Buffett-owned utility grows its Midwestern wind farm portfolio

Source: Daniel Cusick • E&E • Posted: Wednesday, January 25, 2012

Warren Buffett’s appetite for homegrown renewable energy continues to expand as his MidAmerican Energy Holdings Co. announced it will purchase yet another wind-power project in the Corn Belt, its fourth major acquisition this month.

MidAmerican’s planned purchase of the 81-megawatt Bishop Hill II wind project in Henry County, Ill., pushes the company’s January wind power acquisitions to nearly 500 megawatts and further solidifies the firm’s No. 1 ranking in wind power ownership among the nation’s regulated utilities.

“Wind energy is a renewable generation source that meets current and future energy needs in an environmentally efficient and cost-effective manner,” Greg Abel, chairman, president and CEO of MidAmerican Energy Holdings, said in a statement announcing the deal on Friday. “The Bishop Hill II wind project fits our model of investing in the renewable energy sector.”

MidAmerican Energy Holdings, headquartered in Des Moines, Iowa, is controlled by Buffett’s Berkshire Hathaway group, whose other U.S.-based energy assets include the regional electricity and natural gas provider MidAmerican Energy Co., Pacificorp, Kern River Gas Transmission Co. and Northern Natural Gas Co.

According to Bishop Hill’s developer, Invenergy Wind LLC, the Illinois wind farm about 40 miles northwest of Peoria will feature 50 General Electric 1.62-megawatt turbines. The development is expected to be operational by the fourth quarter of this year, and all of its generation will be purchased by Ameren Corp. under a 20-year power purchase agreement, according to officials familiar with the deal.

Bishop Hill I, an adjacent 133-turbine wind farm also being built by Invenergy, will produce roughly 200 megawatts of electricity to be sold to the Tennessee Valley Authority under a power purchase agreement, according to Invenergy officials. The combined projects, to be named the Bishop Hill Wind Energy Center, will be among the largest wind farms in the Midwest, according to the American Wind Energy Association.

A Chicago-based spokeswoman for Invenergy declined to offer details on the deal with MidAmerican, nor would she divulge company’s total investment in the Bishop Hill project, saying it was proprietary information. But Invenergy President and CEO Micahel Polsky, in a statement, said his company was pleased about the acquisition and looks forward to making the Bishop Hill complex “the pre-eminent wind project in Illinois.”

Moving away from coal?

The Bishop Hill II announcement comes only weeks after MidAmerican said it would purchase 407 MW of additional wind power capacity in its home state of Iowa, adding to its extensive holdings in the state.

Those acquisitions, accounting for an estimated 176 turbines, include the 103.5 MW Vienna wind project in Marshall and Tama counties from RPM Access, the 200.1 MW Eclipse wind project in Guthrie and Audubon counties, and the 101.2 MW Morning Light wind project in Adair County from Clipper Windpower Development Co. to purchase.

Experts say the recent wind power acquisitions are driven by the expected retirement of coal-fired electric power units over the coming years in states like Illinois, where utilities will be required to meet a 25 percent renewable energy standard — using fuels like wind, solar and biomass — by 2025.

As of a year ago, 52 percent of MidAmerican Energy’s electricity generation was derived from coal, while 21 percent came from natural gas and 20 percent from wind, hydroelectric and biomass sources, according to the company’s website.

Moreover, in states like Iowa and Illinois, wind power remains highly cost-competitive with the primary backup fuel for most electric utilities — natural gas — so long as the federal government’s current production tax credit (PTC) remains in effect. The PTC is set to expire at the end of 2012 unless it is renewed by Congress.

“It’s really a good deal for MidAmerican,” said Amy Grace, head of North American wind analysis for Bloomberg New Energy Finance in New York. “Iowa and Illinois are windy places. Projects there have high capacity factors, which mean they have some of the lowest costs in the country. The utilities in that region can contract for power pretty cheaply.”

By the end of 2012, MidAmerican says, it will have invested nearly $4 billion in wind power generation in Iowa alone, and the company’s total wind power generation will exceed 2,284 MW. Nationwide, the company has invested roughly $6 billion in wind power generation. Outside the Midwest, the company owns wind farms in Oregon, Washington and Wyoming.

‘Sweet spots’ in the heartland and elsewhere

While industry officials and independent experts have forecast a sharp drop in renewable energy investment with the expiration of the PTC and cash grants offered under the 2009 American Recovery and Reinvestment Act, some believe that wind generation will remain a strong alternative to traditional fossil fuels in the Midwest, especially as advances in turbine, power storage and transmission technology allow wind power to flow more easily to the grid.

“As your turbine towers are getting taller and your blades are getting longer, you’re finding more sweet spots” in the Midwest where wind energy can be harnessed at low costs, said Ellen Carey, a spokeswoman for AWEA in Washington. That, combined with a high concentration of energy-hungry manufacturers in the Midwest, makes deals like MidAmerican’s all the wiser, she said.

And Berkshire Hathaway’s renewable energy investments go beyond wind power. Late last year, MidAmerican agreed to buy purchase First Solar’s $2 billion Topaz project in Southern California (ClimateWire, Dec. 9, 2011). And before Christmas, the firm said it would purchase a 49 percent stake in a $1.8 billion solar plant belonging to NRG Energy Inc. in Arizona (Greenwire, Dec. 19, 2011).