Save and Conserve

In a rather bold move for an American ski resort, the operators of Jiminy Peak Ski Resort in western Massachusetts have decided to install a massive wind turbine in summer 2007. The picture here to your left shows the massive concrete base that Jiminy poured last fall for the 1.5 megawatt (MW) turbine, which will stand 375 feet tall (including blade span). As far as I know, this is an unprecedented plunge into alternative, renewable energy by an American ski resort. Although ski resorts are used to investing massive amounts of up-front capital for lifts and snowmaking systems, I was still fairly shocked to see a ski resort willing to invest so much in renewable energy.

Jiminy Peak has been kind enough to post many details about the turbine project on their website - two pages are available at their Media page with information on project costs and progress. Those pages contain the information I refer to in this post.

Jiminy Peak has decided to throw a lot of money at renewable energy for one primary reason: rising energy costs. From the Jiminy website:

By August of 2005 Jiminy management was searching for energy options due to the dramatic increases in energy cost on multiple fronts. For the season ending 2004 Jiminy had spent $782,766 on energy, for the 2005 season the amount was $948,421. In just 4 months oil prices had gone up 50% by mid-summer and predications for winter electricity rates indicated there would be a 50% increase. The combined impact of these energy costs were predicated to total $1,451,000. This was prior to the impacts of hurricane Katrina. (Energy costs exceeded 1.5 million dollars in 2005-2006.)

People respond to incentives. They also respond to skyrocketing costs. It's reasonable to assume that Jiminy management are environmentally conscious people who support clean, renewable sources of energy. And surely management also sees the PR value inherent in a massive wind turbine project. However, it becomes quite clear when you read the website (and when you consider that energy costs increased 58% from 2005 to 2006) that this is a management team that is primarily driven by the belief that energy costs are going to continue to rise in the future and, therefore, eat away at the resort's future profit margins.

Rising energy costs are a concern, as passing those costs onto our guests by raising lift ticket prices, could materially jeopardize the health of our industry into the future.

In case you didn't already know, it turns out that 1.5MW wind turbines are really expensive. This price tag on this project: a cool $3.9 million. The good news is Jiminy is receiving some help from the Massachusetts Technology Collaborative - details on the grant at MTC's website available here. From the Jiminy website:

In July 2005, Jiminy was notified by Massachusetts Technology Collaborative that a grant for $582,000 had been approved. The grant provided for continued engineering and consulting work, plus purchasing and installation of a turbine ranging from a .75MW to 1.5MW wind turbine.

That puts Jiminy's investment at $3.318 million. The GE turbine is expected to produce 4.6 million kWh of electricity per year. Jiminy plans to consume half that amount on site and the other half will be fed back to the grid, providing Jiminy with a substantial credit on their utility bill. Once the turbine is up and producing electricity, Jiminy - which uses about 7 million kWh of electricity per year, will only have to purchase 4.7 million kWh/year from the utility. At their current cost of $0.12 per killowatt hour (kWh), Jiminy expects to achieve a return on their $3.318 million investment in about 7 years.

The screensheet below of an Excel spreadsheet shows some back of the envelope calculations I did regarding this project.

In column B, row 21 the spreadsheet shows the amount Jiminy expects to save each year at the current cost of electricity ($0.12 per kWh). Yearly savings of $446k definitely looks pretty sweet.

In column C, I changed the cost per kWh to $0.08; yearly savings decline dramatically in this scenario and ROI is not achieved for 12 years. You can see why businesses are reluctant to invest in renewable systems. While it's wonderful to fix a large percentage of your electricity bill for 25 years into the future, you can't help but wonder "What if?" What if energy prices don't continue to rise? What if they fall in the future?

The point I am trying to make is that this project is really quite risky in my opinion. Even with a substantial subsidy in the form of a grant worth nearly $600k, this project will only turn out to be a financial homerun if energy prices maintain or rise from current price levels.

When you combine the horrific winter season Jiminy is dealing with right now with an energy complex that has seen oil prices fall from $75/barrel to $53/barrel in two or three months - indicating a significant drop in demand or even a slowing US economy - you have to wonder if Jiminy chose wisely. It is, of course, easy to armchair quarterback with the benefit of hindsight.

In any case, kudos to Jiminy Peak for taking the plunge and going big on wind energy. I, for one, applaud the project and wish them nothing but success with the turbine. I live close by, so when the turbine goes up this summer I'll try and get over there to snap some pictures and do a follow-up.