Business Models

Production Tax Credit (PTC)

Provides the owner of a qualifying facility with an annual tax credit based on the amount of electricity that is generated. By focusing on the energy produced instead of capital invested, this type of tax incentive encourages projects that perform adequately. In 2007, the rate for the PTC is 1.9¢/kWh. The PTC increases from year to year based on the consumer price index.

Pass-Through Entity

A business structure that allows tax credits and operating gains and losses to be allocated to the owners of the business rather than the business itself, which prevents the income of the business from being taxed twice. Some examples of pass-through entities that would qualify for the federal production tax credit include: limited liability companies, partnerships, sub-chapter “S” Corporations, and limited liability partnerships.

Minnesota Flip

The Minnesota Flip is a business model designed to help local wind project owners with minimal tax appetite pair up with a larger entity that has a more substantial tax burden. Because the tax credits available to project owners are proportional to their level of ownership in the project, the tax motivated entity is the majority owner in the first ten years of production and pays a “management fee” to the local owner in lieu of production payments.

Business Metrics

A system of parameters or other quantitative assessments of a business that can be measured periodically and systematically. Business metrics are often used to keep track of how well a business is meeting its objectives.

Aggregation

Bundling several wind energy projects together so that they are treated as one larger project (when purchasing turbines, interconnecting, or maintaining a project, for example,) in order to spread out costs over more turbines or projects. This can have the effect of improving project economics.

Business Structures

Let's assume you have established that you have a good wind resource on your property, and you decide to undertake a wind energy project. How will you do it? As with any business venture, there is more than one way to structure your involvement. Do you want to own a wind turbine by yourself, or join forces with a partner? Or do you want to sell or lease your land to someone else? The structure you choose for your wind energy business will depend on three main factors:

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