John Deere and Farmers Team Up to Harvest Wind
Farmers have always been vulnerable to weather and price fluctuations, and John Deere has been supplying them heavy equipment since there was heavy equipment to supply. Now farmers' desire for stable income and access to open land and Deere's financial clout and expertise with large machinery are combining to create a new business model -- harvesting wind. Here's the deal as explained by CNNMoney.com:
Deere, which can bring big money to the table and has a working relationship with many farmers going back generations, puts up about half the cost of the project.... The farmer or group of farmers kicks in a small amount and then form a company, which then gets the remaining funding from a bank loan....
The farmers' cooperative secures a contract to sell power to a local utility, then puts up the wind turbines. The projects are usually fairly small in scale, say 5 to 10 turbines....
Deere gets the federal production tax credit of about 2 cents per kilowatt hour and just about all of the proceeds from selling the power for the first 10 years. The farmers get a maintenance fee of about $20,000 a year each...The idea sounds like a win for everyone involved. John Deere profits as do farmers and struggling rural communities, and we all benefit from the increased production of clean energy. The story illustrates the potential for synergy in partnerships and is also a perfect example of the idea of capitalizing on underutilized resources. The wind's always been blowing, and though farmers chasing their hats have been aware of it, no one recognized its potential to generate revenue for local people. Does your company have any resources floating around that you haven't capitalized on yet?After 10 years, when the loan is paid off and Deere has recouped its investment plus profit, the ownership structure flips, with the farmers becoming majority owners. Selling the electricity can generate between $1 and $1.5 million a year in revenue. The federal production tax credit is worth about another $500,000 annually.
(Image of wind turbines by Manicosity, CC 2.0)