Many Iowa Farmers and residents are becoming interested in distributed electrical generation (DG). DG is a broad category, usually consisting of generation installed on Distribution lines (not transmission lines) close to electrical load. Common technologies are Solar PV, Wind Turbines, Fuel Cells, Biomass, etc. Size of systems start with small solar arrays and wind turbines installed on rooftops or farm yards, and continue up to systems of several megawatts constructed near communities or large electric users.
Iowans stand ready to invest in and build these types of renewable energy facilities. However, development of this type lags behind other states and countries, despite the fact that Iowa has excellent wind, solar, and biomass resources. The reason for this is that Iowa lawmakers have not made the policy changes necessary for them to proceed. DG simply needs a fair price for the electricity produced and simple procedures for interconnecting to the electric grid. Iowa lawmakers have declined to take this issue up for several years, fearing the wrath of the utility lobby. Since 2005, Iowa legislators have only been willing to encourage DG in Iowa with several, mostly ineffective incentive programs. The main programs are a tax credit program passed in 2005 to encourage distributed wind energy and a tax credit for solar PV passed in the 2012 legislative session. DG systems need fair treatment from Iowa Utilities, not subsidized, in order to move forward.
Let’s look a little deeper.
Depending on your location in the state and which utility you’re interconnecting to, installing a DG system may vary from a fairly simple process to a downright impossible undertaking. Iowa has net metering for individuals and businesses wishing to install DG, but only investor owned utilities (Mid-American and Alliant) are required to offer it. Iowa Rural electric coops and municipals are not required to do this, and most don’t have programs that treat DG fairly. Without a stable DG program like net metering or a Feed in Tariff (fair price for electricity sales), the DG system will not be built. The solar tax credit program passed by the legislature will be of no use to a home owner without net metering. Worse yet, the tax credit may be mainly used by customers of one Iowa utility – Alliant energy. That utility already has high retail electric rates, net metering, and a customer rebate program for customer owned generation. In short, the credit may only go to a PV system that already had very favorable economics.
Iowans wishing to build a DG community wind project in the megawatt range will find the news almost all bad. Iowa utilities generally “pay” themselves more for their renewable energy systems than they offer independents. The most glaring example is MidAmerican Energy. A 2003 legislative effort to mandate more renewable electricity in Iowa included a provision that some of that generation would come from DG. Instead of passing that legislation, Lawmakers passed a bill specifically to benefit wind generation owned by MidAmerican. While complicated, the result is that legislators allowed the utility to “pay themselves” 7 to 9 cents per kilowatt hr. Federal law requires MidAmerican to purchase electricity from Farmers and other independents at a figure based on their avoided cost of generation , about 2 cents per KWH. Essentially, MidAmerican was able secure legislation that allowed them to build wind farms in Iowa while also preventing a group of farmers who farmed that land from building a wind project at those locations.
Iowa has a lot of installed renewable energy projects, mainly utility scale wind energy. Does it matter who owns renewables and what size the projects are? The current Iowa renewable energy business model consists of utility scale projects that lease land from landowners. The Iowa Wind Energy Association estimates that $14.46 million dollars are paid to Iowa Landowners annually. It is generally assumed wind farm leases amount to 1% of a wind farms gross revenue. This means that as much as $1.4 Billion dollars in gross revenue leaves rural Iowa every year to MidAmerican Energy – owned by Warren Buffet, and other, mainly out of state companies. Since a percentage of Iowa land is absentee owned, a fair amount of the annual lease payments leave our state as well. Is this the best our Iowa policy makers can do?
Some would have you believe that Iowa can’t expand renewable energy unless we make substantial investments in transmission. A recent report released by 25×25.org points out that Germany has transitioned to 25% of its electricity generated by renewables without major transmission upgrades.
Distributed Generation has numerous advantages: More likely to owned by Iowans and have the profits retained here;
Cost competitive with utility scale projects;
Diversifying the electrical grid and improving power quality;
Saving transmission costs by building generation close to where the power is used;
Keeping ratepayers cost of electricity stable
I’ve attempted to give a glimpse into the current policy makeup of this issue in Iowa and included some links that will allow interested readers to investigate more thoroughly. While changing state policy to encourage more DG will be hard work, the potential rewards in economic development, jobs, and energy security are enormous. Are we up to the challenge?