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Looking for income diversity and lower risk, wind farmers see a future in building up, not out.

The wind blows for free. But it doesn't blow for nothing. A handful of farmers in southwest Minnesota are "harvesting" the wind and opening a new income stream. They are raising 200-foot-tall, high technology generators. With blades the size of a Boeing 747 (150 feet from tip to tip), these machines turn breezes into clean and renewable electricity feeding grids in Minneapolis and St. Paul.

After servicing debt and maintenance costs, these farmers expect to clear $20,000 to $30,000 a year per tower. That's 15 times the income they earn selling wind rights. When 10-year loans are retired, annual income from each tower rises to $80,000.

One new wind farmer is Tom Arends, a third-generation farmer. "This is a good one, a good project. As long as we have to live with the wind, we might as well harvest it."

And why not. "How many times can you go outside and say, `What a beautiful windy day,' " adds Arends.

Minnesota's wind industry is a fast-- growing enterprise that generate 300 megawatts of power. (A megawatt is 1 million watts, enough electricity to light 1,000 homes.)

Hundreds of towers rise over Buffalo Ridge, part of a 250-mile-long uprising of wedge-shaped land known as the Corteau des Prairies ("hills of the prairies"). This area runs from North Dakota to Iowa; it rises to 2,100 feet and catches plenty of wind.

Blessed with the Corteau des Prairies, Minnesota, South Dakota and Iowa rank in the top 10 wind-power-producing areas in the nation. California is the nation's wind-power leader, and 16 states have wind-power potential.

North Dakota sits below a resource that could make it the Saudi Arabia of wind power, perhaps generating one-third of U.S. electrical demand.

Texas is another wind-power giant, ranking only behind North Dakota. Other states in the top 10 are Kansas, Montana, Nebraska, Oklahoma and Wyoming.

One might wonder why more farmers haven't jumped into the wind business.

The money looks good, but it's not free or without risk. Arends is heading a project that includes two 900-kilowatt generators. The pair cost $1.9 million.

Up to now, farming's piece of the wind-power pie has been rental payments. Seven towers on 250 acres bring the landowner $14,000 a year, or $55 an acre. The farmer has no up-front costs and loses only 3 acres of production.

The rent checks are not unattractive. But David Kolsrud, a Minnesota farmer and manager of AgriEnergy ethanol plant at Luverne, is a bit insulted. "We have to live with the wind, deal with the wind, scratch out a living on a windy prairie, and we're not supposed to earn anything from it?" asks Kolsrud.

CORNer Stone Farmers Cooperative, which owns AgriEnergy and has a stake in the Husker Ag Processing ethanol plant at Plainview, Neb., is pointing its farmer-members to wind. Two entities, separate from CORNer Stone-Min Win I and Min Win II-are nearing groundbreaking on 3.6 megawatts of capacity.

Arends is president of Min Win II LLC. He says 66 members of CORNer Stone are investing in the venture.

"This is a way to keep the money here in our county where it's produced," says Arends.

Nearly all generators are owned by nonfarming utilities and investors, many of which are out of state.

Underlying the cost of Min Win II is a power contract with Alliant Energy, a Wisconsin-based utility. The 15-year contract includes a guaranteed payment per kilowatt of power generated.

It is true that, while debt is being repaid, the annual return on investment is about 3%, which is low even for farming. But the pay-off comes in 10 years, after the debt is paid off. Arends pencils out a 9 to 11 % annual return over the life of the 15-year contract. And beyond that, wind generators have another 10 years of life.

The contract serves as a primary hedge against risk, says Arends. The risk of a broken or defective generator (they have a strong record of reliability) is managed initially with product guarantees and beyond that with a service warranty.

Bankers, looking at the power contract and warranties, are eager to loan money, Arends contends. "When you buy a combine for $200,000 with no guarantee of [grain] prices and use it three months a year, how do you think the banker feels?" he asks. "I think this is worth it."

Through much of the 1990s, wind power experienced annual growth rates of 25% or better. In 2001, U.S. windpower capacity grew by 2,000 megawatts to 4,500-enough for 4.5 million homes, but still less than 1% of the amount the U.S. needs.

Wind power is not for everyone. Figure on spending about $1,000 for each kilowatt of capacity and a minimum entry fee of about $600,000. You also need that wind resource-a steady 13-mile-perhour breeze on average-so geography eliminates wind power in many rural areas. North Dakota and Texas could be wind giants, whereas Alabama and Florida have no wind-power potential.

There are other challenges, too. A federal production tax credit, due to expire at the end of last year (it had not been renewed as this story was written), is attracfive to large, corporate-owned farms. But that law wasn't written with farming cooperatives in mind. Min Win I and Min Win II will sell credits, but at less than face value.

On the regulatory side are the foggy doings of transmission lines, net billing (rolling back the electric meter), zoning, rights-of-way and other issues. But the roadblocks are falling.

Pipestone County, Minn., farmers Richard and Roger Kas are the first farmers in the nation to build a commercialsized wind farm. On a fall day last year, the two were finishing form work for the concrete pads that will support two 750-- kilowatt generators.

Roger says wind power diversifies their income and dilutes other risks. "This is better than putting up hog buildings," he says. "As soon as you turn [the generators] on, they earn a return."

The Kas brothers work 1,600 acres and run stock cows. To that they have added a 25-year power agreement.

On another part of the Kas farm is a 17-tower wind farm owned by Dan Juhl.

Not a traditional farmer in the corn and soybean sense, "wind farmer" Juhl is currently the go-to guy for farmers interested in owning their own wind farms.

"[Wind farms] are where the real rural economic development is," he says. "This is something we can do for ourselves in the Midwest."

Juhl works with the Kas brothers, Arends and others to put up farmer-- owned wind farms. As a consultant, he charges a fee based on project cost.

"This is a huge opportunity to develop a new cash crop that is not tied to traditional commodities," Juhl says.

Some argue farmer-owned wind farms cannot compete with the largest farms. But Juhl points out that the Kas brothers are bringing in their project at a per-kilowatt cost below larger farms.

And, he adds, farmer-run wind farms don't have to be small. Farmer cooperatives are financing $60 million ethanol plants with less income security. These are the very early "get-your-feet-wet" days for agricultural wind power.

"After these are paid off, we'll make a better living out here," says Roger Kas, looking at the soon-to-be-poured concrete pads for his wind towers.

And the brothers may soon add two more towers to their new farm.

A WINDY FORECAST

Several factors are improving the U.S marketplace for wind power. EFFICIENCY. The cost of generating electricity from wind has declined by 80% since the 1980s, making it competitive with other sources of electricity. INCENTIVES. Some states have set a place at the energy table for farmerowned wind farms. Minnesota wants 15% of its electrical demand supplied by renewable sources, so the state offers a long list of incentives for renewable power. Texas is requiring utilities to have 2,000 megawatts of renewable energy in place by 2009-- 3% of the state's electrical demand. And Iowa utilities are working to meet the state's demand that 5% of its power is renewable by 2010.

U.S. SUPPORT. On one hand, the U.S. is spending a small amount of money-- $40 million last year-to support wind-power research and development. That's 10% of its renewable energy budget.

But the Department of Energy's Wind Powering America program has set a U.S. wind-power-generation goal of 5% by 2020. It encourages federal purchases of wind power and is working to expand the number of states generating wind power.

U.S. Sen. Tom Harkin (D-Iowa) has for the first time included an energy section in the ag committee's farm bill. Harkin's bill provides grants to help farmer-owned power cooperatives get off the ground.

DEMAND. Consumer demand for electricity is climbing sharply. Randall Swisher, executive director of the American Wind Energy Association, says wind energy can provide 6% of U.S. electricity by 2020-about three-- quarters of what hydropower supplies today.

SOURCES

* Dan Juhl: E-mail him at djuhl@dtgnet.com.

* American Wind Energy Association: www.awea.org.