Here’s why this Warren Buffett-Owned utility wants to use 100 percent wind power

By Michael Bastasch

Berkshire Hathaway CEO Warren Buffett’s mantra of doing “anything that is basically covered by the law” to reduce his company’s tax burden has led to a new record for wind energy production.

The Berkshire-owned MidAmerican Energy is on track to be the first utility to generate enough wind energy to theoretically meet the demand of its entire Iowa customer base. The Des Moines–based utility services 770,000 customers. Buffett serves as Berkshire’s chairman and CEO, and he owns about 37 percent of the company.

MidAmerican began purchasing wind turbines about 15 years ago ostensibly to help hedge against energy prices, but Buffett said in 2014 the “only” reason to build wind power was to take advantage of tax subsidies.

“I will do anything that is basically covered by the law to reduce Berkshire’s tax rate,” Buffett told an audience in Omaha, Neb. in 2014.

“For example, on wind energy, we get a tax credit if we build a lot of wind farms,” Buffett said. “That’s the only reason to build them. They don’t make sense without the tax credit.”

MidAmerican CEO Bill Fehrman reiterated that statement in 2016 when the company announced a goal of generating 85 percent of its power capacity from wind energy.

“Because of the tax credits and our ability to deliver these projects at a low cost, we’re setting up our customers for a low-carbon future,” Fehrman told The Wall Street Journal in 2016.

Buffett and Fehrman are referring to the Wind Production Tax Credit (PTC), which is set to expire in a few years. The tax subsidy initially shelled out $24 per megawatt hour to wind producers for the first 10 years of operation, but subsidies began to be reduced in 2017.

MidAmerican will reach 100 percent green energy in 2020 when it completes a $922-million wind farm, Reuters reported.

Iowa has been one of the biggest beneficiaries of wind tax subsidies. The state got 37 percent of its electricity from wind power in 2017, and exported wind energy to other states with mandates to use green energy.

However, coal-fired power plants still provided the lion’s share Iowa’s electricity in 2017, according to the U.S. Energy Information Administration.

The PTC has been a political battleground for years, dividing Republicans who typically stand together on other issues.

Midwestern Republicans, including Republican Sen. Chuck Grassley of Iowa, favor wind subsidies, while most other GOP lawmakers oppose subsidies for wind turbines.

Of course, MidAmerican will still use lots of coal, natural gas and nuclear power to keep the lights on in Iowa due to wind power’s intermittent nature.

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5 thoughts on “Here’s why this Warren Buffett-Owned utility wants to use 100 percent wind power

  1. High Electricity Prices for RE in New England

    The highly subsidized wholesale prices of wind and solar paid by utilities to producers are much higher than in the rest of the US, because of New England’s mediocre wind and solar conditions.
    http://www.windtaskforce.org/profiles/blogs/subsidized-solar-systems-cause-chronic-budget-deficits-in-vermont

    – Onshore/ridgeline wind, about 9.5 c/kWh
    – Offshore wind, large-scale systems, about 16 – 18 c/kWh
    – Large-scale, field-mounted, competitively auctioned solar, about 12 – 13.5 c/kWh
    – Residential, rooftop solar, about 18 – 19 c/kWh

    NOTE: The above prices would be about 50% higher without the subsidies and even higher without cost shifting. See Appendix.

    NOTE: Here is an ISO-NE graph, which shows for very few hours during a 13-y period were wholesale prices higher than 6 c/kWh. Those prices are low, because of low-cost gas, nuclear and hydro plants, all of which produce at about 5 c/kWh. The last four peaks in the graph were due to:
    – Pipeline constraints, aggravated by the misguided recalcitrance of pro-RE Governors of NY and MA
    – Pre-mature closings of coal and nuclear plants
    – Lack of more robust connections to nearby grids, such as New York and Canada. See URLs.

    https://www.iso-ne.com/about/key-stats/markets/
    http://truenorthreports.com/rolling-blackouts-are-probably-coming-to-new-england

    NOTE: The NE states have the highest household electric rates in the US, but that has nothing to do with NE wholesale rates, which have been about 5 c/kWh since 2009. Adding more and more highly subsidized wind (onshore and offshore) at 9 to 18 c/kWh and highly subsidized solar at 12 to 18 c/kWh to the wholesale mix, and closing down low-cost traditional plants will surely further increase NE wholesale prices and retail rates.

  2. Cost Shifting is the Name of the Game

    Here is a list of the costs that were shifted, i.e., not charged to wind and solar owners, which make wind and solar appear to be much less costly, than in reality.

    Those costs, as c/kWh, could be quantified, but it is politically convenient to charge them to: 1) ratepayers via rate schedules (taxes, fees and surcharges), 2) taxpayers, and 3) federal and state debts.

    1) The various forms of inertia (presently provided by gas, coal, oil, nuclear, bio and hydro plants).
    2) Additional ancillary services to facilitate greater percentages of wind and solar on the grid.
    3) The filling-in, peaking and balancing by traditional generators due to wind and solar variability/intermittency.
    4) Any battery systems to stabilize distribution grids with many solar systems.
    5) Any measures to deal with DUCK curves, such as utility-scale storage and demand management
    6) Grid-related, such as grid extensions and augmentations to connect and deal with wind and solar. See note.
    7) Utility-scale electricity storage (presently provided by the world’s fuel supply system).
    https://www.neon-energie.de/Hirth-2013-Market-Value-Renewables-Solar-Wind-Power-Variability-Price.pdf

    Those items are separate from the high levels of subsidies, which also make wind and solar appear to be much less costly, than in reality. See appendix.

    All that enables RE aficionados to endlessly proclaim: “Wind and solar are competitive with fossil and nuclear”.

    NOTE: For example, to bring wind electricity from the Panhandle in west Texas to population centers in east Texas, $7 billion of transmission was built. The entire cost was “socialized”, i.e., a surcharge on residential electric bills.

  3. Increasing Electricity Prices With Increased Wind and Solar
    During the 2009 and 2017 period:
    – The price of solar panels per watt decreased by 75%
    – The price of wind turbines per watt decreased by 50%
    However, the prices of electricity in places that deployed significant wind and solar increased dramatically. See figure 7 in euanmearns URL, which shows Denmark and Germany with much higher household electric prices than the rest of the EU.
    Up 51% in Germany during its expansion of solar and wind energy from 2006 to 2016;
    Up 24% in California during its solar energy build-out from 2011 to 2017; see Appendix.
    Up over 100% in Denmark since 1995 when it began deploying renewables (mostly wind) in earnest. See URL
    http://www.windtaskforce.org/profiles/blogs/wind-and-solar-hype-versus-reality

    NOTE: If 100% RE aficionados were correct, why do countries in the EU, with high levels of RE, such as Germany and Denmark also have high household electric rates? The commercial/industrial rates are kept low and much less burdened with taxes, fees and surcharges, for competitive reasons. Why would that be different in New England? See graph of household electric rates versus the sum of installed wind and solar in the euanmearns URL.
    http://euanmearns.com/an-update-on-the-energiewende/

  4. During the past few years, the media have often published about the decreasing prices of wind and solar. The lay public who reads these stories are intentionally left with the impression the more wind and solar, the lower electricity prices will become. The real world facts show it actually is the opposite. See URL
    http://www.windtaskforce.org/profiles/blogs/wind-and-solar-hype-versus-reality

    Plant Closures and Economics and Politics
    Since 2010, California closed one nuclear plant (2,140 MW) and Germany closed 5 nuclear plants and 4 other reactors at currently operating plants (10,980 MW in total). Those closures were due to political pressures by RE aficionados, who also pressure to close “dirty” coal plants.
    Wind and solar owners are allowed to feed their heavily subsidized electricity into the grid regardless of whether it is needed or not, and, usually, they get paid at above wholesale feed-in tariff rates, or at above wholesale power purchase agreement, PPA, rates; a “no lose” deal for those owners, paid for by everyone else (subsidies, cost shifting, higher prices for goods and services).
    However, nuclear and coal plant owners usually get paid at wholesale prices, which have been decreasing due to the combination of 1) increased, heavily subsidized wind and solar, and 2) increased generation with low cost gas.
    Remember, variable and intermittent wind and solar electricity cannot exist on any electric grid without the traditional, dispatchable, flexible, generators, primarily gas turbine plants, performing the peaking, filling-in and balancing. So it is only natural the owners of wind and solar plants and the owners of gas plants having political coalitions to promote their own agendas, which include the closures of coal and nuclear plants.
    However, the US national security sector relies on the US electrical sector for 99% of its electricity. It is of vital importance for the US to have a large capacity of power plants, with large, onsite fuel storage, such as coal and nuclear plants, to ensure electricity service at a reliability of 99.97% or better, 24/7/365. Having just wind and solar, plus gas plants would greatly diminish the ensuring of that reliability.

  5. “They don’t make sense without the tax credit”.
    Are you listening Mr. Shumlin? Do you understand what you have done to the State of Vermont to make yourself look the ecologist? You really are and were the opportunist and downright reckless politician.

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