Smaller wind producers call for more perks

The owners and builders of smaller, independent wind generators say it’s time they get some breaks from the Iowa Legislature.

Small nonutility wind producers want the same thing that MidAmerican Energy or Alliant Energy get when they set up a wind turbine farm: a guaranteed rate of return to help recover the costs of buying and installing the turbines and then connecting to the transmission grid. The incentive has resulted in Iowa now getting about 20 percent of its electricity generation from utility wind farms.

For smaller wind operators, the issue centers on the surplus electricity that a wind turbine generates. Surplus electricity from a turbine can’t be stored, and most turbine owners want to recoup some or all of their costs by reselling the surplus back into the transmission grid. That right came with federal rules that define the transmission system as a common carrier similar to a highway or telephone line.

Utilities and rural electric cooperatives, or RECs, are obligated to pay for such surpluses either by credits on the turbine owner’s future electric bills or a payment from the utility or REC amounting to the wholesale cost of electricity.

Small operators said that’s not enough.

The net metering credits aren’t cash in pocket and the repayments at the wholesale rate amount to less than half the retail rate that the utility and REC customers pay.

The utilities and RECs defend that payment system by saying that generation is part of the total cost of delivering electricity to customers, and that independent turbine owners shouldn’t be paid for costs that they don’t bear, such as transmission, service and billing.

Bill being developed

A bill being drafted by State Rep. Mark Kuhn, D-Charles City, would establish a “feed-in tariff” that would allow small wind generators to get a guaranteed rate of return for their surplus electricity, to be paid by the utility or rural electric cooperative.

Kuhn’s tariff would be imposed on utilities and RECs by the Iowa Utilities Board, which now has no role in independent wind generation.

Kuhn is building a 40-kilowatt wind turbine on his farm near Charles City. He knows he’ll battle investor-owned utilities and RECs.

“I’m going to do a lot of talking with the utilities and the RECs,” Kuhn said. “I’ve been around enough to know that it doesn’t do much good to write a bill that’s dead on arrival.”

That’s what has happened since 2003, when the Iowa Legislature gave utilities the right to own wind farms. The result has been an eruption of wind power in Iowa. But it also entrenched a system that allows owners of small turbines, generating up to 500 kilowatts of electricity, to be repaid for their surplus electricity by credits, or net metering.

Net metering doesn’t repay in dollars, but in discounts on future bills in the amount of the surplus. If the turbine is bigger, the utility is obligated by federal regulations to pay no more than the wholesale generating cost of the electricity.

Guaranteed rates

At the same time, the Iowa Utilities Board routinely grants 11.7 percent guaranteed rates of return on utility wind farms similar to what is permitted for conventional coal, gas or nuclear generators.

Gregg Heide, a fourth-generation farmer who works about 500 acres near Pomeroy in Pocahontas County, is trying to put together his own commercial wind project as a way to diversify his farm operation.

“The Legislature did a good thing in 2003 when they let the utilities onto the grid, but the law of unintended consequences kicked in,” Heide said. “Now, we have to fight the utilities to get a fairer repayment system, and it won’t be easy.”

Heide is more ambitious than the typical backyard or farmstead operator.

With a partner, he wants to buy and assemble a turbine with generating capacity of up to 2 megawatts that could provide power to 350 or more households. As is typical with such independent wind farms, the passive investor will recoup the investment by taking the federal tax credits for wind energy.

Alan Blum of Estherville said current laws shackle small wind producers. He heads a group that will break ground later this year for a 200-megawatt wind turbine farm in Emmett and Dickinson counties that would serve electric customers in southern Minnesota.

“The little guys in Iowa are really going to struggle,” Blum said. “The costs and the obstacles are huge.”

Recovering costs

Utilities and RECs said they’re not trying to snuff independent wind operators, but merely seeking to recover their costs.

David Caris, vice president for state governmental affairs for MidAmerican Energy, defended the industrywide policy to offer either net metering or wholesale repayments to small operators. He said it’s unfair to pay community wind turbine operators costs for utility service beyond mere generation.

“People don’t realize that in our rates, the pure cost of generating the electricity is just a part,” Caris said. “The utility also is responsible for the upkeep of the transmission system and for billing and service.

“If we pay retail rates to community wind operators who aren’t also helping with those other costs, then we are making our regular ratepayers subsidize the independent wind turbines.”

Allan Urlis, communications director of the Iowa Association of Electric Cooperatives, said his group is waiting to see about any legislation.

“We always ask in the case of this type of legislation, ‘What problem is being addressed?’ ” Urlis said. “For us, it ultimately comes down to a question of what impact any legislation will have on electric supplies and rates, and on a wind tariff proposal we just don’t know.”

Lawmaker weighs in

State Rep. Donovan Olson, D-Boone, chairman of the environmental protection committee that handles much energy legislation, said “we need to do more for the smaller wind producers.”

He has asked for a draft bill that would create “wind innovation zones.” Smaller operators could maximize the 1 1/2 cents-per-kilowatt hour state income tax break for wind generation and also use standardized legal and technical specifications for their wind power hookups.

But Olson said he isn’t going to plunge into the repayment issue.

Frustrations

Ryan Simpson, who will be a registered lobbyist this legislative session on behalf of his employer, Farm Boys Energy of West Des Moines, said, “We support what Donovan is doing with the wind innovation zones.”

Farm Boys builds wind turbines for individuals, and its executives have been vocal about its frustrations, primarily involving the multitude of different local zoning ordinances governing tower heights, as well as technical issues involving interconnection to the transmission grid.

But Simpson said he’d like to see the legislation go further. He wants the net metering laws changed, so customers get cash refunds for surplus electricity rather than credits on future bills.

“What we really want is help on the tariff question,” Simpson said. “We know that will be harder to get through the Legislature. The utilities and the RECs just aren’t going to give ground.”

Blum said wind energy now occupies the same exalted public relations status that was held a few years ago by ethanol, which since has lost its luster for environmental and profitability reasons.

“Ethanol has a tough row to hoe because it has to buy corn and corn can get expensive,” Blum said.

“We’re lucky. The wind is free.”

By Dan Piller

The Des Moines Register

11 January 2009

Tags: Wind power, Wind energy

The copyright of this article is owned by the author or publisher indicated. Its availability here constitutes a "fair use" as provided for in section 107 of the U.S. Copyright Law as well as in similar "fair dealing" exceptions of the copyright laws of other nations, as part of National Wind Watch's effort to advance understanding of the environmental, social, scientific, and economic issues of large-scale wind power development. For more information, click here.

---

« Later Post • News Watch Home • Earlier Post »