Iowa Renewable Energy Farmer

Monday, October 13, 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 @grist.org 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. 

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. 

Wednesday, August 6, 2014

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. 

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. 

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! 

Saturday, July 26, 2014

Regular visitors
to this blog can probably guess that I’m more interested in writing about farmer
owned distributed generation (DG) than utility scale renewable energy projects. 
To clarify, I’m not really opposed to the big wind thing, but I’m opposed to large
wind projects as the only business model for developing wind resources.  I’m also
of the opinion that small scale energy projects are more cost effective than
centralized generation supported by transmission lines.  Current U.S. tax policy
and regulations discourage farmer owned DG, but that’s really a topic for an
upcoming post.  So, with that out of the way, let’s look into the Clean Line controversy
a little more thoroughly, as it has generated a fair amount of media coverage
in Iowa. 

Clean Line is a is a proposed
transmission project that bills itself as a vehicle for carrying wind energy from
O’Brien County in Northwest Iowa to markets in Illinois. Farmers and landowners along the proposed transmission
line route are quite upset at the prospect of a private company possibly using
eminent domain to seize farm land for that companies own use.  This has resulted
in what I think is really the first organized
opposition to renewables in Iowa.  Several Farm publications have covered
this story.  It was on the front
page of a recent Wallace’s Farmer issue.  The Iowa Farmer Today (IFT) also
covered it, noting that over 1000 oppositions to the project have been
filed at the Iowa Utilities Board.  IFT also
noted that “Roger McEowen, director of
Iowa State University’s Center for Agricultural Law and Taxation, said the
first thing landowners need to realize is the agreement as it stands favors
Clean Line Energy.”  Also, it appears
that the transmission line compensation is a one-time payment, while wind
projects generally compensate landowners annually.  So, it’s easy to see why
farmers are peeved. 

While I’m
very concerned about potential abuse of eminent domain in Iowa, I think it’s
unfair for the opposition group to single out Clean Line on this issue.  Eminent
domain is typically used for projects that serve a public need, and Clean Line opponents
don’t seem to believe the company has passed that test.  Then they should also
be concerned with other company’s eminent domain use in the state.  In the Iowa
Utilities Board 2009 Docket RPU-09-0003,

Micheal O’Sullivan with Nextera Energy
testified that “MidAmerican had non-requirement
sales for resale in 2008, according to its FERC Form 1 filings, of
approximately 38% of its total sales of electricity, and approximately 42% of
its total MWh sold”. 

So, it looks like a portion of MidAmerican’s (MEC) wind
is sold on the wholesale market.  Therefore, Clean Line opponents should also be
concerned with MEC having eminent domain at its disposal to expand their AC
transmission in Iowa for excess generation. 

The Iowa Legislature
introduced a bill
in 2014 to tighten requirements for use of eminent domain for this type of
project.  Early versions of the bill would have also affected AC transmission
lines.  Later changes were proposed so the bill would only pertain to DC transmission
lines, the type proposed by Clean Line, giving the state’s other utilities a
pass.  The bill didn’t advance, but whywould legislators write an eminent domain bill that only
affects one company, and not a bill that helps all landowners approached by
developers. The bill was almost
certainly lobbied on by utility interests.  It was also opposed by some environmental
groups, who want the Clean Line project.  It will be interesting to see if some
of those same enviro groups will now oppose eminent domain use by a Texas company
that has proposed an oil
pipeline in Iowa.  Some of them are already citing concerns about the pipelines
potential impacts on farmers.  It seems that the Clean Line opposition group
might also oppose eminent domain use to acquire land for the pipeline. 

A number of
groups do support the Clean Line project, so let’s examine the “for” position
as well.  Supporters like the potential additional clean wind energy the transmission
project could bring online, and wind developers have secured easements where the
Clean Line Substation has been proposed.  I’m not convinced that the new transmission
line will just carry wind energy, as federal guidelines try to give equal transmission
access to all forms of generation.  Wind generation in that section of Northwest
Iowa would have a very good capacity factor, probably close to 45%.  But that
still means that quite often, it could carry coal power from the Dakotas.  Wind
is currently without subsidies, as the federal production tax credit has
expired, while coal still enjoys federal assistance (see
my past post, or try Google).  So, coal power could have an advantage over
wind for electric power purchasers.  That may balance out somewhat with the proposed
EPA regulations for power plants, but you get the picture.  This
study by Capx2020, while from back in 2007, seems to think Regional
Transmission Projects may help import coal power to areas of the Midwest (page
15 – PDF file). 

I found the
above link in the comment section of an article
discussing the nebulous sounding idea of a “Special Purpose Development Corporation — created for the sole purpose
of acquiring properties for a transmission project and then selling the bundled
parcels to the developer.  The number of shares granted would depend on assessed
value.”  The conceptwas pitched
by the Center for Rural affairs, to help
decrease landowner opposition to transmission projects.  While the think tank’s attempt
to “think outside the box” is somewhat refreshing to me, Clean Line opponents didn’t
seem to care for it, as a “small riot” erupted in the comment section of the
article. 

So, how do
we go about encouraging more renewable energy development in the Midwest?  I’m
going quite a bit further out of the box.  Annual payments to landowners for
wind projects have worked well to date, so it seems annual transmission line easement
payments might work better to secure rights for new power lines.  It’s pretty
clear that eminent domain use by renewable projects pisses people off.  It’s an
old business model tool that doesn’t seem suited to modern clean energy
development.  Letting affected landowners have actual ownership in the wind project
and transmission line might work a lot better.  Even wind energy trade magazines
have noticed that the current model for wind development might be in need of
improvement.  Mark
Del Franco at North American Windpower notes that “Times have changed, and so must the actions of wind developers. 
It’s the new reality.” 

However, I’ve
noted before that I think it’s high time for a robust distributed generation
policy to encourage more
local ownership of wind and solar.  It will build more public support for
renewable energy policy.  It might also help larger projects as the public will become
better educated about wind and solar when they can own it.  The public might start
ignoring misinformation about renewables.  It will also help regulators plan and
watch for ratepayer interests, given that some are projecting
that as many as half of the countries electric customers might generate their
own power by 2028.Some of the many
projects planned around the country just won’t be needed under that scenario.  Having
a stable DG policy in the country would help regulators decide which of those
projects will be warranted.  Until that happens, at least some forward thinking
areas of the company have decided not to wait.  I’ll close with a
link to a positive example of rethinking our plan for modernizing the
countries electric grid. 

Update I found an additional link for this post.  It is a Fort Dodge Messenger story about Clean Line meeting with local economic development officials in northwest Iowa.  It contains the following quote "Because of the federal regulations that require line owners to allow
interconnecting, Detweiler said there is the likelihood of additional
revenue by other entities moving power along the system."  So it looks likely this project will carry some coal power.  Mr. Detweiler is an employee of Clean Line. 

Tuesday, June 10, 2014

It’s time to
update efforts to determine if MidAmerican (MEC) is paying correct property
taxes on their wind assets in Iowa, I’m going to concentrate on a small segment
of the MEC wind project near me.  The project was built in 3 phases.  The 3rd
phase consists of thirteen 2.3 megawatt turbines, 5 in Pocahontas County, and 8 in Calhoun County. Curiously, each county valued the turbines differently,
Pocahontas at $3.66 each, Calhoun at $3.60 million.  These figures were quoted
to me during visits to each assessor office.  Since then, the two county
assessors have apparently networked and each county’s assessment currently
stands at $3,631,990.  I’ve asked each assessor to show
me how they calculated the valuations, and how come there was a difference in
the original valuations.  Both have recommended
I review the MEC property tax filings I accessed in both counties. 

I’ll get to
the filings shortly, but first, state law allows Iowa taxpayers to contest
property tax assessments in an annual April to May period at a county review board. 
I filed a petition contesting MEC’s wind values in Calhoun County during
May. I requested an oral presentation,
and was allotted 15 minutes to present information supporting my concern about
MEC’s wind property valuation.  I noted the difference between the valuations in
each county, concern that the utilities don’t appear to itemize all project
soft costs in their county filings, and my general concern that the county
valuation was vastly south of the project cost caps negotiated by MEC, Office
of Consumer Advocate (OCA), and the Iowa Utilities Board (IUB), all entities with
much experience with wind costs.  I also offered to help, as I have consulting
experience with wind projects.  I requested the county access MEC’s Utilities
Board filings and thoroughly review them. The county dismissed my petition for “lack of standing”. 

It’s Interesting
to note (also a little disappointing) that the Calhoun Assessor noted in a
letter dismissing my claim that she had contacted the IUB.  She wrote that the
cost caps weren’t relevant to valuations, and that the final project cost was
$1611 per KW.  See below. 

We can compare the project cost per kilowatt
to the county wind property valuation.  A 2.3 megawatt wind turbine = 2300
kilowatts.  2300 x $1611 per KW = $3,705,300, a number higher than either county
valued the turbines, and higher than MEC’s county filing appraised the turbines. 
I relayed this to the assessor by email
and received the following response – “As
I have said before, we do not assess per kw. That is what you are using to compare. We are assessing the same as Pocahontas County, as well as every other
county with wind energy property.” 

This is why
I asked the county to review the IUB filings to determine why the numbers were
different, and determine if all hard and soft costs are accounted for in the
valuations, as the Department of Revenue (DOR) advises County
assessors to do.  Also at issue, what
items are used to determine the IUB caps? 

OK… back to
the utility filings.  A few interesting examples are below. The first 2 are examples of the ledger
invoices costs listed in the MEC Calhoun County filings. 

In my opinion,
I think it’s hard to determine if these are actual costs incurred in the county,
or general costs at multiple locations.  A more useful format would be itemized
costs of turbine towers, nacelles, foundations, balance of plant, and per
turbine soft costs.  I can’t determine if the underground cable between turbines
is accounted for in this filing.  The filings for the 3rd phase in
Calhoun County included these invoice records.  Pocahontas County has all three project
phases, but MEC only included invoice records for the first phase.  It appears
the utility filed no supporting documentation for the other 2 phases.  The filings
over the last 5 years have also raised and lowered the value per turbine.  See below. 
A decrease in cost was filed in 2013.  Also note
that MEC lists 11of the 2.3 megawatt turbines installed in Pocahontas County. 

A 2014
filing raises the value, again with no supporting documentation.  Also note MEC counts 8 of the 2.3
megawatt turbines installed in the county. The Pocahontas county Assessor counts 5 of the 2.3 megawatt turbines, by the way. 

So what to
do about this issue?  I found quite a few
items that conflict with each other while examining this small segment.  Given that the Utility seems to have misplaced
some of the turbines they thought were in Pocahontas County, and that there seems to be
differences between the utility county filings and information provided by the
IUB, it seems fair to question the costs submitted.  Since the Calhoun assessor notes that all counties
are using the same method to calculate wind values, here are my recommendations:

1-This is an Open Records issue!  Both
counties originally denied my request to see these records.  Once they were
reminded of the section of the Iowa code that allowed citizens to review
property tax filings, they allowed me access.  My local review board petition
was dismissed using Utility board information that I have not had access to
yet.  Lack of transparency has been a big problem in sorting things out with
this issue.  Iowans should have access to these records. 

2 – Every county
with MEC wind assets should review
the MEC filings at the IUB, and thoroughly review their own current methods of
wind valuations.  MidAmerican originally offered to make their tax department
personnel available to review this issue. They have yet to do so.  It seems that 3rd parties
should be involved in this process as well.  I'm volunteering. 

3.  Again, 3rd
party consultants familiar with wind costs should be involved as well.  That
might be difficult, as most consultants might have conflicts of interest, having
worked for existing projects. The IUB
and OCA are watching out for the ratepayer, so they may be perceived
as having a conflict as well. 

4.  The DOR should offer more assistance to
county assessors to determine if all hard and soft project costs are accounted for. 
Iowa now has several billion dollars of wind assets installed.  Even small
mistakes on valuations can add up to larges values not on the state tax rolls. 

So, I’ve
shined a ray of sunshine on this issue.  It needs more work.  I still haven’t learned why MEC and the IUB
modified the cost caps for this project 5 times , but the county only has 3
property tax assessments for this project.  Citizens can appeal to a state
review board if they don’t agree with their (or their neighbors) Property
assessments.  I’m hoping local government will address it.  I’m still reviewing about 100 pages of MEC’s
county filings, so more interesting stuff will probably surface.  Stay tuned…

P.S. It’s probably
obvious to blog visitors that writing skills are not my greatest asset, So
thanks for checking me out and enduring grammar errors, fragmented sentences,
etc.  I’m covering some energy issues that I really think need more discussion
in Iowa, not all of them positive, so I’m going to try ending with an
inspirational link when posting. 

Recently, Germany
set another renewable record, generating nearly 75% of their electricity
with renewables – without building a bunch of big transmission lines.  Almost
half of renewables there are owned by farmers and regular folks, instead of the
corporate business model that makes up the majority of U.S. renewables.  Iowa is
nowhere close to that number, though we enjoy better wind and solar resources
than Germany. It’s time for Iowa to
think locally when it comes to renewables!