CONFIDENTIAL PERFORMANCE THAT ENDURES Opportunities and Challenges for Community-Based Wind Dr. Karl-Heinz Mertins Mgr, Business Development Deere & Company

CONFIDENTIAL PERFORMANCE THAT ENDURES

Opportunities and Challenges for Community-Based Wind

Dr. Karl-Heinz Mertins Mgr, Business Development Deere & Company Moline, IL

Windpower 2005

Rural Wind Energy Development


John Deere – Facts

Founded in 1837, Deere & Company

• Stays focused on solutions for agriculture, construction and forestry, grounds care

• Employs over 45,000 people

• Does business in more than 160 countries

• Is known as one of the most valued and trusted brands in mobile equipment

• Has annual sales of ~ $20 Billion


John Deere – Renewable Energy Activities

Running Green projects prove environmental considerations in business planning and decision-making:

• Ethanol: E-diesel R&D

• Biodiesel: 5% biodiesel in diesel engines

• Biomass:

- Alholmens Kraft power plant, Finland / Timberjack

- Chariton Valley Biomass Project

• Hydrogen: Fuel cell R&D

• Wind Power . . . .


How can farmers get involved ?

Again.

Wind: A Cost Competitive Midwest Resource

Wind energy is mature and cost effective

• Wind turbines are, and will continue to be, placed on farm land

• Well aligned with John Deere’s market presence

• Can increase buying power of farmers


Five Success Factors Of Wind Projects

Land Land RightsRights

Wind Wind ResourceResource

FinancingFinancing Energy Energy MarketsMarkets

Wind Wind TurbinesTurbines

Cost of Energy,Cost of Energy,

ReturnsReturns

Regional differences must be considered


Utility Scale

• 600 kW to 2.0 MW nameplate capacity

• Provides lowest cost of energy

• Suitable for community wind

• Generally no net-metering

Wind Turbines Come In Many Sizes

…And This Size Fits


Room For Different Wind Farm Models

Investor - owned:

• 50 - 200+ MW projects

• Concentrated

Community - owned:

• 2 - 20 MW Projects

• Dispersed clusters

• Aggregated“Peaceful Coexistence”


Grouping Turbines Into Small Wind Farms

Small defined as < 20 MW per site

• Allows connection to distribution systems at or below 34.5 kV:

– Opens up many locations for wind development

• Regulatory Support:

– FERC NOPR for “Small Generators”

• Other Benefits:

– Streamlined permitting

– Direct engagement of land owners

– Some economies-of-scale


Interconnection At Distribution System Level

• Minimizing substation efforts

• Feeding small load centers directly

• Avoiding ISO interconnection studies, fees, and queues


Compatible With Existing Power Grid

Calhoun County, Iowa

• 69 kV lines

• 70 MW potential

• 10 Sites

• Over 140 local owners

Source: Wind Utility Consulting

Opportunities for many participants


Examples To Learn From

Erkelenz, Germany

Brewster, MN

Schneebergerhof, Germany

Jutland, Denmark


Pilot Project On Buffalo Ridge

Deere has become equity investor in farmer-owned turbines

• Objective: proof of concept

• Model & learning platform for future activities

“Learning By Doing”


Pilot Project On Buffalo Ridge

Building partnerships

• Collaborating with local developers

• Need to work with turbine manufacturers, contractors, off-takers

Partners


Refining The John Deere Model

Projects typically less than 20 MW

• Geographically distributed to accommodate power grid

• Aggregated where it makes sense

Local owner(s)

• Receive annual land lease rent for first ten years

• Receive annual management service fee for first ten years

• Purchase the LLC or LP at the end of ten years for Fair Market Value

• Receive 100% of income for remaining life of project (10+ years)

John Deere works with qualified local partners

• Wind developers who initiate projects

• Experienced contractors who participate in BOP work

Gives local partners a fair share


Additional Economic Benefits

Construction

• Creates one to two part-time jobs per MW installed

• 2.4 times more than required for coal & natural gas power plants

Routine O&M

• One permanent local FTE job per 8-10 MW installed

• Many renewable energy jobs are high wage ($38k-$48K)

Indirect and induced economic activities

• Restaurants, hotels, tourism

• others

Creates high local impact


The PTC Is Essential To Success

• Supports cash flow distribution to rural America

• Enables long-range planning and execution

• Helps deliver adequate returns to investors

Significant growth through long-term PTC extension

0

50

100

150

200

250

2000 2005 2010 2015 2020 2025

Win

d G

ener

atio

n (B

illio

n kW

h)

9-year renewal

3-year renewal

2-year renewal

Source: EIA-DOE


The Opportunity

• An historic opportunity exists to stimulate rural economic development through wind energy projects

• John Deere will continue to invest in distributed wind projects if given consistent and adequate Production Tax Credit policy


Wind Energy Can Turn Rural Decay…


• Education

• Transparent project planning process

• Sincere consideration of environmental impacts

• Fair investment opportunities for local participants

– “Saving the land for the next generation”

• Direct and indirect benefits for local businesses

– “Keeping the money in the State/Community”

– Financial benefits to local tax districts

…Through Active Participation Of Farmers…

Community Owned Renewable Energy

“CORE”


…Into New Rural Development

"I think it's one of the greatest things that ever happened. It's good for my pocketbook. It's good for the environment.”

-- Chuck Goodman, retired farmer near Alta, Iowa; Has three wind turbines on his land

Documents

CONFIDENTIAL PERFORMANCE THAT ENDURES Opportunities and Challenges for Community-Based Wind Dr. Karl-Heinz Mertins Mgr, Business Development Deere & Company