Study shows Iowa could see electric bills fall under carbon rule

Source: Jeffrey Tomich, E&E reporter • Posted: Thursday, March 24, 2016

Iowa residential electricity bills could decline as much as 13 percent over the next decade and a half because of energy efficiency and continued exports of wind energy to meet Clean Power Plan obligations, according to an analysis by M.J. Bradley & Associates.

Christopher Van Atten, a senior vice president of the Boston-based firm, presented preliminary results of the firm’s Clean Power Plan modeling during a meeting hosted yesterday by the Iowa Department of Natural Resources.

The meeting in the Des Moines suburbs was the fifth hosted by the state since U.S. EPA issued the final Clean Power Plan rule on Aug. 3. It will also likely be the last until there is more legal clarity following the stay issued by the Supreme Court, as Iowa is joining many other Midwestern states in hitting the pause button on formal compliance work.

“Any meetings following today we decided to put on hold until we know more,” said Bill Ehm of the Iowa Department of Natural Resources. “Unless we hear something out of the EPA or the courts, I think we stand adjourned for some time.”

The M.J. Bradley presentation was among presentations to state regulators, Iowa utilities and environmental advocates. The regional grid operator, the Midcontinent Independent System Operator, recapped findings of initial modeling. The analysis showed that most states within MISO benefit from rate-based compliance plans except when there are high penetrations of renewable energy and energy efficiency.

Michael Goggin, senior director of research for the American Wind Energy Association, also shared results of Clean Power Plan models, which suggested that Iowa’s lowest-cost path to compliance would involve adding another 2,500 megawatts of wind capacity, not including exports. The state already ranks No. 2 with more than 6,200 MW installed, according to AWEA.

Renewable energy, Goggin said, would not only help the state minimize compliance costs but also limit risk that goes along with fuel price volatility.

Iowa’s two investor-owned utilities, MidAmerican Energy and Alliant Energy, also made brief presentations.

David Young of the Electric Power Research Institute also made a presentation urging caution in interpreting various models.

Iowa, which got nearly one-third of its electricity from wind farms last year, reduced carbon dioxide emissions from affected fossil units by 12 percent to 32.2 million tons. The reductions were largely because coal units ran less frequently.

The year-over-year reduction put the state within 500,000 tons of its 2022 goal under the Clean Power Plan, said Marnie Stein of the Iowa DNR. But an increase in electricity demand over the next five years could make the goal less easy to achieve than it appears.

The M.J. Bradley analysis indicated that Iowa’s emissions reductions and fuel mix would differ little regardless of whether the state chooses a mass-based compliance plan, capping CO2 output from affected plants, or a rate-based plan that limits emissions per unit of energy produced.

Four different policy scenarios modeled by M.J. Bradley indicated that Iowa’s CO2 emissions would be reduced by about 10 percent by 2030. And electric bills would decline under each scenario, by 6 to 13 percent, because of lower energy use, lower fuel costs and increased energy exports.

Revenue from the sale of emissions allowances under a mass-based compliance plan could be used to further reduce electric bills, Van Atten said.