Xcel Energy Inc., based in Minneapolis, says it has the most wind power on its system of any U.S. electric utility.

MidAmerican Energy Co., based in Des Moines, says it's the top utility in wind generation ownership.

The competing claims are both legitimate, and they underscore two distinct business approaches to harnessing wind power: To own or not to own?

MidAmerican owns almost all of its wind generation. Xcel, which has been getting power from the wind for nearly 20 years, purchases much of its renewable power under long-term contracts from wind farm developers.

There are pros and cons to each approach, as utilities weigh whether to tie up capital in wind technology or let others take the risks.

"Some utilities say that wind power is here, it's a viable option and I want to get it in my rate base," said Jeff Anthony, business development director for the American Wind Energy Association (AWEA), a trade group that tracks U.S. wind projects. "Other utilities feel, 'No, we don't quite know how to integrate an intermittent source.' "

Together, Xcel and MidAmerican Energy have a 17 percent share of the nation's wind power capacity. That's enough to power 2.5 million homes.

Most utilities have gone Xcel's way and bought renewable power from others under contracts. Industry officials say the companies didn't have any experience with wind power, especially in the 1990s, and turned to companies specializing in the technology.

"It kept the risk off us and therefore our customers," Laura McCarten, a regional vice president for Xcel in Minnesota, said of the utility's early decision to purchase, rather than own, wind power.

That pattern has continued across the U.S. regulated electric industry, but Anthony said 2011 saw a major shift. For the first time, 23 percent of new wind capacity was utility-owned last year, up from a more typical 15 percent to 18 percent, he said.

It's too early to know if that was just a blip. But Anthony said some utilities want to own wind farms so they can get a return on their investment, rather than simply passing the cost of purchased power through to customers.

Xcel, whose position as the nation's No. 1 wind power utility is based largely on purchased power, has shown more interest in owning projects. In 2010, it purchased the Nobles Wind Farm, near Worthington, Minn., but last year decided not to buy one in North Dakota, citing unresolved issues with endangered birds.

MidAmerican Energy Holdings, which has the most utility-owned wind power, actually is a pair of power companies often counted as one because they both are owned by Berkshire Hathaway, the holding company led by billionaire investor Warren Buffett. The Iowa-based unit, MidAmerican Energy Co., has wind farms across that state and is building more this year, while its sibling PacifiCorp, based in Portland, Ore., has projects in Western states.

With new projects being added this year, they'll own 75 percent of their wind generation -- compared with 7 percent for Xcel.

A question of risk

One reason Xcel and MidAmerican have taken divergent paths is that the Minnesota-based utility got started with wind 10 years earlier than its Iowa neighbor -- in 1994.

At the time, wind power was a young technology. Minnesota law required Xcel, then called Northern States Power Co., to invest in wind generation as trade-off for storing radioactive waste at its nuclear power plant near Red Wing.

The first Xcel wind project, near Lake Benton, and others that followed in the 1990s and early 2000s, were built and owned by independent power companies, with Xcel agreeing to buy the electricity, typically for 20 years.

The company's thinking, said McCarten, was "let a wind developer take the risk of how a wind farm and all the turbines would operate, and we would just pay for the energy it actually generated. We felt that on balance that was the best course of action, given what we knew at the time."

By contrast, MidAmerican first turned to wind power in 2004, four years after Berkshire Hathaway acquired the company and at a time when technology had advanced. The utility decided wind farms were worth owning.

That choice was helped by an Iowa law allowing regulated utilities to seek advance rate approval for new generation.

"You have certainty of that before you invest your dollars," said Dean Crist, vice present of regulatory affairs for MidAmerican Energy.

Crist said the company's business strategy is to take advantage of the federal production tax credit, saving 2 cents per kilowatt hour, and carefully manage wind power with the rest of the company's generation.

"If at times our customers do not need some of the generation, we can sell it ... and bring those profits back and keep our rates stable," he said.

That strategy irked the nation's biggest independent wind developer, NextEra, based in Juno Beach, Fla. In MidAmerican's last wind power regulatory proceeding, NextEra tried to limit the utility's wind expansion in Iowa, arguing that too much power would be sold to the grid.

But regulators disagreed.

Losing a hedge?

The risk of future greenhouse gas regulation is another argument for owning, rather than purchasing, wind power.

Mark Bolinger, who researches electricity markets at Lawrence Berkeley National Laboratory, said utilities that don't own their wind power "have lost out on the long-term hedge value of wind."

If wind power prices jump because of greenhouse gas regulations, utilities "may be looking at paying two or three times as much for wind" as their power purchase contracts expire.

But wind power prices have been dropping. When Xcel faces the expiration of its first wind power purchase contracts in 2018, it's possible the utility could get a better deal on its next long-term contracts.

Old wind farms also will eventually need to be upgraded, no matter who owns them. Turbines are expected to have a 25- to 30-year life span, and even if they can be kept running longer, utilities may want larger, improved versions.

But for a few years, after projects are paid off, wind farm owners could face only operation and maintenance costs.

"It's like driving a used car with no payments," said Beth Soholt, director of Wind on the Wires, a St. Paul nonprofit that works on wind power transmission issues.

David Shaffer • 612-673-7090