Buffett’s Midwest utility places major new bet on wind power

Source: Daniel Cusick, E&E reporter • Posted: Monday, May 13, 2013

Warren Buffett

Warren Buffett. Photo by Mark Hirschey, courtesy of Wikipedia.

In a bold move characteristic of its billionaire owner, Warren Buffett, MidAmerican Energy Co. this week said it would add 1,050 megawatts of wind power to its already extensive wind holdings in Iowa by the end of 2015.

The $1.9 billion investment, billed as the largest economic development project ever in Iowa, follows a trajectory set by Des Moines-based MidAmerican several years ago when it pledged to become one of the world’s most aggressive utility deployers of renewable energy.

If the expansion is approved by the Iowa Utilities Board, MidAmerican will own and operate about 3,335 MW of wind generation capacity in Iowa by 2015, and those wind turbines will account for roughly 40 percent of the rate-based utility’s overall fuel mix, according to company officials.

Since 2004, MidAmerican has installed 1,267 wind turbines in Iowa, representing a total investment of about $4 billion, according to the company. With the additional planned 656 turbines, MidAmerican will solidify its place atop the nation’s utility providers of wind power.

The move will also help Iowa expand its economy around renewable energy, clean energy manufacturing and technology firms that want to be associated with clean power.

Energy costs to shrink along with carbon footprint

MidAmerican’s 714,000 utility customers in Iowa, Illinois, Nebraska and South Dakota should also benefit from the project, officials said, as none of the construction costs will be passed along to ratepayers.

In fact, officials said the buildout of wind power should allow for a rate reduction of $3.3 million to MidAmerican’s customers in 2015, ramping up to a $10 million annual rate reduction by 2017.

At the same time, the company expects to pay $3.2 million annually in rent to Iowa landowners who agree to site turbines on their lands and generate $360 million in additional property tax revenue over the next 30 years.

Lastly, MidAmerican Energy President and CEO Bill Fehrman said, the expansion will “further enhance our corporate principle of environmental respect by reducing our carbon footprint by 10.3 percent.”

Wind power advocates, including Iowa’s Republican state executives, Gov. Terry Branstad and Lt. Gov. Kim Reynolds, said they welcomed the announcement as another notch in Iowa’s expanding economic development belt.

A hub for tech firms and turbine makers

Branstad noted the “significant progress” that wind energy companies have made over the last half-decade in improving wind turbine performance and efficiencies while driving down the costs of wind energy.

In total, Iowa produces an estimated 5,000 MW of wind energy from both rate-based utilities like MidAmerican and independent wind farm owners. MidAmerican’s latest investment will boost that figure by 20 percent, to more than 6,000 MW.

“I’m a true believer in the idea of an all-of-the-above energy approach,” Branstad said. “Our state’s low-cost energy and diversified portfolio have been an important part of our success formula in attracting significant capital investment to this state in the last two years. Iowa is no longer overlooked by high-tech and new media companies now because we have become known as a state that is a real innovator and leader.”

Among the technology firms to put down roots in Iowa are Internet technology giants Microsoft Corp., Google Inc. and Facebook Inc., all of which already operate or plan to build data centers in the state, partly due to its abundance of wind energy (ClimateWire, April 26).

Iowa has also emerged as a supply chain hub for the wind power industry, with blade, tower and turbine manufacturers setting up shop across the state (ClimateWire, April 11, 2012).

A number of those firms laid off employees as wind power development slowed in the face of uncertainty over the federal production tax credit for wind, which was eventually extended in January. Now, many of those same manufacturing firms could get a recharge from MidAmerican’s expansion plans.

Rob Gramlich, interim CEO of the American Wind Energy Association, which wrapped up its 2013 annual meeting Wednesday, welcomed the news from Iowa and credited the state’s leaders with helping keep wind energy viable through their support of the federal PTC.

“We applaud MidAmerican Energy and Gov. Branstad for this investment in the state of Iowa,” Gramlich said. “The Iowa congressional delegation deserves credit for their unwavering support of the production tax credit which makes these investments happen and supports over 6,000 wind energy jobs in Iowa.”

Fossil fuels remain in the portfolio

Reynolds noted that the new MidAmerican wind farms should create 460 high-wage construction jobs over the next two years as well as 48 permanent jobs once the turbines are running.

MidAmerican Energy is a subsidiary of MidAmerican Energy Holdings Co., which is majority-owned by Berkshire Hathaway Inc., the investment company controlled by celebrity investor Buffett.

MidAmerican Energy Holdings has been among the most aggressive purchasers and developers of renewable energy since the early 2000s. In addition to its current 2,285 MW of wind energy holdings in Iowa, the company owns merchant wind farms in Oregon, Washington and Wyoming.

The company has also invested heavily in solar power through its MidAmerican Renewables LLC subsidiary, with 1,271 MW under development in California along with an estimated 347 MW of geothermal capacity.

But the parent company also has strong ties to fossil fuels, including 9,400 MW of coal-fired generation and 3,500 MW of natural-gas-fired generation split between rate-based utilities MidAmerican Energy Co. and PacifiCorp of California. MidAmerican Energy Holdings also owns two major gas pipelines under subsidiaries Kern River Gas Transmission Co. and Northern Natural Gas.

Earlier this year, MidAmerican Energy announced it would shutter seven coal-fired boilers at three of its Iowa power plants as part of a settlement agreement with the Sierra Club. At least one of those plants, the Riverside Generating Station in eastern Iowa, will be converted to burn natural gas, a company spokeswoman said.