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Iowa: Tax Credits Increased, Distributed Generation Investigated, and Communities Impacted

September 04, 2014 by Alexandra Aznar

This is the third blog in a four-part series of articles in which we discuss either the valuation of solar to the grid and various stakeholders or value-of-solar (VOS) tariffs and policies. For previous posts and background information, please see the "Louisiana: Net Metering Cost/Benefit Study Authorized" and the "Utah: Monthly Net Energy Metering Fees Debated" posts.

Iowa has been one of the most active states in solar policy development in 2014. In fact, the Iowa Utilities Board, state legislature, and Supreme Court have all passed rulings and laws in recent months. We'll review some of these pivotal solar energy, distributed photovoltaic (PV) generation, and net energy metering (NEM) rulemakings, as well as highlight innovative solar development at the local level in a case study on the Farmers' Electric Cooperative in Kalona, Iowa.

Iowa Utilities Board: Notice of Inquiry about Distributed Generation

Seeking to gather policy and technical information about distributed generation, the Iowa Utilities Board (IUB) opened up a notice of inquiry (NOI) docket in January 2014 (Passera 2014). The NOI is an information gathering docket that could produce recommendations for future action, such as a utility commission rulemaking or legislative activity (Baer 2014). The IUB invited participants to "comment on broad general questions related to the benefits and challenges of distributed generation, both for utilities and their ratepayers, on policies that should be examined with respect to distributed generation, and to identify the technical, financial, regulatory, and safety aspects of distributed generation..." (Iowa Utilities Board 2014, p. 2). Of note, amidst concerns about NEM and cross-subsidization, the IUB asks for comments on "...the potential ramifications of distributed generation to participating and nonparticipating rate payers (Ibid).

A diverse group of stakeholders including business, environmental, and citizens groups have already responded to the NOI, which has remained open with periodic deadlines for comments on particular issues. To date, utilities have voiced concerns about distributed generation and cross-subsidization among their customers. However, there has been an increasing interest in utility-owned community solar projects among Iowa utilities, (Baer 2014). Investor-owned Alliant Energy also discussed whether a possible rate case in early 2014 would involve proposing changes to its Iowa net-metering tariff (Baer, 2014), but that rate case was not filed. The NOI will allow stakeholders and policy makers to gather more information about NEM in Iowa before considering any changes (Baer 2014).

Bill HF 2336: Net-Metering Expansion

Meanwhile, the Iowa General Assembly introduced bill HF 2336 in February which would require all rate-regulated electric utilities—MidAmerican Energy, Interstate Power and Light, and Linn County Rural Electric Co-operative—to offer net-metering to customers. The bill expands upon Iowa's 1984 net-metering sub-rule, adopted by the Iowa Utilities Board, which currently applies only to Iowa's two investor-owned utilities (HF 2336 2014; DSIRE 2014). Subsequent rule waivers to the 1984 rule have placed a 500 kilowatt (kW) limit on eligible systems, but Iowa's original net metering rule places no individual system cap or enrollment limit (DSIRE 2014). Bill 2336 includes requirements that rate-regulated utilities purchase "a minimum of 5 percent of their required electrical output pursuant to net metering agreements by July 1, 2019," does not place aggregate NEM capacity limits, and would not allow "special fees applicable specifically to net metering" (HF 2336 2014).

There are now many potential NEM customers in Iowa because demand for solar—from individuals to commercial businesses—has rapidly increased (Uhlenhuth 2014). In particular, large hog and turkey producers have shown interest in customer-owned solar because of 1) Iowa's solar tax credits, 2) the roofs of their animal holding buildings are ideally sloped for solar panels, and 3) their summer electricity bills are high in the summer when buildings must be cooled for the animals. Distributed PV's ability to produce maximum amount of energy during seasonal peak load and perhaps even peak times of day makes it an attractive energy resource for these farmers (Baer 2014; Uhlenhuth 2013).

Iowa Supreme Court Ruling: Third-Party Power Purchase Agreements are Legal

Iowa's utility regulatory framework provides an interesting backdrop to increasing consumer demand for distributed generation. Regulated utilities in Iowa have exclusive rights to customers within their service territories—a point that has arisen in discussions of expanding solar markets and distributed solar generation (Foley, 2014). On July 11, the Iowa Supreme Court ruled on a third-party power purchase agreement case that is certain to have implications on the future of distributed generation in Iowa. In this case, Alliant Energy—joined by MidAmerican Energy and the Iowa Association of Electric Co-operatives—protested against Eagle Point Solar's 2011 agreement with the city of Dubuque allowing Eagle Point to purchase and install a solar system on a Dubuque operations building and sell the electricity generated to the city (Associated Press 2014; Rodgers 2014). Alliant argued that the "third party power purchase agreement" between Eagle Point Solar (a local solar company) and Dubuque violated state law that establishes Alliant's exclusive service territory; moreover, if Eagle Point Solar wants to sell electricity, it must be regulated like other Iowa utilities, claimed Alliant (Associated Press 2014; Rodgers 2014). However, the Supreme Court ruled that Eagle Point Solar is not a public or electric utility and does not violate state law (Foley 2014; Uhlenhuth 2014; Supreme Court of Iowa 2014). The ruling seems to indicate that Iowa will join the 22 other states that currently allow third-party power purchase agreements.

Senate Bill 2340: Expansion of Iowa Solar Tax Credits

These actions are taking place within a broader set of actions in the state; Senate File 2340 was signed by Governor Terry Branstad on May 30, 2014 (Senate File 2340 2014). This bill:

  1. Increases "the cumulative value of tax credits [for solar] claimed annually" from $1.5 million to $4.5 million
  2. Increases residential and business state solar tax credit caps (from $3,000 to $5,000 and $15,000 to $20,000, respectively)
  3. Allows taxpayers to claim multiple tax credits, as long as they claim only one per solar installation (Senate File 2340, 2014).

These solar tax credit expansions had strong bipartisan support evidenced by a 46-0 Senate vote and a vote of 88-4 in the House (Iowa Environmental Council 2014). The recent tax credit expansion is likely to stimulate an uptick in solar installations. Analysts predict 8-10 megawatts (MW) of PV will be installed annually, up from 2–3 MW per year under the previous tax credits (Iowa Environmental Council 2014; Baer 2014.)

Farmers' Electric Cooperative: A New Solar Farm and Progress Toward 2025 Energy Goals

All of these rules and laws are having impacts at the local level. In March 2014, the Farmers' Electric Cooperative (FEC)—a small, rural electric coop in southeastern Iowa—broke ground on a 800 kW solar farm. This installation will add to the FEC's robust solar capacity comprised of a spot market purchases from local solar producers, a Green Power Project (a $3 per month green pricing program for purchasing local renewable energy), and community solar garden (Mckenna 2014). FEC also offers its 550 customers real-time metering and a feed-in-tariff (FIT) inspired by a pilot program by Wisconsin's Alliant Energy and lessons learned from German policies (Mckenna 2014). Customers enrolled in the FIT initially received a flat $0.12/kWh ($0.05/kWh above retail prices), but FEC recently lowered this rate to $0.10/kWh for ten years because of the recent increase in Iowa's solar tax credit (mentioned above).

FEC is almost halfway to their "25 by 25" vision drafted in 2008 that aims for a 25% reduction in outside electricity purchases—3% coming from energy tracking and monitoring, 7% from energy efficiency and conservation, and 15% from renewable solar and wind energy—by 2025 (Mckenna 2014; Gamble and Mckenna 2013). A desire to save customers energy, money, buy local, and help co-op members take advantage of federal tax credits were the main motivators behind FEC's 25 by 25 goals. Because of high transmission costs and poor wind resources in their part of Iowa, local solar allows FEC to reduce peak demand 60% of the time and avoid high transmission charges during those peak hours (Mckenna 2014). Co-op members have responded to FEC's solar push with enthusiasm. Within the first two days of FEC's offer of a community solar garden, the first 20 PV panels were sold out. Customers could purchase up to ten panels at a time. Continued demand has motivated FEC to add an additional 40 panels a year. While FEC owns the solar PV racking and installs the modules, customers actually receive a certificate of ownership for their module (Mckenna 2014).

The expansion of Iowa's solar tax credits and efforts like those of FEC to incorporate more distributed solar capacity reveal a fertile policy environment for distributed PV. At the same time, pushback against NEM policies and the IUB NOI demonstrate concern about how distributed solar generation should be integrated into a regulated utility structure. All eyes are on Iowa as it manages this push and pull in the distributed solar domain.

Sources

Associated Press. January 22, 2014. "Iowa Supreme Court hearing solar power case." The Washington Times. http://www.washingtontimes.com/news/2014/jan/22/iowa-supreme-court-to-hear-solar-power-case/. Accessed July 7, 2014. Baer, Nathaniel. Phone Interview. Iowa Environmental Council. July 1, 2014.

Database of State Incentives for Renewables and Efficiency (DSIRE). 2014. "Iowa: Incentives/Policies for Renewables and Efficiency. http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=IA02R&re=0&ee=0. Accessed July 2, 2014.

Foley, Ryan. July 11, 2014. "Iowa ruling gives boost to solar energy expansion." The Miami Herald.http://www.miamiherald.com/2014/07/11/4230352/iowa-supreme-court-to-decide-solar.html. Accessed July 14, 2014.

Gamble, Lawrence. and Warren Mckenna. 2013. "ASES 2013-238: Farmers Electric Co-operative, Kalona Iowa: American's Most Progressive Utility?"

House File 2336. 2014. "An Act providing for the establishment of a net metering program applicable to rate-regulated electric utilities, and including effect date provisions. http://coolice.legis.iowa.gov/Legislation/85thGA/Bills/HouseFiles/Introduced/HF2336.html. Accessed August 1, 2014.

Iowa Environmental Council. 2014. "Governor Branstad Signs Key Solar Tax Incentive Bill." http://iaenvironment.wordpress.com/2014/05/30/governor-branstad-signs-key-solar-tax-incentive-bill/. Accessed July 7, 2014.

Iowa Utilities Board. Docket No. NOI-2014-0001. "Order Opening Inquiry on Distributed Generation and Soliciting Comments." https://efs.iowa.gov/cs/groups/external/documents/docket/mdaw/mjez/~edisp/213037.pdf. Accessed June 25, 2014.

Mckenna, Warren. Phone interview. Farmers' Electric Cooperative. June 25, 2014.

Passera, Laurel. 2014. "Iowa Utility Board opens inquiry, seeks public comment on distributed generation in Iowa." Interstate Renewable Energy Council (IREC). http://www.irecusa.org/2014/03/iowa-utilities-board-opens-inquiry-seeks-public-comment-on-distributed-generation-in-iowa/. Accessed June 25, 2014.

Rodgers, Grant. January 22, 2014. "Supreme Court Hears Dubuque Solar Power Case." The Des Moines Register. http://www.desmoinesregister.com/story/news/crime-and-courts/2014/01/23/supreme-court-hears-dubuque-solar-power-case/4789889/. Accessed July 7, 2014.

Senate File 2340. 2014. "An Act Modifying Provisions Applicable to the Solar Energy System Tax credit, and Including Effective Date and Retroactive Applicability Provisions." http://coolice.legis.iowa.gov/linc/85/external/SF2340_Enrolled.html. Accessed July 2, 2014.

Supreme Court of Iowa. 2014. No 13-0642. SZ Enterprises, LLC d/b/a Eagle Point Solar v.Iowa Utilities Board, a division of the department of commerce, state of Iowa. http://www.iowacourts.gov/About_the_Courts/Supreme_Court/Supreme_Court_Opinions/Recent_Opinions/20140711/13-0642.pdf. Accessed July 14, 2014.

Uhlenhuth, Karen. December 18, 2013. "Move over wind? Solar energy market 'exploding' in Iowa." Midwest Energy News. http://www.midwestenergynews.com/2013/12/18/move-over-wind-solar-energy-market-exploding-in-iowa/. Accessed July 16, 2014.

Uhlenhuth, Karen. January 27, 2014. "In the Midwest, farmers leading the way on solar power." Midwest Energy News. http://www.midwestenergynews.com/2014/01/27/in-the-midwest-farmers-leading-the-way-on-solar-power/. Accessed July 16, 2014.

Uhlenhuth, Karen. July 11, 2014. "Iowa Supreme Court rules in favor of third party solar." Midwest Energy News. http://www.midwestenergynews.com/2014/07/11/iowa-supreme-court-rules-in-favor-of-third-party-solar/. Accessed July 14, 2014.

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