1. Developing Wind Energy in Indiana: A Case Study of Benton County Ian Van Lieu April 25 th, 2008

2. Presentation Overview National Wind Energy Overview Indiana Wind Energy Activity Wind Energy Basics Development of Benefit Cost Model Results Conclusions

3. National Wind Energy Wind Energy is currently the fast growing technology in electricity generation Current installed capacity is 16,819 MW Capacity under construction 3,627 MW

4. Source: American Wind Energy Association

5. Installed Capacity

6. Drivers of Wind Energy Declining Wind Costs Fuel Price Uncertainty Federal and State Policies Economic Development Green Power Marketing Cap and Trade Program

7. Presentation Overview National Wind Energy Overview Indiana Wind Energy Activity Wind Energy Basics Development of Benefit Cost Model Results Conclusions

8. Benton County Projects Indiana Winds Project – 130 MW facility by Earl Park Fowler Ridge Project – 750 MW in 2 phases

10. Indiana Development Adams Boone Jay Randolph Wayne White

11. Presentation Overview National Wind Energy Overview Indiana Wind Energy Activity Wind Energy Basics Development of Benefit Cost Model Results Conclusions

12. Wind Speed Wind speeds increase with height above the ground It is not only about wind speeds – Wind Power is the amount of energy produced by the wind Wind Power=(Wind Speed) 3 Wind Speeds are often best described using a Weibull Distribution

13. Wind Speed Distribution

14. Wind Turbine Power Equation ρ: The density of the air measure in kg/m 3 A : The area swept by the turbine C P : Turbine power coefficient V Wind : The wind speed in meters per second Turbine Power =

16. Presentation Overview National Wind Energy Overview Indiana Wind Energy Activity Wind Energy Basics Development of Benefit Cost Model Results Conclusions

17. Benefit Cost Model Assumptions FactorBaseline Value Project Life25 Years Nominal Interest Rate7.00% Inflation Rate2.5% Project Debt Percentage60% Loan Repayment Period10 Years Price Per kW Installed$1127.00 Number of Wind Turbines67

18. Project Cost FactorBaseline Value Total Project Cost$113,263,500.00 Project Equity$45,305,400.00 Debt Payments$9,675,704.57

19. Benefit Cost Model Assumptions FactorBaseline Value Operation & Maintenance Cost$24.08 per kW Power Purchase Agreement$0.045 per kW Production Tax Credit$0.019 per kW Annual Turbine Lease Payment$5,000.00

20. Property Tax Abatement YearAbatement Factor 1 100% 2 90% 3 80% 4 70% 5 60% 6 50% 7 40% 8 30% 9 20% 10 10%

21. County Property Tax Revenue YearProperty Taxes 1 -$7,434 2$142,424 3$177,226 4$258,431 5$344,574 6$430,718 7$516,862 8$603,005 9$689,149 10$775,293 11 through 25 $861,436

22. Depreciation Schedules MACRS15 Year Schedule Year 10.20.1 Year 20.320.1 Year 30.190.1 Year40.11520.1 Year 50.11520.05 Year 60.05760.05 Year 7 through 1600.05

23. Presentation Overview National Wind Energy Overview Indiana Wind Energy Activity Wind Energy Basics Development of Benefit Cost Model Results Conclusions

24. Baseline Scenarios Net Present ValueWithout Tax AbatementWith Tax Abatement Minimum $20,250,880$23,208,780 Mean $25,366, 640$28,256,650 Maximum $30,309,370$18,849,450 Standard Deviation $1,383,383 Coefficient of Variation 5.49%4.91% P(NPV≤0) 0.00% Return on Equity 14.63%15.78%

25. Cost Overrun Sensitivity Scenario 1: 102% Scenario 2: 106% Scenario 3: 110% Scenario 4: 115% Minimum$ 21,566,900$ 18,455,330$15,343,770$11,454,310 Mean$ 26,682,660$ 23,571,090$ 20,459,530$ 16,570,070 Maximum$ 31,625,390$28,513,830$25,402,260$ 21,512,800 Std. Dev.$ 1,383,383 C. V.5.18%5.87%6.76%8.35% P(NPV≤0)0.00% IRR15.13%13.92%12.79%11.48%

26. Interest Rate Sensitivity Scenario 1Scenario 2Scenario 3 Interest Rate9.00%11.00%13.00% Minimum$10,646,290$1,006,838$6,557,295 Mean$14,974,010$4,722,915$3,342,950 Maximum$19,155,350$8,313,308$201,928 Standard Deviation$1,269,838$1,004,887$874,078 Coefficient of Variation7.82%21.28%- P(NPV≤0)0.00% 100.00% Return on Equity15.07%12.20%11.48%

27. Alternate Cost Overrun IRR Baseline Before Financing After Taxes Before Financing Before Taxes Scenario 1: 102%15.13%11.11%9.84%7.73% Scenario 3: 106%13.92%10.59%9.23%7.16% Scenario 5: 110%12.79%10.04%8.65%6.62% Scenario 6: 115%11.48%9.40%7.98%6.00%

28. Presentation Overview National Wind Energy Overview Indiana Wind Energy Activity Wind Energy Basics Development of Benefit Cost Model Results Conclusions

29. Wind farms in Benton county will be able to operate profitably under many of the scenarios studied. The results of the model are dependent on the wind speed estimates and the initial values of the model assumptions. The project is sensitive to both the debt interest rate and total project cost.

30. Conclusions A 10 percent increase in total cost still allows the project to operate with a positive average net present value. A 10 percent decrease in the wind speeds will decrease the quantity of electricity generated by 33 percent and also decrease the production tax credit by that amount.

31. Questions