MidAmerican Energy told the Iowa Utilities Board in an April 14 application that its 2,000-MW Wind XI development program is designed to meet renewable energy needs and extended production tax credit (PTC) authorization from Congress.
MidAmerican Energy applied for a Determination of Ratemaking Principles for the proposed Wind XI Project, which, like its name implies, is the eleventh installment of a slate of wind projects developed in recent years. MidAmerican on April 14 publicly announced the filing of this application.
Wind XI is a significant step forward in MidAmerican’s vision of producing enough renewable energy to match 100% of the annual electric energy requirements of customers. “The energy industry is in the midst of a shift away from fossil fuels and towards emissions-free renewable generation,” the application noted. “While court actions on the Clean Power Plan proposal may impact the timing of this shift, the trend is clear: the future of the industry will be in generation that does not emit greenhouse gases. Aside from regulatory requirements, customers are increasingly demanding sustainable energy options. MidAmerican’s vision is a proactive action to address these trends and to position MidAmerican, its customers and the state of Iowa for a leadership position in this changing industry.
“With this Application, MidAmerican is seeking advance ratemaking principles for 2,000 MW of new wind generation. When added to our current fleet, MidAmerican will have over 6,000 MW of renewable generation, enough to serve approximately 85% of the annual energy needs of our customers when Wind XI is completed.
“However, this step towards the 100% vision has a critical timing component. The recent extension of the federal Production Tax Credit (‘PTC’) provides a limited opportunity for MidAmerican to achieve this proactive step and bring financial benefits to the state of Iowa without the need to ask for an increase in prices to do so.
“Under reasonable assumptions about the future and with the use of price mitigation principles, MidAmerican will be able to develop 2,000 MW of wind – a $3.6 billion investment and the largest economic development project in state history – without the need to increase prices for our customers. This can only be achieved if we capture the benefits of the full PTC, which is set to expire at the end of this year. To ensure that MidAmerican can fulfill the requirements of the PTC law, we request the Board issue a decision on MidAmerican’s request by September 21, 2016. This will allow for adequate review of the Order before making the significant financial commitments to begin construction on the Project.”
William J. Fehrman. MidAmerican’s President and CEO, said in supporting testimony that when the prior Wind X project is completed in 2016, MidAmerican will have 4,048.2 MW of wind generation in operation. MidAmerican anticipates that in 2017, wind generation will supply 58% of its Iowa retail customers’ energy needs.
MidAmerican making sure any in-construction projects qualify for PTC
Michael C. Fehr, MidAmerican’s Vice President–Resource Development, noted that development and construction of the Ida Grove and the O’Brien wind projects in 2016 (the 552 MW Wind X Project) are a key part of his current duties.
As for Wind XI and PTC expiration timing, Fehr wrote: “Given the size of the Project, MidAmerican does not expect to be able to place into service all 2,000 MW prior to January 1, 2019. With respect to those facilities not completed by January 1, 2019, MidAmerican will need to be in a position to demonstrate ‘continuous efforts’ for the duration of the time between the end of 2016 when it ‘began construction’ until it places such facility into service in order to qualify for PTC’s at the 100% level. For those facilities expected to be completed in 2019, MidAmerican has a development and construction plan that will allow MidAmerican to demonstrate that it made continuous efforts to advance those particular facilities towards completion.
“In order to put itself in position to take advantage of the PTC at the 100% level for all wind generation included in the Project, MidAmerican must sign a contract with a turbine vendor which will provide for purchasing turbine equipment in late 2016 that would meet the 5% cost threshold to satisfy the ‘begin construction’ requirements for up to 2,000 MW.”
Information about specific Wind XI project sites is redacted from Fehr’s testimony. MidAmerican has entered into certain real estate purchase options for a number of potential substation sites, professional services agreements with consultants for various diligence services, and agreements associated with entering into the interconnection queue with the Midcontinent ISO. MidAmerican has not entered into any wind project asset purchase agreements with developers, turbine supply agreements or balance-of-plant (BOP) contracts at this time.
All potential Wind XI sites are in Iowa, where there is a good basis to believe that development and construction can be timely completed in order to qualify for PTCs, adequate wind resources exist, and that acceptable transmission capabilities and costs exist, Fehr added.
At each Wind XI project, each wind turbine unit will include a wind turbine and a step-up transformer. The actual turbine size is expected to be 2 MW or larger (however, MidAmerican said it continues to evaluate new technologies and may include a small number of research and development type wind generators as part of Wind XI that do not fit this description provided they can be incorporated into the project under the requested cost cap and within the project economics).
MidAmerican will serve as its own general contractor for Wind XI as it has done for nearly all of the prior wind projects, but the BOP scope of work will be performed under an engineer-procure-construct (EPC) arrangement. MidAmerican will negotiate the EPC contract(s) for the BOP work, and the contract for purchase of the pad mounted transformers if not included in the turbine scope of supply. Thus, MidAmerican will purchase the turbines, and contract with one or more contractors to perform the BOP work. The BOP contractor(s) will be responsible for performing the BOP work, which usually includes procurement of materials for and construction of the access roads, underground electrical collection and fiber optic systems, installation of turbine foundations, installation of the pad mounted transformers, if applicable; and erection of the towers and turbines.