Wednesday, August 6, 2014

Does MidAmerican pay the correct wind property taxes in Iowa? August 2014 update

I found the following article by Loren Hough, for the Chronicle Times in northwest Iowa. It assembles a lot of good information about wind project property taxes in NW Iowa. Of interest was the following -    “According to Mike Prior at the Iowa Wind Energy Association (IWEA), the estimated cost of new wind energy is generally pegged at $1.8 million per MW in 2014. That wind energy cost estimate figure was at $2 million per MW in 2012.”  

My last post on this topic concentrated on one small part of the MidAmerican (MEC) project in Pocahontas and Calhoun counties, using 2.3 megawatt turbines. In that post, I noted the current assessment of $3,631,990 per 2.3 megawatt turbine, installed in 2012, at MEC’s Pomeroy project. If we use Mike’s above figures, It appears that IWEA (MEC is a member) thinks it should cost almost $1 million additional dollars to install a 2.3 megawatt turbine.  

2012 costs - $2 million per MW x 2.3 megawatt = $4,600,000. 

The article also notes that O’Brien county estimates the value of MEC’s 500 megawatt project there (214 turbines, 2.3 megawatts each) at $900,000,000, installed in 2014.

$900,000,000 divided by 214 = $4,205,607.   IWEA’s 2014 cost estimate is $1.8 Million per megawatt. 

$1,800,000 per MW x 2.3 megawatt = $4,140,000.

 Much closer to IWEA’s estimate. What exactly is going on in Pocahontas and Calhoun County?  I haven’t been to determine the reason for this huge difference in assessed value by examining the MEC filings in these 2 counties.   

I want to clarify that I’m a huge wind energy supporter (you won’t find a bigger supporter). I’m just trying to determine if MEC is paying the correct property taxes on their wind assets. I also tend to prefer locally owned wind turbines over the absentee owned projects. So, let’s take a look at that.   

The article correctly points out that current wind development has been a “windfall” for the counties that land a wind project. The O’Brien county assessor notes that the MEC project will net a $6,480,000 annual property tax payment when assessments are fully in. So, nothing to sneeze at, but what would happen if this project were locally owned? The property tax amount would be the same, but gross revenue for electric sales would also stay in the county.  

The Iowa Energy Center has a nifty calculator for estimating wind turbine potential. The calculator did not have a 2.3 MW turbine choice, so I used a 1.6 MW turbine instead, and selected a town in O’Brien County . Here is the estimate. 

A 1.6 megawatt turbine will produce approximately 6,725,742 kilowatt hours annually. It takes 312 of 1.6 megawatt turbines to = the projects 500 megawatt size.   Iowa Utilities Board 2009 Docket RPU-09-0003 contains an estimate that MEC is paid 7 to 9 cents per kilowatt hour for wind production. 

6,725,742 x .07 cents per kWh = $470,801. That figure x 312 turbines =   a much bigger annual revenue number than the annual property tax number. $146,890,205 annually for the county in gross turbine revenue!  

Does anyone else think it’s time for state policy that encourages local ownership of wind energy? That policy would spread wind energy all around the state, letting more counties benefit than the select few that hit the home run by landing a big project. And Iowa sure isn’t keeping much wind profits in the local economy.  This post was originally going to be about why Tax and regulatory policy is preventing farmer owned wind energy, but this seems to be a good Segway into that topic. 

Thanks for stopping by. 

Here’s a positive story about renewables, as promised. What happens when you design a successful locally owned energy program? Quite a bit!     

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