A Free-Market Energy Blog

Subsidies Keeping Iowa Wind Turbines Turning

By Janna Swanson -- May 13, 2020

Editor Note: The article below, a revised version of a post at Stop These Things, is an example of a grassroots volunteer propelled by the menace of industrial wind turbines. Her analysis of wind-stronghold Iowa is pertinent for the national debate in regard to a villain in Michael Moore’s game-changing 100-minute documentary, Planet of the Humans.

Iowa is a big wind state, having force-started the industry with a 1983 mandate for state utilities to buy power from 105 MW of wind capacity. With state subsidies in addition to the federal Production Tax Credit, wind literally pays for itself with in reduced corporate taxes. Wind is Iowa’s largest power source, with 10,000 MW of capacity generating 40 percent of the state’s electricity. It is also at the forefront of landfill issues of scrapped wind blades.

Where to start? First, industrial wind and solar make no sense economically. Both past and present CEOs of MidAmerican Energy (“we delivered 61.3 percent renewable wind energy to our customers,” their website boasts) admitted that the turbines in Iowa will be 100% paid for by tax credits.

The first indication of this was on Simon Conway’s WHO Radio show. Simon interviewed CEO Bill Fehrman in 2017, who admitted that 100% of the cost of the turbines comes from taxes. In a May 30, 2018, article written by the Des Moines Register’s Donnelle Eller, current MidAmerican CEO Adam Wright said:

MidAmerican will receive about $10 billion in federal production tax credits for the investment, covering the capital costs needed to build the wind farms.

Even though the production tax credits are being phased out, MidAmerican’s newest project will qualify for the full amount of credits for ten years under federal law.

Rick Olson, the president of Iowa Lakes Electric Co-op, told me that the entire cost of the wind turbines they built in 2007/2008 were also 100% paid for by the federal government. With the PTC set to phase out by 2020 (or 2021) the Rural Electric Co-ops could not afford to build new turbines because the the RECs are tax exempt.

Recently those public power utilities are asking for a piece of the pie. Iowa Lakes Electric Co-op has recently reported that their turbines, though in good condition, are making less energy than projected because of a simple lack of wind. This makes their energy even more expensive all around.

MidAmerican’s Matt Fehr told me recently that it was “not real” money, because the government does not balance its books. Perennial competitive problems is why wind and solar have recently hatched a coronavirus-inspired plan to ask the IRS to not hold them to the PTC deadline for two years and that they receive cash instead of a tax credit.

How is it that in 2018 wind installations were being built that will qualify for the “full amount of credits,” when the PTC was supposed to be declining every year starting in 2016? It has to do with “safe harbor”:

The safe harbor clause comes from the “Fiscal Cliff” legislation of 2013 that led to an IRS interpretation allowing wind projects to have begun construction by year-end if a minimum of 5% of the project’s total capital cost is incurred before January 1st. This means that ground doesn’t have to be broken for a project to have “started construction” in the eyes of the IRS. 

A second way of satisfying the clause is through the Physical Work Test, which delineates certain construction tasks that are significant enough to contribute towards PTC qualification. Whatever method is used, it doesn’t change the fact that the project has to be in service within four years of the start of construction. No matter how it qualified at the time, the clock starts ticking.

In addition to the federal PTC, Iowa wind developers barely pay any state tax on these structures as well. Iowa Code 427b.26 requires only that turbines pay 0% the first year, 5% the second year, 10% the third, increasing by increments of 5% until a cap of 30%. Yet in Huron County, Michigan, we see wind developers contesting their taxes.

Also, wind companies are taking advantage of a piece of legislation from 1986 that allows the wind company to replace some of the wind turbines and begin the 10 years of tax credit over again:

Repowering is an opportunity for a developer to requalify an existing wind project for the renewable electricity production tax credit for wind projects under Section 45 of the Internal Revenue Code of 1986 based on new placed-in-service and begun-construction dates while retaining some of the existing project. (North American Windpower, August 2017)

Does this make any difference to anyone else? It’s all a matter of private property and private contracts, right? No. Wind developers admit a long list of negative impacts for neighbors up to a half-mile from any 500-foot wind turbine by offering contracts called “Neighbor Agreements” (click for example) that seek to get neighbors to sign off on negative impacts (as well giving the wind developers a blanket easement to their property) for some money. By the time they offer you this “deal,” though, your County Supervisors have already allowed them to build turbines 1,200-1,500 feet from the foundation of your home.

This is part of the reason that since 2015, 260 government entities across the US have banned or blocked industrial wind at the urging of their constituents. Many more communities have fought and lost to lawmakers that sought the money over the security of their constituents. In Iowa Code 331.301, Supervisors are not tasked with making money for the County but rather to “protect and preserve the rights, privileges, and property of the county or of its residents, and to preserve and improve the peace, safety, health, welfare, comfort, and convenience of its residents.” We are not the only country having problems with industrial wind. Even Germany’s wind industry is at a standstill because of rural backlash. Norway, too!

Data from the US Energy Information Administration show that in the US, we use the more than 100,000 MW installed wind capacity only a third of the time. The only way we would be able to utilize wind like mineral energies to generate electricity is for the wind to blow 24/7, 365 days a year, at a steady 30 mph or so.

Energy companies plan to instead squeeze out more reliability installing massive batteries and thousands of miles of new transmission lines, which only underscores the problem with using a diffuse intermittent source such as wind on a large scale. And they never count these costs when they talk about industrial wind being “cheap.” Industrial wind replaces nothing; it can only displace the energy from traditional sources for a short time. This is a grand scheme of the Averch-Johnson Effect., where utilities make more by inflating the rate base upon which a rate of return is multiplied. (Look to see who is behind pushing these projects and you will see large investor-owned utilities.)

Conclusion

Iowa boasts that 40% of our electricity is generated by wind turbines. But remember that that is still only about 4% of all the energy we consume, and we are only 1% of the US population. That 4% has already covered about 1,500,000 of our acres with industrial wind projects, negatively affecting homes and businesses within as well as on the perimeters of these project areas. And taxpayers around the country have to make up the taxes that Iowa-based wind projects allow utilities to escape.

While wind turbines reduce emissions at the final point of generation, once you take the emissions of manufacturing, transporting, and construction, as well as batteries, excess power lines, and grid inefficiencies, not much is left to offset the huge amount of money and angst. The opportunity cost is switching from coal to natural gas and forgoing wind power altogether. The same people boosting industrial wind and solar because of a concern from carbon emissions are also shunning nuclear even though it is emissions free.

Wind turbines have shown that they last 20-25 years all told and 10–15 before they require a million dollars each in “repowering.” A traditional power plant, in contrast, lasts 60-75 years with incremental replacement and upgrading.

We can have traditional power without turbines or solar, but it is not possible to have it the other way.

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Janna Swanson is President of the Iowa Coalition for Rural Property Rights. described as “a large, statewide grass-roots organization of people living within proposed or existing industrial wind installations.” Living in northwest rural Iowa (Ayrshire, pop. 150), Swanson is also a member of the National Wind Watch Board and the Preservation of Rural Iowa Alliance.

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