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Potential Economic Impacts of Commercial Wind Power Development

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					Potential Economic Impacts of Commercial Wind Power Development
                         in North Dakota




                           F. Larry Leistritz



                               Prepared for
            Griggs/Steele Wind Power Development Group LLC




                                 2001
     Potential Economic Impacts of Commercial Wind Power Development
                              in North Dakota

        The use of wind energy has a long history in the United States and the Great Plains
region. Construction of small wind mills to pump water on farms and ranches dates back at least
150 years (BBC Research & Consulting 2000). Commercial wind development, with large wind
turbines connected to the electric grid and producing electricity for widespread distribution, is
however a relatively recent phenomenon. Early in the 1980s, commercial wind turbines were
installed in three areas in California. These commercial wind farms were encouraged by state
investment credits and policy support; however, they proved to be a relatively high cost energy
source, and the pace of commercial wind development slowed until near the end of the decade.

       In the past few years, wind electricity generation in the U.S. has increased substantially.
By the fall of 1999, installed nameplate capacity of commercial windfarms in the U.S. had
reached 2,400 megawatts (MW) with another 713 MW of new wind projects in various stages of
development (BBC 2000). Several factors have contributed to increased interest in wind power:

1. Improving efficiencies of commercial wind developments, which has reduced the cost per
       kilowatt hour generated by about 50 percent since the early 1980s;

2. A federal production tax credit of 1.7 cents per kilowatt hour;

3. Increased costs of natural gas, which has been the fuel source for much of the electric
        generating capacity installed in recent years (Clemmer 2001);

4. State policies requiring utilities to obtain some portion of their electricity requirements from
        renewable sources (Minnesota, Iowa, and Wisconsin are regional examples) (Synapse
        Energy Economics 2001); and

5. A U.S. Department of Energy initiative, Wind Powering America, that calls for meeting goals
      of 5,000 installed MW by 2005, 10,000 MW by 2010, and reliance on wind for at least 5
      percent of U.S. electricity by 2020.

       The increasing interest in commercial wind power may offer development opportunities
for North Dakota, which has the largest wind energy potential of any state in the nation (Gosselin
2001). Numerous localities around the state offer the class 4, 5, and 6 wind resources generally
desired for commercial scale wind generators. In addition, the state=s sparse population should
minimize siting problems.

        Wind power development may be viewed quite positively in rural areas of North Dakota.
 Prices for most farm commodities have been depressed in recent years, and so farmers and other
rural landowners are likely to welcome lease payments (for wind turbine sites) that would

                                                  2
accompany windfarm development. Also, windfarm development would represent an
opportunity to broaden the economic base of North Dakota=s rural areas, most of which are
heavily dependent on agriculture and have been suffering economic and population decline
associated with farm consolidation and depressed farm commodity prices. The construction
activity associated with windfarm development, as well as the project=s ongoing operation and
maintenance, would provide an economic stimulus for the communities near a windfarm site.

       Wind power development could offer substantial benefits to North Dakota=s larger
communities as well. Entities involved in windfarm development are likely to include
engineering and construction firms based in the state=s larger cities (like Fargo and Grand
Forks). In addition, North Dakota firms may become increasingly involved in manufacturing
wind generating equipment. For example, in 1999, LM Glasfiber opened a plant in Grand Forks
to manufacture wind turbine blades. DMI, Inc. (DMI), a manufacturing firm located in West
Fargo, builds wind turbine towers.

       While North Dakota=s wind energy potential is quite substantial, development to date has
been very limited. Of the 560 MW of wind generating capacity in the Midwest region in 1999,
North Dakota accounted for only 1 MW (Synapse 2001). The slow progress of wind
development in North Dakota to date can likely be attributed to several factors:

1. Absence of a state requirement for utilities to obtain a percentage of their electricity from
       renewable sources (whereas nearby states like Minnesota and Iowa have such standards);

2. Absence of state tax incentives encouraging wind energy development (a situation addressed
       by the 2001 Legislative Session); and

3. Distance from major markets, which raises transmission costs (Synapse 2001).

        With increased interest in renewable energy sources and the growing competitiveness of
windpower, proposals for specific wind energy projects have been advanced. One of these
projects is the Griggs/Steele Wind Power Project, a 100 MW facility to be located in the Griggs
and Steele County area in east central North Dakota. In addition, regional analyses of the future
energy needs of the Midwest region have pointed to a substantial potential role for North
Dakota=s wind resources. For example, the recent study, Repowering the Midwest, projects 750
MW of new wind generating capacity in North Dakota by 2010 and a total of 2,550 MW by 2020
(Synapse 2001).

       The purpose of this report is to assess the potential economic effects of commercial wind
power development in North Dakota. The analysis includes evaluation of the local and statewide
economic impacts of developing the Griggs/Steele Wind Power project. In addition, the
statewide impacts of developing a 1,000 MW wind energy industry over the next 10 years will be
examined.



                                                3
                                             Methods

        Assessing the economic impact of the construction and subsequent operation of wind
energy facilities involves estimating (1) the direct expenditures that would be made to entities
within the local area and elsewhere in the state as a result of facility construction and operation
and (2) the secondary impacts that would be expected to result from these direct expenditures.
The secondary impacts and total (direct plus secondary) impacts are estimated at local and state
levels using an input-output model.

         The direct effects of the commercial wind power development options being studied are
estimated based on the attributes of the North Dakota development scenarios compared with
those reported in recent studies of actual or potential wind development in Iowa, Minnesota,
Nebraska, and New Mexico (BBC 2000, Clemmer 2001). For the Griggs-Steele Project, a 100
MW wind farm with 71 turbines each with 1.5 MW capacity, construction costs were estimated
to total $1 million per MW of installed capacity, or $100 million total. Of this, roughly $74
million would represent expenditures for major equipment (turbines, blades, towers), and one-
half of these expenditures were estimated to accrue to North Dakota firms. The remaining $26
million represents outlays for activities such as structural construction (foundations, pads, and
roads), project engineering, project/contractor management and related activities. The direct
expenditures accruing to North Dakota entities and the portion estimated to be received by local
area firms and households are summarized in Table 1. Of the $100 million construction outlay,
$63 million is estimated to accrue to North Dakota firms and households and about $27.9 million
or 28 percent would represent expenditures within the local area (i.e., Griggs and Steele
Counties). For a detailed discussion of the basis for estimates of direct costs and their allocation,
see Appendix.

        During the operation and maintenance phase of the project, major expenditures are for
salaries and wages (about $926,000 annually) and lease/royalty payments to landowners of the
tower sites ($285,000 per year). These expenditures are expected to occur within the local area.
In addition, a total of $262,000 is expected to be spent annually for items such as vehicle,
buildings, and grounds maintenance, insurance, utilities, and miscellaneous materials and
services. Of these expenditures, 60 percent were estimated to be within the local area and the
remainder elsewhere in the state (Table 1). In total, the project=s annual direct impacts during
the operations and maintenance phase total almost $1.5 million of which $1.4 million or 93
percent occur in the local area.

       The second wind power development scenario analyzed involves developing a total of
1,000 MW of wind energy capacity at various North Dakota locations over the next 10 years.
The estimated direct effects of construction and subsequent operation of these facilities are
summarized in Table 2. The costs of constructing and operating wind energy facilities are
expected to decrease somewhat over the next decade (EPRI/DOE 1997). Therefore, the
construction costs (per MW) for the 1,000 MW of wind generating capacity were assumed to be


                                                  4
Table 1. Expenditures Associated with Griggs-Steele 100 MW Wind Energy Project, local area
       and statewide

Project Phase/                                      Local Area              Statewide1
  Economic Sector
                                                    -------------- $ 000 ---------------
Construction Phase (one-time):

          Construction sector                               27,920                   46,539

          Manufacturing sector                                                       16,461

          Total                                             27,920                   63,000

Operation/Maintenance Phase (annual):

          Household sector:

             Lease/royalty payments                         285                      285

             Salaries/wages                                 926                      926

          Retail sector                                     79                       131

          Business & personal services sector               79                       131

          Total                                             1,369                    1,473
1
    Includes local area expenditures.

Source: Estimates based on data from previous wind farm construction costs (see Appendix).




                                                5
Table 2. Expenditures Associated with Development of 1,000 MW of Wind Energy Capacity in
       North Dakota, 2002-2011

Project Phase/                                                          Statewide
  Economic Sector
                                                                      ---- $ 000 ----
Construction Phase (one-time):

       Construction sector                                                     447,878

       Manufacturing sector                                                    158,182

       Total                                                                   606,060

Operation/Maintenance Phase (annual):

       Household sector:

         Lease/royalty payments                                                2,280

         Salaries/wages                                                        5,928

       Retail sector                                                           840

       Business & personal services sector                                     840

       Total                                                                   9,888

Source: Estimates based on data from previous wind farm construction costs (see Appendix).




                                              6
86 percent of the level assumed for the Griggs-Steele Project (see Appendix). However, after the
first 150 MW, additional wind generating capacity will require transmission system upgrades at
an estimated cost of $120,000 per MW. Operation and maintenance (O&M) costs per MW for
the 1,000 MW scenario are estimated to be 80 percent of those for the Griggs-Steele project,
while landowner royalties are assumed to be the same per MW as for Griggs-Steele (i.e., $2,667
per MW).

         The direct project expenditures can be expected to lead to additional secondary impacts as
the initial expenditures stimulate additional rounds of spending and respending (often termed the
multiplier process) both within the local area and elsewhere in the state. The North Dakota
Input-Output Model was used to estimate the secondary impacts associated with wind energy
project construction and operation. The model consists of interdependence coefficients or
multipliers that measure the level of business activity generated in each economic sector from an
additional dollar of expenditures in a given sector. (A sector is a group of similar economic
units, e.g., the firms engaged in retail trade make up the retail trade sector.) The model was
developed based on survey data from North Dakota firms and households and is closed with
respect to households (i.e., households are included within the model). For a complete
description of the input-output model, see Coon and Leistritz (1989). This model estimates the
changes in gross business volume (gross receipts) for all sectors of the area economy that arise
from the direct expenditures associated with wind farm construction and operation. The
increased gross business volumes are used to estimate secondary employment and tax revenues
based on historic relationships. The procedures used in the analysis are parallel to those used in
estimating the impact of other facilities and activities (Leistritz 1995; Bangsund and Leistritz
1998).

        Estimating the secondary economic impacts for the local (Griggs-Steele Co.) area
required an extension of the input-output (I-O) procedures. The I-O model represents the
economic interdependencies that prevail within the North Dakota economy, where many types of
goods and services are available primarily in regional trade center communities, such as Fargo or
Grand Forks. Applying the I-O coefficients to the local area expenditures would be likely to
somewhat overstate the secondary impacts that could be expected to occur within the two-county
(Griggs-Steele) area (i.e., because area residents obtain many goods and services in larger cities
outside the two counties). To adjust the secondary impact estimates to account for the types of
goods and services available locally, community pull factors were used. These pull factors
reflect a community=s retail sales relative to the purchasing power of trade area residents (i.e., its
potential sales). Larger, more self-sufficient communities have pull factors near 1.0 while
smaller communities generally have smaller pull factor values (Coon and Leistritz 1998). In
recent years, the pull factors for Griggs-Steele County communities have averaged 0.525, and
this value was used to adjust the I-O estimates to approximate the secondary impacts likely to be
experienced within the local area.




                                                  7
                                              Results

        The results of the economic impact analysis are presented in two parts. First, the analysis
of the impacts of constructing and operating the Griggs-Steele Project are presented. Then, the
impacts of the 1,000MW scenario are summarized.

Griggs-Steele Project

        The total (direct plus secondary) economic impacts of constructing the Griggs-Steele
Wind Energy Project are summarized in Table 3. The statewide impact of project construction is
estimated to total $187 million. Thus, the initial $63 million in direct expenditures leads to
another $124 million in secondary impacts. Sectors that experience major impacts include
construction ($49.9 million), manufacturing ($29.6 million), and retail trade ($29.1 million).
Households sector gross receipts (which are equivalent to personal income) increase by $41.3
million. These levels of additional gross business volume would support about 2,270 additional
jobs statewide, of which about 125 would be on-site construction jobs with the remainder
occurring in other sectors of the state economy.

        The local area impacts of project construction, while substantially less than the statewide
effects, are still quite substantial. The increase in gross business volume (gross receipts) of area
firms is estimated to total $48.9 million (Table 3). Thus, the initial expenditures of $27.9 million
lead to another $21 million in secondary impacts. Retail sales are estimated to increase by $6
million and personal income (households sector) by $8.9 million. These levels of gross business
volume would support about 626 additional jobs in the local area, including both on-site
construction jobs and employment created elsewhere in the local economy.

       While the construction phase impacts represent a one-time stimulus to local and state
economies, project operation represents a continuing economic contribution. The statewide
economic impact of the Griggs-Steele project is estimated to total $4.4 million annually (Table
4). Households receive the largest impact ($2 million) followed by the retail trade sector ($1.1
million). These levels of gross business volume would support about 44 jobs, in addition to the
workers directly employed in project operation and maintenance.

         The local area impacts of project operation and maintenance also are substantial. The
local impacts are estimated to total $2.8 million annually, including $1.6 million of additional
personal income and $582,000 of additional retail sales. These levels of gross business volume
would support about 26 jobs in various sectors of the local economy, in addition to the direct
project employment.




                                                 8
Table 3. Total (direct plus secondary) Economic Impacts of Construction of Griggs-Steele 100
       MW Wind Energy Project, local area and statewide

Economic Sector                                                Local Area              Statewide
                                                               -------------- $ 000 ---------------
Construction                                                            28,655                  49,888

Manufacturing                                                           304                         29,608

Retail trade                                                            6,010                       29,144

Finance, insurance, & real estate                                       1,228                       6,071

Services                                                                1,010                       4,925

Communications & public utilities                                       885                         4,071

Households                                                              8,926                       41,274

Other1                                                                  1,902                       21,981

Total gross business volume                                             48,920                      186,961

--------------------------------------------------------------------------------------------------------------

Total employment (FTE jobs)                                             626                         2,270


1
    Includes agriculture, mining, transportation, and government.




                                                          9
Table 4. Total (direct plus secondary) Economic Impacts of Operation and Maintenance of
       Griggs-Steele 100 MW Wind Energy Project, local area and statewide

Economic Sector                                                Local Area              Statewide
                                                               -------------- $ 000 ---------------
Construction                                                            61                      121

Communications & public utilities                                       74                          149

Retail trade                                                            582                         1,129

Finance, insurance, & real estate                                       114                         225

Services                                                                245                         342

Households                                                              1,609                       2,028

Other1                                                                  145                         365

Total gross business volume                                             2,830                       4,359

--------------------------------------------------------------------------------------------------------------

Secondary employment (FTE jobs)                                         26                          44
1
    Includes agriculture, mining, manufacturing, transportation, and government.


        Development of a 100 MW wind energy project would also generate substantial tax
revenues for state and local governments. During project construction, the additional gross
business volume generated in various sectors of the North Dakota economy would result in an
additional $1.35 million in sales and use tax collections, $536,000 in added personal income tax
collections, and $390,000 in corporate income tax collections, for a total, one-time state tax
revenue increase of $2.3 million (Table 5). During the period of project operation, an estimated
$85,000 of additional revenue would be generated annually from these three state taxes.

       The potential contribution of the project to local government tax revenues is even more
impressive. The project would result in added local tax revenue based on the following formula:

          Market value x 0.5 = Assessed value
          Assessed value x 0.03 = Taxable value



                                                         10
         Taxable value x local mill rate = local property tax revenue

A review of local mill rates in areas with high wind power potential indicate that 370 mills is an
appropriate rate for planning purposes (Haley 2001). Thus, the formula becomes:

Market value x 0.5 x 0.03 x 0.370 = local tax revenue

For the Griggs-Steele Project, the estimated annual local property tax revenue would be:

$ 100 million x 0.5 x 0.03 x 0.370 = $555,000


1,000 MW Scenario

        The total (direct plus secondary) economic impacts of construction and subsequent
operation of 1,000 MW of wind energy capacity are summarized in Table 6. The statewide
impact of constructing the wind energy facilities (including transmission system upgrades) is
$1.8 billion. The $606 million of direct expenditures lead to another $1.2 million in secondary


Table 5. Impact of Griggs-Steele Wind Energy Project Construction and Operation on Revenues
       from Selected State and Local Taxes
                                                              Project Phase
Tax                                              Construction              Operation & Maint.
                                                 ------------------ $000 -----------------------
State Taxes:
Sales and Use                                             1,349                     53

Personal Income                                                             536                         26

Corporate Income                                                            390                         6

Total                                                                       2,275                       85

Local Property Taxes                                                        -----                       555

Note: State tax revenues do not include taxes that will be paid directly by the Griggs-Steele Wind Energy Project.



impacts in various sectors of the North Dakota economy. Sectors that experience major impacts
include construction ($480 million), manufacturing ($285 million), and retail trade ($280
million). Statewide personal income would be increased by an estimated $397 million
(households sector). These levels of gross business volume would support about 20,986 jobs


                                                            11
(including both on-site construction jobs and those generated elsewhere in the state economy).

         The impacts of construction could be expected to be distributed over time as various wind
facilities are installed. Their distribution across the state will depend somewhat on the specific
locations chosen for major wind projects. However, two factors should be kept in mind in
interpreting these estimates: (1) construction impacts represent a one-time contribution to the
state economy and (2) regardless of the specific sites chosen for wind facilities, a substantial
portion of the economic contribution from construction is likely to accrue to the state=s larger
cities (e.g., Fargo, Grand Forks) where the manufacturing activity is located and where major
construction and engineering firms are headquartered.



Table 6. Total (direct plus secondary) Economic Impacts of Construction and Operation of 1,000
       MW of Wind Energy Capacity in North Dakota

Economic Sector                                                Construction            Operation
                                                               -------------- $ 000 ---------------
Construction                                                            480,092                              815

Manufacturing                                                           284,524                              400

Retail trade                                                            280,327                              7,562

Finance, insurance, & real estate                                       58,399                      1,519

Services                                                                47,373                      2,267

Communications & public utilities                                       39,169                      1,003

Households                                                              397,028                              13,682

Other1                                                                  211,306                              2,051

Total gross business volume                                             1,798,218                            29,299

--------------------------------------------------------------------------------------------------------------

Total employment (FTE jobs)                                             20,986                      386


1
    Includes agriculture, mining, transportation, and government.



                                                         12
        Operation of wind power facilities will represent a long-term contribution to the North
Dakota economy (Table 6). The total annual economic impact of operation of the 1,000 MW of
wind energy facilities is estimated to be more than $29 million. This includes more than $13.6
million of additional personal income and $7.5 million of added retail sales. The operation phase
would support an estimated 386 new jobs, of which 15 to 20 percent would be persons directly
engaged in facility operation and maintenance with the remainder representing employment in
other sectors of the state economy.

       The 1,000 MW wind energy development also would add substantially to state tax
revenues (Table 7). During project construction, added revenues from the three major state taxes
were estimated to total $21.9 million while during operation about $571,000 would be generated
annually from these taxes (Table 7).

       Local property taxes also would be quite significant under the 1000 MW scenario.
Assuming that transmission upgrades add to local tax bases, the 1000 MW scenario will
represent a market value of about $962 million ($860 million for wind generation and $102
million for transmission). Applying the local tax formula as before:

$962 million x 0.5 x 0.03 x 0.37 = $5,339,100


                                 Conclusions and Implications

         Wind energy development may offer substantial economic benefits to North Dakota=s
rural areas, as well as to its larger communities. Developing a commercial wind farm represents
a major construction effort. In addition to providing potential job opportunities for local workers
and economic stimulus for businesses in the project area, wind power development represents a
major opportunity for firms that manufacture wind turbine towers, blades, and other components
and for the state=s engineering and construction firms. During a wind farm=s operational period,
the site area will benefit from the jobs and payroll represented by the operations and maintenance
work force (about 10 workers for a 100 MW project), from lease/royalty payments for
landowners (about $4,000 for a 1.5 MW tower), and from local purchases of supplies, materials,
and services. These expenditures will represent an on-going contribution to local and state
economies over the life of the facility. In addition, wind power development will result in
substantial added state and local tax revenues.




                                                13
Table 7. Impact of 1,000 MW Wind Energy Facility Construction and Operation on Revenues
       from Selected State and Local Taxes
                                                             Project Phase
Tax                                             Construction              Operation & Maint.
                                                ------------------ $000 -----------------------
State Taxes:
Sales and Use                                            12,979                    350

Personal Income                                                               5,161                       178

Corporate Income                                                              3,757                       43

Total                                                                         21,897                      571

Local Property Taxes                                                          ------                      5,339

Note: State tax revenues do not include taxes that will be paid directly by the wind energy facilities.




                                                             14
                                         References

BBC Research & Consulting. 2000. Potential Economic Benefits from a Commercial Wind
     Power Facility in Quay County. Santa Fe: New Mexico Energy, Minerals, and Natural
     Resources Department.

Bangsund, Dean A., and F. Larry Leistritz. 1998. Economic Contribution of the Sugarbeet
      Industry to North Dakota and Minnesota. Agr. Econ. Rpt. No. 395. Fargo: North Dakota
      State University.

Clemmer, Steven. 2001. Strong Winds: Opportunities for rural economic development blow
     across Nebraska. Cambridge, MA: Union of Concerned Scientists.

Coon, R. C., and F. L. Leistritz. 1998. The State of North Dakota: Economic, Demographic,
      Public Service and Fiscal Conditions. Fargo: North Dakota State University.

Coon, R. C., and F. L. Leistritz. 1989. The North Dakota Economy in 1988: Historic Economic
      Base, Recent Changes, and Projected Future Trends. Agr. Econ. Stat. Series No. 45.
      Fargo: North Dakota State University.

EPRI (Electric Power Research Institute) and U.S. Department of Energy (DOE). 1997.
      Renewable Energy Technology Characterizations. TR-109496. Washington, DC: U.S.
      Department of Energy.

Gosselin, Dean. 2001. AThe Growth in Wind Power: Market Overview,@ presentation at Wind
       Energy and Rural Development in North Dakota II Conference (Bismarck, Jan. 10).

Haley, Jay. 2001. Personal communication regarding local tax rates. Grand Forks: EAPC
       Architects & Engineers.

Leistritz, F. Larry. 1995. Potential Local Socioeconomic Impacts of the Proposed ProGold
        Processing Plant. Agr. Econ. Rpt. No. 328. Fargo: North Dakota State University.

Synapse Energy Economics. 2001. Repowering the Midwest: The Clean Energy Development
      Plan for the Heartland. Environmental Law and Policy Center.




C:\ACOPY\wind.rpt.wpd                      March 6, 2010




                                              15
                                           Appendix

               Key Assumptions and Parameters of Economic Impact Analysis

Griggs-Steele Wind Energy Project

         Construction costs for the project were estimated to be $100 million ($1 million per MW
of installed capacity), assuming that construction will occur in 2002 or 2003. This is mid-range
of the values used by Clemmer for 2000 ($1.1 million/ MW) and 2005 ($0.939 million/MW) in
his recent study of wind power development in Nebraska (Clemmer 2001). These values are also
consistent with estimates from a recent New Mexico study ($43.9 million for a 40 MW
facility)(BBC 2000), allowing for some economies of size between 40 MW and 100 MW
facilities. The breakdown of construction expenditures between purchases of turbines, towers,
and other components (assigned to the Manufacturing sector of the ND Input-Output Model) and
other construction costs (Construction sector) is consistent with both Nebraska and New Mexico
studies. One-half of the turbines, towers, and related components were assumed to be purchased
within North Dakota. This is greater than the >base case= assumptions of the Nebraska and New
Mexico studies and is similar to the Nebraska scenario with 50% of turbines manufactured in-
state. This seems reasonable given the development of wind component manufacturing in North
Dakota.

          The allocation of construction phase expenditures between the local area and the rest of
the state is consistent with the breakdown presented in the New Mexico study (BBC 2000).

         During the operation and maintenance phase, royalties to landowners are assumed to be
$4,000 per year per 1.5 MW tower. This is equivalent to the $2,000 per 750 KW tower used in
the Nebraska study (Clemmer 2001). Expenditures for salaries were based on the New Mexico
study, adjusted by a factor of 1.9 (to account for a shift from 40 to 100 MW). Expenditures for
materials and services were likewise calculated as 1.9 times the estimate for the New Mexico
facility (BBC 2000). While all salaries and royalty payments were expected to accrue to
recipients within the local area, only 60 percent of expenditures for materials and services were
estimated to be local; the remainder would accrue to entities elsewhere in the state.

1,000 MW Scenario

        The direct effects of developing 1,000 MW of wind energy capacity over the next 10
years were estimated by using the expenditures associated with the Griggs-Steele Project as a
point of departure and assuming a gradual decline in capital and operating/maintenance (O&M)
costs over time. The decrease in costs (per MW of capacity) is expected to result from increasing
production volumes over time leading to economies of scale both in wind energy production and
in manufacturing of wind facility components (Clemmer 2001, EPRI/DOE 1997). These trends
are reflected by assuming that the 1,000 MW of capacity will be installed at an average capital


                                                16
cost per MW equal to 86 percent of the cost of the Griggs-Steele Project. The O&M costs per
MW for the 1,000 MW scenario are estimated to be 80 percent of those for the Griggs-Steele
Project. Landowner royalties are assumed to be $2,667 per MW per year, as in the Griggs-Steele
Project.

        Substantial wind energy development will require investments to upgrade transmission
systems. To account for these costs, it was assumed that the first 150 MW of wind power could
be added in North Dakota without incurring additional costs beyond interconnection to the
existing transmission system. For wind power capacity additions beyond 150 MW, new or
upgraded transmission facilities would cost $120,000 per MW. (These assumptions are parallel
to those of the recent Nebraska study [Clemmer 2001].)




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