Monday, May 23, 2016

Why Iowa Is Leading In Wind Power

It’s no secret that Iowa is a leader in wind power. News outlets, internet searches, wind trade organizations, etc. all tout Iowa’s installed wind capacity, though I’ve yet to see an article that explains why Iowa has become a wind power leader.
The quick answer is - Policy!   

Iowa’s first wind construction of note happened because the state's legislators required investor owned utilities to have 2% wind in their portfolios. Utilities opposed the legislation, though it passed and required utilities to purchase wind energy from other sources. Legislators envisioned lots of small installations, owned by farmers and other entrepreneurs, but ended up with a single installation owned by Enron (sigh). 

Wind was also added in the windier parts of northern Iowa to support RPS goals in surrounding states (looking for a supporting link here).  Iowa also has a special wind property taxassessment, and access to the sometimes available, sometimes not, federal windproduction tax credit. However, none of these policy tools catapulted Iowa to leadership status IMHO. 

Faced with a potential increase in the states renewable portfolio standard in 2003, MidAmerican instead pushed legislation passed by the Republican controlled House and Senate, and signed by then Governor Tom Vilsack, that allowed MidAmerican to include wind generation in its customer rate base. That’s right, Iowa didn’t lead in wind energy until one of our large utilities was guaranteed a minimum rate of return on its wind assets (kind of sounds a lot like a feed in tariff, right?)  That legislation also conveniently (for the utility) excluded farmers and other independents from receiving the same fair treatment.  A proposed amendment to the MidAmerican bill to fix that omission failed. And, MidAmerican still fiercely opposes any legislation to level the playing field. Iowa’s relatively small distributed wind, farmer and independently owned assets since, have been constructed using a hodgepodge of state and federal grants, tax credits, and other incentives, often at considerable risk.  

Wind is very cost competitive with other generation sources of course, though MidAmerican’s owner Warren Buffet would tell you otherwise. So, Iowa policy makers, how about a stable fair policy that gets renewable energy for the rest of us

Edit - part 2

Since we set the "way back machine" to Iowa's early wind power days and Enron, I should note that Iowa policy makers anticipated then that electric utilities in the state would become deregulated. In fact, the states investor owned utilities pushed heavily for it in 2000. In 1998, Utility property tax rates were overhauled anticipating such a change, creating a utility replacement tax. The deregulation effort was halted here, probably when the Enron scandal broke, and also I hear, because of heavy resistance from the state rural electric coops, labor, and the enviro community. I'm guessing at least one of those groups regrets that decision now. 

However, my understanding of the wind bill put forth by MidAmerican is that it achieved partial deregulation, deregulating the wholesale market, allowing the utility to build excess wind capacity,and guaranteeing a rate of return, while also shutting out competition. Customer rate payers were held captive to their monopoly utility, unable to shop for competitive electric plans, and receiving unfair treatment if they wished to generate their own electricity. Partial deregulation allowed the Enron market manipulation scandal to happen in California, though differences in Iowa's legislation seem to be more about limiting competition and limiting consumer choice.  

So, this stinker policy change is responsible for Iowa's "leadership" in wind energy.
Even though legislators originally envisioned diverse widespread ownership of renewables in Iowa, one utility has cornered the market. 

MidAmerican - stable, guaranteed rate of return on wind assets, while only required to offer low avoided cost to farmers and competitors, 

Profits flow to Berkshire Hathaway instead of being retained in rural Iowa.

Ratepayers left without choice in electric providers.

and etc. 

Bad as this legislation is, it still proves that only a stable risk free environment will allow for this country's transition to clean energy. Distributed generation is an important part of that transition, but now utilities are moving to corner that opportunity as well. Distributed generation needs such a stable policy as well, except one that creates opportunities for farmers, home owners, and other average folks, not big utilities. In other words, it will be much easier to get public support for said clean energy transition, if we create policy that benefits the many, not the few.  In Iowa and nationwide, its time for energy democracy



Sunday, May 8, 2016

Does using a water heater as an energy storage device make sense? Well, it’s complicated.

Here’s an  1200 word post for all you folks who can’t get enough energy efficiency information.

 A more accurate title for this might be “Who benefits from using water heaters as energy storage devices, the electric customer or the utility?” After reading-   Q&A: An energy storage solution mayalready be in your basement, I’m adding a post on this, as I’ve had some experience with a water heater program similar to the one discussed in the above link.  So, let’s dive a bit deeper into this issue.

The article opens with- “The much publicized Tesla Powerwall battery offers a way for homeowners with solar panels to store their energy for use at night as well as help utilities manage the grid.
Yet a decidedly less flashy piece of equipment residing in basements and closets of homeowners holds much greater potential as a residential battery – electric water heaters.”  

I’m not sure how to use my water heater to power our farm acreage if we experience a grid outage, but that snarky comment should be one of the few you’ll encounter in this post. The article describes a rural electric cooperatives (GRE) load shifting water heater program. It involves installing electric load controls on water heaters, and heating the water at night, when grid prices are low.

My rural electric coop offers a similar program. They sell subsidized, well insulated water tanks that use resistance heating elements, in return for installing load controls that can shut off the heaters during times of peaking grid prices, and probably recharging at night when they eventually move to “time of day” electric rates. I’m guessing GRE’s program is similar, though I didn’t check to see what type of heaters their distribution coops sell or subsidize, though the Q&A article mentions that “Each water heater absorbs 13 to 14 kilowatt hours (kWh) of energy every night.” That totals about 5110 KWHs annually. That’s typical electric usage for resistance element water heaters. Our farm house had a water heater of this type for about ten years. It was well constructed, we always had plenty of hot water available, but it used lots of electricity, about the same amount as the ones in GRE’s program. The energy tag from our old heater is pictured below.

So, the following info is not a product or retailer endorsement.

After doing some calculations, I passed on participating in my electric provider’s water heater program, and instead, selected this heat pump water heater, purchased at retail instead of the coops subsidized rate. Here’s the math to explain why.  My coop offers an 85 gallon water tank for $400, Energy Factor - .91.  Homedepot lists this water heater for $1,544.99, so my electric provider subsidizes and sells it more than 2/3 below retail. Home depot lists the heat pump model I chose at $2,399.00, energy factor 3.39. I purchased ours at another retailer on sale for about $2000 if memory serves.
People’s energy consumption habits vary widely, so I’ll stick to my own usage figures. I have some energy monitoring equipment that makes it fairly easy to determine energy usage. We used our previous tank about 10 years, and it consumed about 14 KWHs per day, or about 5000 KWHs annually.  The heat pump model was installed a couple years ago, and is using about 2 KWHs per day, or about 730 KWHs annually.  
The new heater should last 10 years, so, I estimated an average electric rate of 14 cents per KWH for that period. So far, I’m saving about 4270 KWHs, or just about $600 per year. The electric provider didn’t have our new heater in their program, but they decided to offer a modest rebate in return for an agreement to load control the new heater at their discretion, which they haven’t done yet. A modest federal tax credit was available for heat pump water heaters (now expired, I think).  Our pay off time for the additional cost of my non subsidized heated is 2.7 years. If it was as deeply subsidized as the coops heater, ROI would probably be reached in about 1 year.  

So, it appears the electric utility is distorting the market, making their water heater seem the most attractive choice. If you use this water heater for, say, floor heating a building, my utility further distorts the market by offing a special electric heating rate, forcing other utility customers to help subsidize the program.  It’s kind of amusing then, when utilities try to claim customers who generate their own electricity are receiving a subsidy that’s unfair to customers who don’t generate their own electricity.  Customer Self generators provide a benefit to other ratepayers, but that’s a topic for another post, I think. Many utilities also have no problem awarding large KWH consuming accounts with lower electric rates, another "subsidy" that small KWH using customers must bear. I’m feeling the snarky level rising again, so let’s move on.  

This type of utility program doesn’t meet my criteria for an energy efficiency program. It provides peak energy savings to the utility, increases sales of electricity (certainly not the only utility program that increases KWH sales), and possibly extends the life of old fossil fuel power plants. I was surprised to see at least one enviro group supporting an effort to roll this program out nationwide.

So, let’s tally up.
Water heater program - utility benefits
Additional KWH sales for several years

Peak Load savings
Continued use of power plants at risk of becoming stranded assets.

Water heater program - customer results 
Market distortion discourages purchase of a more efficient appliance. Choosing the correct water heater is one of the best opportunities for significant reduction of electric use in the home. As energy efficiency options go, water heaters have an excellent return on investment potential. Our previous water heater accounted for almost 1/3 of our annual electric usage.
Lower up front purchase cost, but several thousand dollars of increased KWH purchase over water heater life span. Money that could be used to help finance a solar array.  

If the home owner does wish to explore backup back up power options ( batteries, generator, etc), having a water heater that uses several thousand watts when running, makes it much more difficult(and costly) to adopt emergency back up power solutions. And, with utility load controls installed, will you be able to use your water heater in emergency back up situations?

usage limited to certain time periods. If the electric customer has a solar array and the utility recharges the water heater at night, while adopting time of day rates... well, you get the picture.   

Final thoughts
Our farm has a solar PV installation, which further complicates this discussion. The Q&A article notes that as more solar PV is connected to the grid, daytime electric usage makes more sense. It certainly does when the customer owns the solar array. It’s time that self-generators are properly compensated for peak load cost savings that they provide to the grid. Yeah, I’m a feed in tariff supporter (There might be a post  comparing feed in tariffs and net metering soon).   

Serious energy wonks will probably guess that I believe that net metering discourages energy efficiency efforts (subject of a future post). More food for thought. Do energy efficiency efforts slow the transition to renewable energy?  And, If you intend to generate your own electricity, it does makes a difference what type of appliances you should choose. Yeah, the utility business is a changin, and it seems like some utilities are going to fight change as hard as they can. The customer is always right, and a lot of customers will want to generate their own electricity.  

Also, resistance heating water tanks do interest me in certain applications. Floor heating in grid tied situations with renewable power. Pellet fired boilers, or solar assistance to keep electric use low. Or used off grid with the same tech. They would be a good choice for certain agriculture and commercial applications.  Sorry if I came off as overly critical of them. The main issue here seems to be monopoly market distortion.

They have their place, but I think most residential locations would be better off making another selection.   

P.S. Please note in my REC news letter, members are advised to maximize energy efficiency prior to considering solar installations. Hopefully all rural electric cooperatives water heater programs will soon include the most efficient water heaters available...

                                             photo living with energy in Iowa

Sunday, January 24, 2016

MidAmerican wind propery tax update

 Here are a couple slides from the property tax filings submitted by MidAmerican (MEC) to the Webster county property tax assessor. See the previous post for a MEC presentation showing higher installed wind project costs than the utility reported to the county. The hand written math calculations were on the document when I received it. 

 There was also a filing in regard to a substation that MEC classified as wind property  in 2013.  Its called the enXco substation, as I think enXco was involved  in the wind project development at this site. MEC does a walk back in this filing, and now asserts the substation is not wind property and will be taxed under the Iowa utility replacement tax, presumably at a lower rate. If this substation was built in order to bring wind electricity onto an area transmission line, it seems like its wind conversion property. If it's an existing substation that was upgraded to accommodate the wind energy, the upgrades should be wind conversion property, as should the small  transmission line and smaller substation listed in the letter. There might be a clause in the Iowa Utility Replacement Tax code that supersedes  427B.26 SPECIAL VALUATION OF WIND ENERGY CONVERSION PROPERTY, but I haven't been able to find it yet.

MEC seems to be telling the county how it is, even though wind energy conversion property is assessed locally. The wording in Iowa code 427B.26 seems to make this a local government choice, not the utilities. The memo to assessors from the department of revenue in the previous post would also seem to suggest this substation should be wind property.   

Since the utility has 20 some wind projects in Iowa, I'm concerned that there may be multiple potential errors in property tax assessments around the state.
More to come.

Wednesday, January 13, 2016

Why Does MidAmerican list higher costs for their wind projects than the utility reported to county assessors?

Here’s an update on the MidAmerican wind property tax issue. Numerous posts can be found here on this subject.
 I was asked to review the Webster county wind property tax documents, filed by MidAmerican, by some of the local government folks in that county, and met with county supervisors in the summer.  Following the meeting, I checked the Iowa Utilities Board (IUB) website to see if the board listed an exact per kilowatt cost for the MEC Lundgren (Webster county) wind project, as the board has done for previous MidAmerican projects. I came up empty handed, and a letter sent to the Iowa Utilities Board requesting information on the installed costs of MidAmerican wind projects in my area of Iowa generated a response inviting us to search for the information online, noting that some of the projects we inquired about were not in the electronic filing system. We were invited to visit the Utilities board office during regular business hours to review those files. Considering the IUB provided MEC wind project cost information over the phone to the Calhoun County assessor, the board’s lack of assistance was puzzling, and a little disappointing. The board staff member did mention some of the information requested might be confidential. This would make it very hard to use in a public property tax discovery process.  However, the utilities board filings on project cost would seem to be necessary in order to follow Department of Revenues instructions to county assessors to be sure that all project costs are accounted for. An excerpt of the Departments memo to county assessors is included below.

MidAmerican has even been saying their wind projects cost more than they are reporting to counties. While looking for information online, my document search results turned up a MEC presentation that contained cost information about Lundgren.

$1.9 billion divided by 448 total turbines = a value of $4,241,071 per turbine. The utility reported a value of $3,493,871 for each turbine to Webster County. Some of the total project costs will be substation and transmission upgrades, but the utility board document excerpt below clearly states that they are wind related, and assets in in each county should be taxed as such, not taxed under the Iowa utility replacement tax. Webster County document filings indicate MEC has classified wind assets under the Iowa Utility Replacement tax.
“Once the analysis is complete, MISO will identify transmission facilities required to interconnect each Wind VIII site. These facilities include interconnection facilities, new transmission lines, substation facilities and miscellaneous facilities. Most of the facilities are expected to be located on property owned by MidAmerican or another transmission owner which means that no easements will be required. However, there may be some facilities that will not be located on property owned by MidAmerican or another transmission owner in Iowa. All easements required for these facilities will be obtained in accordance with Chapter 478 of Iowa Code and 199 IAC 11. This is consistent with some of MidAmerican’s past wind projects. All MidAmerican transmission facilities other than facilities located entirely on MidAmerican property will be addressed in separate Board dockets focused on those facilities.”

The project cost numbers here are substantially higher than the utility is reporting to counties. It also appears the utility has also listed wind transmission and substation upgrades under the Iowa Utility Replacement tax, instead of 427B.26, which I believe contains a higher tax rate.     
427B.26 excerpt -  "Wind energy conversion property" means the entire
      wind plant including, but not limited to, a wind charger, windmill,
      wind turbine, tower and electrical equipment, pad mount transformers,
      power lines, and substation. 

So, there you are. I’ve checked 3 counties so far, and It appears the MEC wind property tax rates might be too low. It would be nice if assessors, utility, and the iowa Utilities Board would be more helpful in sorting this out. Webster County is currently in the process of replacing their assessor.

Stay Tuned.

Monday, October 13, 2014

Iowa Renewables Update For October 2014

I’m still working on a tax and regulatory post to explain why current state and federal policy discourages farmer owned renewables (it also discourages business and individual renewable systems). That will be posted sometime after harvest. Is there a tax professional out there interested in co-authoring a piece?  Here are some “around the interweb” items and thoughts about farmers and climate policy in the meantime.  

 Nathanael Johnson called on farmers to march at the recent climate rally , and spent some time discussing Iowa farmers. Grist is a great source for energy and climate writing. However, this post was particularly interesting to this farmer. Johnson correctly points out the disconnect between Greens and Farmers. Asking farmers to attend a climate rally scheduled in the middle of harvest is an excellent example of this (Sorry Nathanael, just couldn’t resist). 
His closing statement also caught my eye -  “In the past greens have largely dismissed conventional farmers because we’ve thought they were opposed to our goals. But if agriculture emerges as a true political power against global warming, greens will be ready to listen when farmers say, “Hey, you should be giving us some credit for our environmental efforts.”  I’ve found state and federal level green groups have indeed been dismissive of farmer owned renewables in the past as well (with at least 1 exception). I know quite a few of them, and have found them mainly enamored with  controlling emission levels, energy efficiency, utility scale wind – transmission lines, and lately solar leasing…but not focused on the barriers to farmer renewables.  These positions haven’t built much public support in the voting booth for climate policy and renewables.   
 Ag groups haven't had farmer renewables on their priorities list either, but that might finally be changing now that some farmers are starting to push them. , So, maybe Greens and Agriculture might have an issue they could agree on. I’m guessing German Farmers did march in this rally calling for moving Germany to 100% renewables. After all, farmers are major players in renewables there. In the Midwest, not so much.  

Who knows, if Greens and Ag could actually agree on this issue , maybe these groups could start to find consensus on the tougher climate policy goals we need. A lot of farmers are ready to do their part, Sadly, public policy isn't ready for them.    

Elsewhere, a utility funded study says their customers with solar installations help – not harm utility ratepayers.  

The Iowa Utilities Board is currently conducting a review of state Distributed Generation policy, and it appears they will do little to help farmer owned renewables in this docket. Feed in Tariffs, and statewide net metering will be not be taken up, and there’s no guarantee they will standardize interconnection procedures either.   In the past, the board has suggested the legislature take up some of these issues. Look for a full post on this.

There seems to be a lot of misinformation circulating in U.S. media on the German renewable revolution. This blog by Craig Morris is a good place to get the facts.

Iowa could only manage a number 30 rating on this “best state to locate your clean energy company” list. Sigh.

Iowa farmer opposition to a new transmission line continues. 

The positive uplifting link in this post, if you’re checking such things, is the above link on Marching German farmers. Thanks for stopping by the blog.