16. januar 2017 - 10:20

MidAmerican Energy: Buffett, Trump and the 2GW wind farm

Warren Buffett does not have to travel far from his desk at Berkshire Hathaway’s headquarters in Omaha, Nebraska, a stone’s throw from the Iowa state line, for a look at his expanding fleet of wind turbines.

Driving east, they spring up first at his 153MW Walnut wind farm, and from there they blossom in every direction across Iowa’s farmlands. Soon they will be nearly inescapable in many parts of the Hawkeye State.

In 2017 MidAmerican Energy, the Des Moines-based utility owned by Buffett’s Berkshire Hathaway conglomerate, will begin building its jaw-dropping 2GW Wind XI development. The 1,000-turbine, multi-site effort will count as the largest US wind project of all time.

Even before the first turbine goes in, MidAmerican ranks among the most important companies in US renewables. It owns 4GW of wind capacity today, more than any other rate-regulated utility, and its wind farms already generate enough power to meet half its retail load in Iowa.

Yet while MidAmerican is significant in any year, it will be especially fascinating in 2017.

To start, there’s the imminent groundbreaking at Wind XI, whose rapid build-out over the next three years will bring hundreds of workers into remote corners of Iowa and send ripples across the US wind supply chain.

One of the biggest stories to emerge from the wind industry in 2016 was Vestas’ surprise win in securing the supply deal for Wind XI with its V110-2.0MW turbines — the largest order in the history of the global wind business.

Siemens, which has a wind rotor-blade factory in Iowa, had won most of MidAmerican’s big orders in recent years, and was expected to do so again with Wind XI. But Vestas won the deal on price, Mike Fehr, MidAmerican’s vice-president for resource development, tells Recharge.

As a regulated utility, MidAmerican was obligated to look closely at a “large number” of potential turbine suppliers, Fehr explains. “We evaluated them all on a cost-of-energy basis, and that’s how we ended up with Vestas.”

In early 2017 MidAmerican unveiled the sites for the first two projects within Wind XI, totaling 338MW. Both are due for completion by the end of this year.

The industry will be hungrily awaiting more details, including which other companies will win work and where the other wind farms will be built. “We expect it will probably be on six sites,” Fehr says. “We have a number of targeted sites, and we’re also maintaining a list of contingency sites just in case something goes wrong.”

Even more important than the practicalities of Wind XI in 2017, however, is the impact MidAmerican’s experience could have on the looming US debate on energy, infrastructure and rural jobs.

Perhaps no American company serves as a more potent counterexample to the nonsense President-elect Donald Trump continues spewing about wind energy, including his post-election remark to The New York Times that “for the most part [wind turbines] don’t work”.

When Berkshire Hathaway acquired MidAmerican in 1999, the utility — Iowa’s largest, with a service area covering two thirds of the state —got most of its power from coal and nothing from wind. When Wind XI is completed in 2019, MidAmerican’s wind fleet will produce enough power to meet 85% of its retail load in Iowa, and it’s already plotting to get to 100%.

Thanks to MidAmerican’s nearly $7bn of wind investments in Iowa over the past decade, the state now gets more than 35% of its electricity from wind, the highest level in the country — and not far off global pace-setters like Denmark. The figure will surpass 40% with Wind XI on line.

Critically, this transformation is not happening in a liberal state whose energy policies would be easy for Republicans to dismiss as extreme. It’s happening in Iowa, a staid, Republican-dominated Midwestern state that voted for Trump by a ten-point margin.

The politics of this are hugely important at a time when the Clean Power Plan looks headed for the scrapheap and even the production tax credit (PTC) could be in jeopardy. Far from being the political football that Trump seems to think it is, renewable energy has become deeply popular among Americans of all political stripes.

No one seems to understand this better than MidAmerican — or, for that matter, Iowa’s politicians. Republican senator Charles Grassley, a staunch defender of the PTC, ran a campaign ad for his re-election this autumn showing the smiling 83-year-old perched atop a wind turbine.

For a glimpse into just how ingrained wind has become in Iowa, one need only pull over at the rest stop off the highway near tiny Adair, about halfway between Des Moines and Omaha, where a vertical Siemens blade greets visitors like an obelisk and tiled mosaics of wind farms grace the passages to the toilets.

Iowans, in other words, need no further convincing that wind turbines work just fine.

In the year ahead, MidAmerican will also serve as a devastating rebuttal to Trump’s claims that wind energy creates few jobs compared to sectors such as coal. “We don’t make the windmills in the US,” Trump said in November. “They’re made in Germany and Japan.”

In fact, the 1,000 turbines Vestas will deliver to MidAmerican will be made at the Danish company’s cluster of factories in Colorado. The turbine order is the “flagship” of Vestas’ current efforts in the US, Vestas Americas president Chris Brown tells Recharge.

With thousands of turbines to maintain across Iowa, the economic impact of projects like Wind XI reverberates far beyond the factory floor. “Ask community colleges in the state what’s the hottest field for new graduates,” Brown says. “It’s wind energy.”

Meanwhile, Iowa’s wind boom has opened a critical new revenue stream for many farmers and rural communities at a time of depressed commodity prices.

“Every wind turbine means income for the farmer whose land it’s on, revenue for local governments that get property taxes from the investment, and rewarding careers for many Iowa families,” Terry Branstad, Iowa’s Republican governor, said recently at the state capitol.

While the details vary from project to project, landowners often receive $7,000-10,000 per year for every turbine installed on their property, according to press reports. MidAmerican has already partnered with 2,400 landowners in Iowa for its existing wind farms, and is in negotiations with many more for Wind XI.

For all his investments in wind, Buffett does not seem particularly motivated by climate change.

Nevada’s NV Energy, another of Berkshire Hathaway Energy’s rate-regulated utilities, has waged a notorious battle against distributed solar in its service territory, and Buffett’s BNSF Railway is the country’s leading hauler of coal.

What does motivate America’s third-richest person are smart, profitable ideas; if they come with ancillary environmental benefits, so much the better.

Trump has railed against the federal incentives provided to wind operators in the form of the PTC, without dwelling on the far greater amount of subsidies provided to the fossil-fuels industry.

Buffett, who does not see eye to eye with Trump on many issues, has been frank about the fact that many of his wind investments would not have made sense without the PTC — currently worth $23/MWh of generation. “Society has decided that federally subsidised wind and solar generation is in our country’s long-term interest,” he wrote in Berkshire Hathaway’s last annual shareholder letter.

But what Buffett surely knows — and Trump seems not to — is that onshore wind is becoming extremely cost-competitive, particularly in windy places like Iowa with local supply chains and deep experience building projects. Many believe the industry will be able to stand on its own two feet in such places even after the PTC phases out for new projects in 2020.

Certainly most Iowans seem to view MidAmerican’s wind investments — and the PTC — as value for money.

Electricity is cheap in the state. Iowans paid an average of $0.085/kWh last year, lower than any of their neighbours in the coal-reliant Midwest — and substantially less than the $0.104/kWh national average.

Having received regulatory sign-off in 2014 to raise its electricity prices for the first time in 16 years, MidAmerican has pledged to build Wind XI without any additional price hikes for its customers.

 “Right now our customers are served by a mix of renewables and conventional thermal assets,” Fehr says. “The more wind we have, the less fuel cost they have. You pay a little more capital for the wind upfront and it’s offset by the fuel-cost savings.”

Branstad says Iowa’s wind farms are a magnet for businesses, from manufacturers to data-centre operators like Google and Facebook, at a time when US corporations are becoming increasingly fervent consumers of renewable power.

“Business leaders say they like Iowa because of our low cost of electricity and the growing share that comes from renewables,” he says.

One of the most critical questions for US renewables in 2017 is whether Trump is truly as viscerally opposed to renewables as he has suggested, or whether he simply lacks an appreciation of how competitive wind and solar have become — and how many jobs they’re creating.

Thankfully, the latter seems a very real possibility. In that case, MidAmerican’s example can be instructive.

Branstad, for one, is doing his part. Responding to a question from Recharge, the governor said he “personally talked to” Trump about the growing competitiveness of wind at the BBQ-and-motorcycle-themed “Roast and Ride” Republican fundraiser held last summer in Iowa.

“I pointed out to him that in Iowa wind energy is becoming more and more economical,” Branstad says. “We’re in the process of trying to educate all candidates and policymakers at the federal and state levels about how important this is.”

And it seems Branstad will play an important part in the next administration. In December, Trump confirmed that he will name Iowa’s governor as the next US ambassador to China, where he will no doubt be hearing plenty about China’s world-leading renewables market.

Trump has made it abundantly clear that he intends to unlock America’s bountiful energy resources, to create jobs and deliver cheap energy to families and industry. Meanwhile, environmental groups will be pleading for the US power sector to continue lowering its carbon emissions.

Somewhere between the two there’s a compromise, and it probably looks an awful lot like MidAmerican Energy.


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