Thursday, January 17, 2013

Distributed Solar


 For almost 10 years, I've advocated at the Iowa State legislature for better distributed generation policy. In that timeframe, lawmakers have done little but enact small incentive programs. We still lack standard interconnection procedures, and a state feed in tariff program that would extend a fair price for electricity sales to Distributed generation (DG).

In fact, The Iowa legislature has done little of significance on this issue since they enacted Net Metering in 1985. Only the states investor owned utilities are required to offer net metering, not rural electric coops or municipal utilities.
The utility lobby has opposed any legislation favorable to DG. They spend a lot of time telling legislators that customer owned generation will raise electric rates and shift unfair costs to ratepayers. 

However, information is starting to surface that shows DG has numerous cost benefits to ratepayers. An article about a California study points to numerous consumer benefits. In fact, some are starting to project that German ratepayers will have lower electric rates than United States ratepayers in a few years.

Germany, who has an aggressive DG program shows incredible time of day electric rate savings, When the sun comes up, the price of electricity plummets, showing great peak electric cost savings for electric customers.

Iowa legislators like to claim we lead in renewable energy. It’s time to ignore the disinformation the utility lobby provides them,  live up to that claim, and pass DG legislation.                     

Thursday, January 10, 2013

Part 2 of "Is MidAmerican Energy Company paying the correct property tax amounts at its Iowa wind project sites?" coming soon .  

Distributed Energy


Here's a link to a new report from on their recent tour of Germany. This country has transitioned to 25% of their electricity produced by renewable energy, mainly owned by local farmers and residents. A quote from the report: 

"Germany’s feed-in tariff (FIT) has helped to make the country a world leader in renewable energy. Since its establishment in 2000 as part of the Renewable Energy Sources Act (EEG), renewable energy in Germany has grown from just 6 percent to 25 percent of their total energy consumption in 2012. But this is not just a statistic, the results of the policy can be seen all across the country as solar panels line barns and village homes and wind turbines dot the horizon. What is equally remarkable is that the energy transition, contrary to the expectations of its critics, has not necessitated significant transmission upgrades or negatively affected the reliability of power. In fact, Germany had just 15 minutes of unplanned power interruptions in 2011. " 

It also appears that their strong distributed - locally owned energy program has not increased rate payer bills significantly, and costs much less than utility transmission costs.  In fact, long term price projections point towards Germans paying less for electricity than we do, while enjoying tremendous opportunities for economic development. 
Check out the report here.

Sunday, January 6, 2013

I submitted a post on Iowa distributed generation policy at .
You can read it here

Wednesday, January 2, 2013

Is MidAmerican Energy Company paying the correct property tax amounts at its Iowa wind project sites?
I plan a lot of posts about farmer owned renewable energy.  Iowa has a lot of installed wind capacity, but mostly large utility owned projects. I live near one of the largest wind farms in Iowa, the Pomeroy project owned by MidAmerican energy company (MEC), and have a small parcel of land in the project area that has a MEC wind turbine on it. I plan occasional posts about this experience as well, because to date, most Iowa farmers experience with wind energy has been through leasing land to utility companies developing wind projects, rather than owning and operating wind farms.  
The 1st phase of the MEC Pomeroy project was constructed in 2007.  The 1.5 megawatt wind turbines in the first phase are valued for property tax purposes at an installed cost of just under $2.6 million each.  In April 0f 2007, MidAmerican employee Dean Crist supplied me with installed cost estimates for wind energy they used for comments on farmer owned wind energy legislation pending at the 2007 Iowa State legislature. The estimates are below in bold type -
        MidAmerican Energy Company
C-BED Pricing Assumptions

The 40 MW and 180 MW projects analyzed by MidAmerican under the proposed C-BED pricing structure were assumed to be stand-along financial entities that retained ownership of all wind generation facilities through the life of the project.

Major Assumptions:

Turbine Cost:                        $2,000/kW installed
Capital Structure:                 50/50 Equity/Debt
LTD Interest Rate:               7%
Debt Financing:                     10 year term
Capacity Factor:                   40%
O%M Expenses:                   $1/MWh
Income Tax Rate:                  41.57% (combined state and federal rate)
Discount Rate:                       11.70% (utility after-tax return on equity)
Production Tax Credit:        10 year credit ($.020/kWh to $.024/kWh)

If we take MEC’s installed cost assumption of $2000/KW, It seems the phase one 1.5 Megawatt turbines should be assessed at $3 million instead of the $2.6 million amount.  Since over 100 turbines were installed in phase 1, our school district and Pocahontas County, where the project is located might be short significant annual tax revenue.      

I asked the county assessor for all information as to how the turbine property tax was determined. The office declined to provide any information besides the assessed amounts per turbine.  I then contacted an attorney who advised that I had a right to that information as a tax payer in that county. He sent a letter informing the assessor’s office of that Iowa code section and again asked for the information. This process is ongoing.  So far, I have received some basic information regarding annual tax assessed each turbine, but no supporting documentation for the turbine installed cost. 

I also asked MEC to provide this information at a public meeting they hosted in November. I received the following reply from Dean Crist at MEC. MEC did not reply to my 2nd request for the information supporting the $2.6 million installed cost –

“The Iowa formula for determining the assessed value of wind energy conversion property was set in 1993, when Iowa Code Section 427B.26 was enacted.  See below.  To arrive at assessed value, net acquisition cost of each property is multiplied by 0% in year one, 5% in year two, ramping up 5% per year through year six, then 30% in years 7-20.   Regular local assessment valuation methods apply after year 20.

Our wind energy conversion properties are locally assessed.  Most other Iowa operating properties owned by MidAmerican Energy Company are centrally assessed by the state of Iowa under the utility property replacement tax system.

All Iowa counties and cities where MidAmerican Energy Company has wind property have adopted the ordinance referenced below.  Consequently, local assessors for each county or city have, to the best of our knowledge, properly followed the statutory formula in determining the taxable assessed values of all of our wind energy conversion properties, including those of the Pomeroy Wind Farm.”

427B.26 -- Special valuation of wind energy conversion property.
a. A city council or county board of supervisors may provide by ordinance for the special valuation of wind energy conversion property as provided in subsection 2. The ordinance may be enacted not less than thirty days after a public hearing on the ordinance is held. Notice of the hearing shall be published in accordance with section 331.305 in the case of a county, or section 362.3 in the case of a city. The ordinance shall only apply to property first assessed on or after the effective date of the ordinance.
b. If in the opinion of the city council or the county board of supervisors continuation of the special valuation provided under this section ceases to be of benefit to the city or county, the city council or the county board of supervisors may repeal the ordinance authorized by this subsection. Property specially valued under this section prior to repeal of the ordinance shall continue to be valued under this section until the end of the nineteenth assessment year following the assessment year in which the property was first assessed.
2. In lieu of the valuation and assessment provisions in section 441.21, subsection 9, paragraphs “b” and “c”, and sections 428.24 to 428.29, wind energy conversion property which is first assessed for property taxation on or after January 1, 1994, and on or after the effective date of the ordinance enacted pursuant to subsection 1, shall be valued by the local assessor for property tax purposes as follows:
a. For the first assessment year, at zero percent of the net acquisition cost.
b. For the second through sixth assessment years, at a percent of the net acquisition cost which rate increases by five percentage points each assessment year.
c. For the seventh and succeeding assessment years, at thirty percent of the net acquisition cost.
3. The taxpayer shall file with the local assessor by February 1 of the assessment year in which the wind energy conversion property is first assessed for property tax purposes, a declaration of intent to have the property assessed at the value determined under this section in lieu of the valuation and assessment provisions in section 441.21, subsection 9, paragraphs “b” and “c”, and sections 428.24 to 428.29.
4. For purposes of this section:
a. “Net acquisition cost” means the acquired cost of the property including all foundations and installation cost less any excess cost adjustment.
b. “Wind energy conversion property” means the entire windplant including, but not limited to, a wind charger, windmill, wind turbine, tower and electrical equipment, pad mount transformers, power lines, and substation.
(§ 427B.26 enacted by L. 1993, c. 161, § 2.)

I tried to access this information a few years ago, but was not successful.  My renewed effort on this issue stems from the county considering creation of a tax increment finance district (subject of a future post) that would divert  wind farm property tax revenue away from our school district. An easy way to verify the installed cost of MEC’s wind projects would be to access the rate recovery information the investor owned utility filed at the Iowa Utilities Board. Unfortunately, that information does not seem to be available to the public.   I’ll post more on this as it develops. More information on the Iowa utility property replacement tax system can be found here