Oil and Wind Energy: North Dakota Update Dr. Cole Gustafson Feb. 9, 2011

Oil and Wind Energy: North Oil and Wind Energy: North Dakota UpdateDakota Update

Dr. Cole GustafsonDr. Cole Gustafson

Feb. 9, 2011Feb. 9, 2011

North Dakota ProductionNorth Dakota Production

• July 2010 – 321,042 BOPD• July 2010 – 320,371 MCF/D• 5,051 Producing Wells

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Williston Basin Deposition - NDWilliston Basin Deposition - ND

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Relative ThicknessRelative Thickness

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ND Bakken and Three ForksND Bakken and Three Forks

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Mud MotorsMud Motors

DrillpipeNon-magnetic Drill Collar

Bent Sub

Mud MotorRotating Sub

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Road RepairRoad Repair

Paving $1,000,000 / mile Graveling $3600 /mile

Rebuild Gravel Road $300,000/mile

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Farm Windmill--AermotorFarm Windmill--Aermotor

262 ft242 ft

Overall DiameterIncl. Hub: 252 ft

Wind Generation in North Wind Generation in North DakotaDakota

Operational:Operational:– TurbinesTurbines 770770– Rated CapacityRated Capacity 1223 Mw1223 Mw

Under Construction:Under Construction:– Rated CapacityRated Capacity 76 Mw76 Mw

Planned:Planned:– Rated CapacityRated Capacity 6684 Mw6684 Mw

NameLocati

on

Power Capacity

(MW)Units

Turbine Mfr.

Developer Owner Power PurchaserYear

Online

Cedar Hills Wind Facility

19.5 13GE Energy

MDU Utilities MDU Utilities MDU Utilities 2010

Ashtabula II 67.5 45GE Energy

NextEra Energy Resources


Minnkota Power Cooperative

2009

Luverne 49.5 33GE Energy

NextEra Energy Resoureces

Otter Tail Power Co.


2009

Prairie Winds Minot Wind 2

4.5 3GE Energy

Basin ElectricPrairie Winds ND 1

Basin Electric 2009

Prairie Winds ND I 115.5 77GE Energy

Basin Electric Basin Electric Basin Electric 2009

Rugby 149.1 71SuzlonIberdrola Renewables

Iberdrola Renewables

Missouri River Energy Services

2009

Wilton Wind Energy Center II

49.5 33GE Energy



Basin Electric 2009

Ashtabula II 52.5 35GE Energy

NextEra Energy NextEra Energy 2009

Ashtabula - NextEra 148.5 99GE Energy



2008

Ashtabula - Otter Tail 48 32GE Energy




2008

Power Generation Capacity Power Generation Capacity in North Dakotain North Dakota

MegawattsMegawattsPercentPercent

WindWind 12231223 21 21

Hydro-ElectricHydro-Electric 515 515 9 9

Coal-FiredCoal-Fired 40714071 7070

TotalTotal 58095809 100 100

Some “Some “Back-of-the-EnvelopeBack-of-the-Envelope” Numbers…” Numbers…

Rough Cost at 39% Capacity Factor: ¢/kWhRough Cost at 39% Capacity Factor: ¢/kWh

Capital Cost Capital Cost ($2.2Million/MW, 6%, 23 yrs)($2.2Million/MW, 6%, 23 yrs):: 5.2 ¢/kWh 5.2 ¢/kWhLand Lease:Land Lease: 0.1 ¢/kWh 0.1 ¢/kWhO&M / Insurance:O&M / Insurance: 0.9 ¢/kWh 0.9 ¢/kWhProperty Taxes: Property Taxes: 0.2 ¢/kWh 0.2 ¢/kWh

Total Estimated Cost: 6.4 ¢/kWhTotal Estimated Cost: 6.4 ¢/kWhLess OffsetsLess Offsets……

– Production Tax CreditProduction Tax Creditor 30% Treasury Grantor 30% Treasury Grant

– Accelerated Depreciation Accelerated Depreciation

– Renewable Energy Credit SalesRenewable Energy Credit Sales

Net Cost After Tax -- Less

than 4¢/kWh

Local Economic Impacts - LangdonLocal Economic Impacts - Langdon

106 1.5mw towers106 1.5mw towers

$500 million investment, $1 million lease $500 million investment, $1 million lease payments, $456,000 local tax paymentspayments, $456,000 local tax payments

Met tower (2004), FPL (2006)Met tower (2004), FPL (2006)

Wind - Local Government IssuesWind - Local Government Issues

Large Wind – Infrastructure, labor, housing Large Wind – Infrastructure, labor, housing community servicescommunity services

Small Wind – Zoning, siting, setback, Small Wind – Zoning, siting, setback, inspections, complaints, decommissioninginspections, complaints, decommissioning

Taxation/investmentTaxation/investment

Purchasing – How much? Purchasing – How much?

Generation – Where? Size? Own/Contr.?Generation – Where? Size? Own/Contr.?

www.ndsu.edu/energywww.ndsu.edu/energy

Common Landowners Questions on Wind Lease Contracts

Basics of Farm/Residential Small Wind Turbines

Wind Energy Development: Key Financial Considerations

Managing Your Expectations - Sizing a Small Wind Turbine To Your Land

Understanding Wind Energy Leases

Public Involvement and Land Issues Relating to Wind Projects

Questions?Questions?

[email protected]

Investment & Risk ComparisonInvestment & Risk Comparison

•Transmission Risk•2-3 years wind studies

•Engineering $$$•Permitting Risk•Operating Risk

•Market Risk•Tax Risk

¼ to ½ acre ofland per turbine

Project Developer

Landowner

Cost: $3-5 Million/turbineRevenue:

$4-$6000/turbine/yr

Wind will displace the Wind will displace the system’s highest cost fuel system’s highest cost fuel

Fuel Cost of Electricity…

Gas is a likely partner for wind energy

Power Curve:Power Curve:Generation vs Wind SpeedGeneration vs Wind Speed

56 - 62 MPHCutout

Reaches Rated Capacity at 26 - 31 MPH

6 - 8 MPHCut-in

250 kW @ 13 MPH

1475 kW @ 26 MPH

Documents

Oil and Wind Energy: North Dakota Update Dr. Cole Gustafson Feb. 9, 2011