Carnahan: Gone with the wind

11/10/2008 12:00:00 AM

Tom Carnahan, son of the late Gov. Mel Carnahan and former Sen. Jean Carnahan, could be called a green visionary and entrepreneur.

The little town of Rock Port is served by four wind turbines and is independent of the local power grid. Excess electricity is sold to a local electric cooperative.

We spoke in Carnahan's corner office on the mostly empty second floor in a rehabbed brick building on Washington Avenue downtown.

This is an impressive office for a start-up company.
I started this in 2005. I wanted to see if I could be the developer of Missouri's first wind project. We pulled the partners together. We got the community and the landowners; and the rural electric co-ops came on board. We got bipartisan support from legislators in the area.

This was your idea?
It was solely my idea. I quit practicing law and was very excited about renewable energy. It didn't make any sense that there were wind farms in Iowa and Kansas and Oklahoma and Illinois and none in Missouri. So I went about trying to figure how to get that done. Everyone was cooperative. The farmers were a little skeptical at first, and I had to ask them to take a leap of faith with me because it had never been done in Missouri before. If I could pull this together, I needed them to tell me I could use their property.

Did your family name help?
I think it did. I don't think they did it because of my family name, but they knew where to find me.

What is your total megawatts?
We have, in Missouri, right at 160 megawatts. Our first project was 57 megawatts. The next two were 50, and the Rock Port one was five.

Are other companies getting into this?
We have competitors. Luckily, our company was profitable from the first year because we were able to rapidly get projects done. I was able to get profits and put them back into the company to hire new people.

About a year ago, it became clear that if we were going to be a top-tier wind developer, we were going to need a larger balance sheet. I went looking for the right partner. In April, we closed a $150 million equity investment in Wind Capital Group. It's a Dublin-based company.

Isn't $150 million pretty small?
It's all relative. That's enough for us to grow over the next couple of years and purchase the equipment we need to do these projects. Wind turbines are a couple million dollars apiece. That doesn't include construction costs.

Is your company privately held?
That's correct. As we look where we're going to be two to three years from now, we're constantly running different scenarios. We'll look at public markets from time to time.

Where are the turbines made?
We have Suzlon (Wind Energy) turbines. They build the turbines in India, and now they're building the blades in Minnesota.

We've bought 150 megawatts of GE turbines to be delivered in 2010. They are all made in the United States. I want to see much of the wind energy (industry) based in the U.S., if possible.

Isn't a wind turbine a simple piece of equipment? Will these stimulate a green economy?

Wind turbines are more complicated than you may expect. The blades are like a very finely designed airplane wing. There are computerized equipment, gearboxes, the generator inside. On the outside, with the monopole, they look very simple.

Are you limited to what you can do in Missouri to the northwestern part because strong winds aren't found elsewhere?
The good winds are almost completely concentrated in northwest Missouri. We wouldn't have been able to build a wind farm where we have with the technology that existed 10 years ago. Turbines are getting more efficient, and the blades are getting longer, so places that were marginal a few years ago all of a sudden make sense now.

Can you imagine wind farms across the northern tier of counties?
Absolutely. It's not just where you can get wind. You could have the best wind regimes on earth, but if you don't have any transmission lines, if you can't move the electricity from the windy spots to the demand centers in urban areas, you're not going to have wind farms there. One good thing about northwest Missouri is there is a lot of transmission, so it's unique.

Do you plan to go into other renewables?
It's something I've grappled with. Are we a wind-energy company, or are we a renewable-energy company? I decided we are a wind-energy company, and that we were going to do that better than anyone. We are going to focus on developing wind-energy projects with an emphasis on the midwestern U.S.

Are there risks with cultural and political differences?
I actually relish that. Challenges in business and in life, for that matter, present opportunities. So if there's a challenge in doing a job in Brazil, that might just mean an opportunity for us if our competitors don't want to go there.

All the developers in 2005 said you couldn't do a project in the state of Missouri. It was common knowledge that wind energy wouldn't work here. In that challenge, I found an opportunity and was able to start a business.

Can you saturate the market geographically?
I don't think that's going to happen any time soon. The midwestern U.S. is a very, very big area. The immediate challenge is saturating the transmission capacity that's available. That's happening right now. There are not enough power lines to move energy safely and effectively.

What do you pay landowners?
About $5,000 per turbine per year. We have some farmers that have five or six of them on their property. It's not taking any land out of production, so they like it.

In addition, we believe in paying our fair share of property taxes. That is good business. The community as a whole sees the benefit, not just the farmers involved.

You're not looking to dodge taxes?
No. It's difficult. As prices go up, there's a lot of pressure to cut costs. We need to do that to have competitively priced electricity. We made a decision that we are not going to seek tax abatements like some of our competitors have.

What does it cost to produce a megawatt of electricity?
I can't talk about specific projects and our power-sales agreements. We would be very competitive with energy made from natural gas right now. The important thing to remember is wind energy is inflation-proof. Once the project is built, you know what the price is going to be for 20 years.

This is a very important point. You don't have fuel-price fluctuations. You don't have to wonder what the railroad's going to charge you to move your fuel.

Even if wind is slightly higher in 2008 than its competitors, you look at the price over time. It's a flat price over 20 years, compared to a combined-cycle or a coal unit that's going to have increased costs. Even if you sprinkle in a carbon tax or cap-and-trade, it all of a sudden looks very, very good.

 

By Repps Hudson
SPECIAL TO THE POST-DISPATCH - 11/07/2008