MidAmerican Energy Co. (MEC) recently reported to the assessor’s office the final net acquisition cost figure for the recently completed and commissioned O’Brien Wind Energy Project, located in northern O’Brien County, Iowa, along Highway 18 near Sanborn.
In its Dec. 29, 2016, news release, MEC said that with the completion of the Ida Grove wind farm in Ida County and the O’Brien Wind Energy Project, MEC wrapped up work on two major projects in its Wind X Expansion Program that added 551 MW of wind generation capacity for customers. Two wind farms are included in the Wind X project – one in O’Brien County and the other in Ida County. Both wind farms in the Wind X project were developed by Chicago-based Invenergy LLC.
“We are proud to do business in a state that leads the nation in the percentage of energy generated from wind,” says Michael Fehr, vice president of resource development for MEC. “Wind is a key element of our balanced approach to energy generation because it’s a renewable and clean source of energy.”
As part of MEC’s Wind X expansion program, which the Iowa Utilities Board (IUB) approved on Aug. 21, 2015, 104 turbines power the O’Brien Wind Energy Project, generating 250 MW of wind energy, while 134 turbines spin at the Ida Grove project, generating 301 MW of wind energy.
In its written order approving Wind X, the IUB set a cost cap at $1.61 million per megawatt for the completed project as a whole. This per-megawatt cost figure was lower than the cost figure of $1.638 million per megawatt that MEC had proposed. MEC added in its news release that the Wind X project will provide more than $115 million in landowner payments each year and more than $160 million in property tax revenues over the next 30 years.
O’Brien County Ordinance #19 states that MEC must provide the County Assessor’s Office with figures showing the total net acquisition cost of the O’Brien Wind Energy Project by Feb. 1 of each year once the last turbine is commissioned.
Net acquisition costs are defined as the total cost for all of the wind farm infrastructure, including turbine purchases, access road construction costs, the underground collection system and transportation of turbine components to the site.
Ordinance #19 incorporates a graduated property tax schedule by which the first year is taxed at a 0% rate, the third year is taxed at 10%, and that tax rate increases by 5% each year until the seventh year, when it’s capped at 30%.
Without a wind energy conversion property tax ordinance, the state would centrally assess all wind energy infrastructure. With this ordinance, the county determines the property tax revenues according to the wind farm’s net acquisition cost figure that MEC reports to the assessor’s office.
MEC recently filed the net acquisition cost figures with the county assessor, Lowell Dykstra. MEC reported that the net acquisition cost for the 250 MW wind farm came to $366,397,578. By dividing the 250 MW rating of the wind farm into that net acquisition cost figure, this shows that the per-megawatt cost of the wind farm was $1.46 million, well under the IUB cost cap of $1.62 million.
So, the recent report from MEC indicates that the per-megawatt cost of building new wind energy is still coming down, according to what MEC is experiencing. In 2007, the American Wind Energy Association pegged the cost of building new wind energy at $2 million per megawatt. By 2014, the cost had fallen to $1.8 million per megawatt.
The recently commissioned wind farm has 104 Siemens wind turbines spread out over three townships. By dividing 104 into the net acquisition cost figure, this shows that the installed cost of each Siemens SWT 108 model wind turbine is $3,399,382. MEC said the cost for the wind farm interconnection substation in Lincoln Township came to $12,756,250.
Therefore, with the third-year property tax rate figured at 10%, Dykstra calculated that the property tax revenue from the wind farm will bring in $824,395 to the county’s tax coffers. In fall 2024, when the wind farm will be fully assessed at 30%, MEC’s property tax payment to the county will total $2,473,184. The 30% rate is then capped for the balance of the wind farm’s useful life, perhaps another 20 years.
The school districts in which turbines are located stand to benefit the most from the property tax revenues from the wind farm.
However, this also means that what the school districts receive in state aid for education could be reduced due to the substantial wind farm property tax revenues going toward local education funding, Dykstra explains.
The three townships of Center, Lincoln and Franklin will also receive funds due to the property tax revenues from the wind farm. Northwest Iowa Community College will also benefit financially due to the property tax revenues that will be allocated toward the college.
By adding both the net acquisition costs for the $820,195,459, 500 MW Highland Wind Farm and the $366,397,678, 250 MW O’Brien wind farm together, MEC’s investment to harvest 750 MW of O’Brien County wind energy is approximately $1,186,593,137 since August 2013.
In fall 2024, when all 318 wind turbines will be fully assessed at 30%, MEC’s yearly property tax payment could approach a staggering $8,173,378 per year. According to the auditor’s office, the Valero Renewable Fuels Co. ethanol production facility at Hartley is the next-largest property tax-paying entity in the county after the two wind farms, at $645,280.
When MEC purchased the 104 Siemens wind turbines, the purchase agreement also included a maintenance and support agreement with Siemens to provide the technicians performing day-to-day maintenance on the turbines. The new jobs that the two wind farms brought into the county are another significant impact.
Lawrence Lewis, supervisor of wind generation at MEC, was recently questioned about the number of wind turbine technicians he has that perform day-to-day maintenance of the 318 wind turbines MEC now has operational in O’Brien County. Lewis reports he currently has 27 to 28 wind turbine technicians that maintain MEC’s wind turbine infrastructure. He says his workforce has now peaked, and employment levels are not expected to increase.
In an early 2016 Chronicle Times story published after the final cost figures for MEC’s 500 MW Highland Wind Farm Project were reported to the county assessor’s office, O’Brien County Auditor Barb Rohwer spoke to the potential benefit from the property tax revenues that flow into county coffers from the construction of a wind farm.
Rohwer said, “Building a wind farm cannot guarantee there will be property tax reduction, but it will mean property tax relief. What this will do for other people’s property taxes, to relieve their taxes – this is going to be quite an impact. What we can do for repairing roads and bridges and other stuff is going to be phenomenal.”
On Jan. 24, during the O’Brien County supervisor’s discussion related to future wind farm property tax revenues, current Board Chair Tom Farnsworth updated the other supervisors on the substance of an idea being kicked around at recent O’Brien County Economic Development Corp. (OCEDC) meetings.
Farnsworth said, “One of the ideas that was brought up over at a recent OCEDC meeting the other night was that with all these windmills in the county – when all is said and done – is that we are going to have quite a bit of taxation revenues from the windmills.
“It was suggested that a committee be set up made up of representatives from rural, city and maybe someone from the board of supervisors to see if there’s anything else we could do with the wind farm revenues within the county to help, besides using it for reducing property taxes. I don’t think setting up a committee is a bad idea. It’s not binding or locked in or anything.”
Farnsworth went on to say this idea was also brought up at a recent Farm Bureau meeting, and they would like to have some representation on any committee. “I don’t think it’s a bad deal,” Farnsworth added.
Speculation over several suggestions of different services and entities where specific funds could be targeted was voiced. One idea mentioned was to use future wind farm property tax revenues to improve EMT and ambulance services within the county. No one spoke up in total opposition to the OCEDC suggestion of forming such a committee.
Loren G. Flaugh is a freelance writer living in Iowa. He can be reached at firstname.lastname@example.org.