Building Zone (JOBZ) in Faribault. Minnesota is also home to a premier wind power site assessment and weather modeling company called Windlogics. A number of Minnesota manufacturers are trying to determine how they can take advantage of the opportunity to develop components for wind turbines.

Right now, all eyes are on the nation’s Capitol watching to see whether Congress will pass the $820 billion federal stimulus package. It contains about $50 billion in energy-related grants, tax cuts and loan guarantees for wind, solar and energy conservation projects for private homeowners, schools and government buildings. Clearly, the Minnesota Legislature is taking a cue and trying to pass legislation that will make it easier for schools to benefit from the stimulus money. If the federal stimulus package passes, it would send a powerful signal to investors to move forward because the bill renews the Production Tax Credit until December 31, 2009 and leaves the door open for more extensions and tremendous future growth opportunities.