Building infrastructure to sell wind energy could cost $4 billion, Nebraska power board says

Source: By Russell Hubbard / World-Herald staff writer • Posted: Tuesday, December 16, 2014

Prairie Breeze

“A potentially significant portion of this cost would likely have to be borne by Nebraska utilities and their customers, depending on the extent to which the new lines are developed through the regional transmission planning processes,” reads the analysis released Monday by the Nebraska Power Review Board, which regulates the state’s utilities.

“Some of these costs, however, will be offset by the benefits of reduced transmission congestion that increases the value of all power sales by Nebraska electric suppliers and reduces the net cost to Nebraska ratepayers.”

The analysis also found that the market for wind power in the Midwest is already saturated with suppliers; neighboring Iowa gets 27 percent of its power from wind, mostly from MidAmerican Energy, the utility owned by Omaha’s Berkshire Hathaway.

Also among the findings are that Nebraska offers lower financial incentives than other states and that the state suffers from “the perception of a more burdensome permitting and regulatory process.”

Two years ago, Nebraska wind installations generated 459 megawatts, or 5 percent of the state’s total. About 750 megawatts of new wind power

has been added in Nebraska in recent years, with a 400-megawatt project planned for next year, bringing the total to 1,209 megawatts, or about 14 percent of state generation.

The Nebraska Public Power District says it already is close to reaching its 2020 goal of 10 percent of its energy with renewables, primarily wind. The Omaha Public Power District said it has a long-term goal of generating 30 percent of its electricity from wind.

The analysis, performed by global consultant the Brattle Group, said investment in the local, regional and interregional transmission infrastructure that would be needed to support an “ambitious target” of 5,000 megawatts to 10,000 megawatts of renewable generation in Nebraska would cost between $1.5 billion and $4 billion.

As it stands, moving electricity out of Nebraska isn’t so easy. Transmission limitations between Nebraska and other states, the analysis found, cause congestion that reduces the revenue that Nebraska utilities can obtain from the sale of their excess generation.

Amping up the transmission grid would eventually lower utility bills, the analysis said, because state utilities could earn more from export sales.

“Increasing wholesale market prices in Nebraska by reducing transmission congestion would help reduce Nebraska’s customers’ electricity costs,” the authors wrote.

The Brattle Group analysis also said Iowa, Kansas and Oklahoma offer exemptions on property taxes for periods ranging from five years to forever, while charging no tax on the generating capacity. Nebraska offers no property tax exemption and charges a capacity tax of $3,518 per megawatt hour.

Wind energy attracts widespread approval in Nebraska, according to a poll of 600 voters released last week by the Wind Energy Foundation.

“Overwhelmingly, residents see renewables as a key part of expanding America’s energy portfolio while working toward energy independence and creating jobs in the state,” the foundation said. “Eighty percent of the electorate has a favorable view of renewable energy and 65 percent believes that renewable energy will create jobs in Nebraska.”

Not everyone is a fan of wind generation in its current form. A nonprofit free-market advocate called the Institute for Energy Research said wind power is far less economical than generally portrayed, with its true cost obscured by tax incentives and the unpredictable nature of wind, which can leave expensive generating equipment idle for long periods.

“A lot of the costs of wind are hidden by subsidies,” said the group’s Chris Warren. “If wind can stand alone in the marketplace, then let it compete. But as it is, it is propped up in a variety of ways.”

One of those ways is via tax laws. This month, the U.S. House of Representatives passed an extension of the federal wind production tax credit valid through the end of the year. The credit allows for a tax benefit equal to 2.2 cents for every kilowatt-hour of electricity generated.