Opinion Page: 5 reasons to be skeptical of MidAmerican's future energy plans
Without careful regulatory scrutiny, MidAmerican’s customers will be writing a blank check for its $3.9 billion proposal.
MidAmerican Energy’s generation of renewable energy equivalent to 88.5% of its customers’ use is a great win for Iowa, but that achievement is not a reason for customers to write a blank check on their request to the Iowa Utilities Board to invest an additional $3.9 billion in new generation and other spending.
MidAmerican did not invest in wind for the purpose of reducing its carbon output; company executives did it because they saw a promising business opportunity. And while this new proposal may be good for MidAmerican, the utilities board needs to ensure it is also good for consumers.
While customers have been winners in MidAmerican’s wind investment so far, the objections to this new spending by Google, Facebook and Microsoft, which have sophisticated experts to analyze these matters, raise the question whether MidAmerican’s proposal achieves the goal of getting to 24/7 clean energy at the lowest cost. Let’s look at five important factors that need to be explored to determine if the proposal truly delivers 100% clean energy for Iowans at the lowest cost:
MidAmerican Energy produces excess energy today
First, while MidAmerican Energy generates renewable energy that is equivalent to 88.5% of Iowa’s use, the company still keeps all its coal plants operating. MidAmerican Energy ends up generating much more energy than what its customers consume; the rest gets sold to other utilities.
Profits are not based on the efficiency of the electric grid
Second, MidAmerican’s rates are set by a regulatory framework from the 1920s, where utilities’ profits are based on the company’s amount of capital assets, not necessarily on the efficiency of the grid. Therefore, when evaluating the company’s spending proposals, it is important to verify that the proposal is in the customers’ best interest — not just structured to maximize future profits.
Peak demand is the most expensive energy to produce
Third, MidAmerican Energy explains that it needs all its coal and gas plants operating to address the peak demand times, which helps prevent blackouts. Energy during peak demand is the most expensive energy to produce and deliver. If there is going to be a large investment into new low-cost renewable energy, one would assume it would be to reduce the cost of the expensive peak-time generation.
However, peak demand is on hot summer afternoons when the wind tends to blow less. Solar, in contrast, generates its maximum energy on those days. It is the reason that the grid of the future needs a balance of wind, solar and storage.
Under MidAmerican’s proposal, only 2% of the new generation would be from solar, and MidAmerican proposes only to “study” storage. Thus, the $3.9 billion would do little to reduce the need for expensive coal generation during peak hot summer days. With its proposal, MidAmerican gets to add to its capital base with more wind but avoids undercutting the need for its existing coal plants. This raises more questions.
Coal plant carbon capture is not a low-cost measure
Fourth, MidAmerican Energy’s proposal includes expenditures to study carbon capture technologies for its existing coal plants, which will make these plants even less economical. The utilities board must determine if this investment is in the best interest of customers or is it designed merely to reduce the risk to MidAmerican’s profits in the future if these capital-intensive coal plants are forced to close.
MidAmerican Energy is not being transparent about long-term projections
Fifth, the only way for the utilities board to make an informed decision whether this $3.9 billion investment is good for customers is to have MidAmerican share its long-term planning and projections with the board and the public. Unfortunately, MidAmerican has taken the board to court to avoid sharing its detailed long-term projections, contending that Iowa law does not allow the utilities board access to the information. It has also resisted sharing other relevant information with the public for “competitive” reasons.
MidAmerican operates in a protected, guaranteed geographic territory, which is enshrined in the Iowa Code. It has, by law, no competition. A fair trade-off should be that the utilities board and the public have visibility into the long-term needs and plans for the system.
The utilities board needs such information to ensure this proposal is in Iowans’ best interests. Otherwise, MidAmerican’s customers are writing a blank check for its $3.9 billion proposal.