ORIGINAL REPORTING: WHILE SOME TALK OF NEW BUSINESS MODELS, IOWA'S COOPS INVENT THEM
While some talk of new business models, Iowa's coops invent them; "Those who say renewables are a threat ... should realize that they are also an opportunity.”
Herman K. Trabish, November 6, 2014 (Utility Dive)
Name a utility that has met 40% of its electricity with solar but is not fighting net metering, and is not struggling with interconnections.
Now name a utility that meets over 12% of its load with wind but has no nuclear and coal power producers attacking it for negative pricing.
The first is Iowa’s Farmers Electric Cooperative. The second is Iowa Lakes Electric Cooperative. Both are part of an untold story about renewables solutions.
“These coops have figured out local solutions,” explained Iowa Association of Electric Cooperatives Director of Regulatory Affairs Regi Goodale. “Each has a different approach to making renewable energy work for their organizations. And one-size-fits-all doesn’t work.”
The 905 U.S. rural electric cooperatives are independent, non-profit electric utilities providing at-cost electricity to 42 million owner-members in 47 states.
Some coops own generation. Others only deliver power from other coops, from independent power suppliers and/or from electricity markets. They serve 12% of U.S. meters, own $140 million in transmission and generation assets, and deliver 11% of U.S. kilowatt-hours.
Their basic principles are open membership, member control through economic participation, autonomy, service to members, cooperation with other cooperatives, and commitment to community.
Regional diversity, local solutions
Rural electric cooperatives provide about 15% of Iowa’s electricity, drawing on power supplies in eight states, Goodale said.
Central Iowa Power Cooperative (CIPCO), with a 594 megawatt peak demand load, provides about half the kilowatt-hours served by Iowa coops with a generation portfolio that is largely Iowa-sourced and is 60% carbon free, he explained.
But the northwest of Iowa uses wind from the Dakotas, the south gets power from Missouri, and Wisconsin’s Dairyland Power serves the northeast corner of the state with Iowa and Minnesota generation, Goodale added. “We procure power regionally and that means geographic and resource diversity, which makes more renewables available and the use of renewables more reliable.”
Iowa’s 40% solar story
“In southeast Iowa, we don’t have the wind resources of other parts of the state,” explained Farmers Electric Cooperative General Manager Warren McKenna, who won the Solar Electric Power Association (SEPA) Utility Executive of the Year Award for leading his coop to solar.
McKenna started in 2008 with a 20 module solar garden. It almost immediately became 40 modules, despite being limited to one per member. It is now about 38 kilowatts, even though the cost of the modules has gone from a coop-subsidized $250 to an unsubsidized $475.
Farmers Electric then worked with local farmers and businesses on “site solar,” McKenna said. It initially offered a $0.20 per kilowatt-hour feed-in tariff (FIT) but because of solar’s popularity the rate is now $0.125 per kilowatt-hour.
Most recently, Farmers Electric provided a power purchase agreement (PPA) for the 800 kilowatt Eagle Point Solar Farm. McKenna helped put that 10-year PPA together. He also spent a year finding transmission adjacent, south facing land for the $2.2 million project, then worked it through zoning and permitting.
Solar now provides an average of 10% of the Farmers Electric load. “On Sundays, when demand is reduced and the sun is shining, our solar may provide as much as 40% of our electricity,” McKenna said.
The price is a mix of the various solar payment programs. A small part is at the FIT rates. Some is the current $0.125 per kilowatt-hour rate, and some is at the undisclosed Eagle Point project PPA rate.
“It is still operating at a loss,” McKenna said, “but in 20 years, as that all flows together and the guaranteed rates become market-based and with the escalation of the retail rate, the blended rate will pan out.”
Solar allows Farmers to limit its fossil-based power to 50%, he added. “Any time you plug into an outlet in Iowa, 27% of the electrons come from a wind generator. We are 10% solar from our own production. The rest is probably nuclear and natural gas and maybe hydroelectric power. Wind is driving down the wholesale electricity cost and saves us about $100,000 per year. We are using that to finance solar.”
If Farmers can do it, he added, Iowa should be able to get 10% or more of its power from solar.
“Solar is a great fit for rural Iowa because farmers grow corn and solar is just another thing to farm,” McKenna said. “Why not grow power locally? Why not buy power from farmers?”
Geothermal, livestock waste, and ethanol
Iowa’s coops have also partnered in over 8,300 business and residential geothermal heating and cooling systems,” Goodale said.
“With the energy savings you get, and the federal, state, and utility incentives available, you almost can’t afford not to install a geothermal system, “ saidIowa Geothermal Association Executive Director Ron Marr. “Last winter, $5 per gallon propane was driving people to it.”
Though Dairyland Power and Iowa farmers have pilot projects that could turn the state’s enormous livestock waste resource into power generation, Goodale said, the agriculture industry’s main renewables contribution has been in the production of corn ethanol and soy biodiesel for transportation fuels. But Iowa Lakes Electric Cooperative found a way to make wind power central to transportation fuels production.
How ethanol helped a coop get to 12% wind
Iowa gets over 27% of its electricity from wind power and has the third biggest installed capacity of any state, with 5,177 megawatts and 3,216 turbines. On a more modest scale, two Iowa Lakes Electric projects that went online in 2011, totaling 14 turbines and 21 megawatts, comprise the biggest installed wind capacity of any U.S. distribution-only coop.
Since coops are non-profit and don’t pay federal income tax, they cannot take advantage of wind’s production tax credit. “What makes the projects workable,” explained Iowa Lakes President/CEO Rick Olesen, “is that they were sited at a large substation next to an ethanol production facility.”
That eliminated the need for transmission, he said.
“As wind has expanded in our region, there has been a constraint on the transmission delivering the generation to load centers," Olesen explained. "We put each of our projects next to a load center. We not only do not add to transmission congestion, but we actually relieve it.”
The $43 million investment was a big undertaking for the small utility, but it now has a positive cash flow. The projects’ capacity factor percentage has been “in the low 40s for five consecutive years, exceeding the 39% to 40% predicted,” Olesen said.
“They were predicted to generate about 72.2 million kilowatt-hours per year of our annual 650 million kilowatt-hours sold,” he said. “Last year, they generated 79 million kilowatt-hours and this year we are on track to generate over 80 million kilowatt-hours.”
That is over 12% of Iowa Lakes’ total generation.
Working with the coop, Iowa Lakes Community College developed a now-famous wind technician training program and a maintenance team trained there has kept Iowa Lakes’ turbines running at 98% availability. Financing was done with low cost Competitive Renewable Energy Bonds through CoBank, a bank specializing in electric cooperatives.
“It has been a great success story and a real win-win all the way around,” Olesen said. “And now North Dakota’s Basin Electric Power Cooperative is planning to use the same strategy."
In the process of doubling their installed wind capacity of 712 megawatts to over 1,400 megawatts, Basin Electric will site new wind in the Bakken oil production area. "There is huge new load there and great wind resources,” Olesen said.
“Those who say renewables are a threat to the utility business model,” Goodale said, summing up the lessons from coops, “should realize that they are also an opportunity.”