July 12, 2009 (Updated August 24, 2009)
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Michael Vickerman, Executive Director
608.255.4044
mvickerman@renewwisconsin.org
by Michael Vickerman, RENEW Wisconsin
July 12, 2009
In a unanimous vote, the Public Service Commission (PSC) recently cleared the way for Alliant Energy’s Wisconsin utility to construct a 200 megawatt (MW) windpower plant project in southern Minnesota. Once operational, the Bent Tree project, costing upwards of $450 million, will be a productive source of renewable energy that will provide lasting benefits to Minnesota’s economy and environment. Since it will be Alliant’s Wisconsin customers who foot the bill, however, it is reasonable to inquire whether the current utility practice of outsourcing renewable energy production to other states is a good thing for Wisconsin’s economy.
Because we can’t see it, taste it, hear it or smell it, we tend to lose sight of the fact that electricity is a manufactured product. To make it, capital is amassed and expended on machinery that convert raw resources like coal, flowing water, and wind into this highly useful form of energy. The electricity is then transported via networks of wires to power factories, illuminate residences and streets, propel commuter trains, and energize the complex communications systems that allows to store vast quantities of instantly retrievable information. It is hard to name a manufactured product that adds more value to an industrialized society than electricity.
Yet electricity’s impact on the economy is not defined solely by the activities it supports. There is as well the intense amount of economic activity that goes into building the power plants themselves. In the case of Bent Tree, the capital used to manufacture, transport and erect 122 wind turbines will unleash a year-long burst of construction work in Freeborn County employing hundreds of skilled laborers and technicians. The work will also ripple through nearby component manufacturers involved with the project, as well as ports and other transfer points where components are unloaded and loaded onto special vehicles and hauled to the project zone.
But the economic stimulus doesn’t end there. The Bent Tree turbines, once operational, will produce a stream of revenues to local governments over the life of the project. These dollars will be used to support police and fire protection, recycling and emergency medical services in the host communities. Area landowners will also receive payments that will supplement their existing income. In times of distress, these payments enable farmers to stay current on their taxes and keep their farms going. Last, the turbines will also support a crew of technicians and windsmiths to operate the facility and maintain it over a minimum of three decades.
There is no question that this project will energize Freeborn County’s economy for many years to come. But it also begs the question: how much of Bent Tree’s first-order and second-order economic benefits will trickle into Wisconsin? Answer: Virtually none.
Alliant’s decision to invest in a Minnesota wind project comes at a time when Wisconsin is struggling to keep its manufacturing sector intact. In light of the ongoing economic contraction, now would not be a propitious time to outsource energy production to neighboring states and export Wisconsin capital and skilled labor to build valuable infrastructure that could easily be located in our own state.
Imagine, if you will, the uproar that would surely erupt if citizens learned that federal stimulus dollars were going over into Canada to build factories owned by U.S. companies. However, what Alliant received permission to do--dedicate nearly $500 million in Wisconsin ratepayer dollars to build a brand-new windpower plant in Minnesota--is, at bottom, no different.
Granted, Bent Tree is the not the first wind project owned by a Wisconsin utility to be located in another state. This trend began with Madison Gas & Electric’s 30 MW Top of Iowa facility, costing $62 million, which started operation in early 2008. Also in Iowa, construction is underway on Wisconsin Public Service’s 99 MW Crane Creek project, which is expected to tally about $250 million when completed. But with the approval of Bent Tree, what started out as a trickle has turned into an outright flood of utility capital flowing out-of-state. Keep in mind too that Bent Tree will be three times the size of Cedar Ridge, the only Alliant-owned windpower facility in Wisconsin.
It is true that windpower projects in Iowa and Minnesota are lower-cost sources of electricity than those in Wisconsin. But shouldn’t there be more to the decision calculus than just the unit price of electricity? For example, locating a Bent Tree-sized facility in Wisconsin would generate $800,000 a year in local government revenues and about $600,000 a year in lease payments to landowners. Building it here would also create hundreds of jobs for operating engineers, ironworkers, electricians, specialty haulers, wind energy technicians, and other skilled laborers. What is the basis for giving these impacts so little weight in a power plant proceeding?
Regrettably, under today’s standards of review for permitting utility-owned power plants, the PSC had no choice but to approve Alliant’s application. Alliant had adequately demonstrated that it needed another source of renewable energy to comply with Wisconsin energy policy, and that Bent Tree was the least expensive option on a per-megawatt-hour basis.
It’s worth noting that there are several independently owned prospects that don’t require PSC approval could be up and running in 18 to 24 months, and two of them—Horizon’s in Lafayette County and Iberdrola’s in Columbia County--are in Alliant’s Wisconsin territory. Yet they languish for want of a power purchase agreement with an electric provider. Furthermore, given the current utility preference to own wind generating assets rather than buying wind electricity, there is no assurance that these prospects will ever get built.
True, the current economic contraction has taken a bite out of the wind industry, but that hasn’t put the brakes on wind development elsewhere in the Midwest (see table below). And while local opposition to wind energy has stalled a half-dozen proposed wind plants across the state, that doesn’t explain why fully permitted projects are not proceeding to construction.
No, there is another reason why wind development in Wisconsin is at a complete standstill, and it’s the double whammy described above—the utility preference for out-of-state wind energy coupled with their unwillingness to buy wind energy from independent developers.
In a weakening economy, we can ill-afford to let utilities continue investing Wisconsin capital in out-of-state renewable energy production while simultaneously throwing up barriers to companies seeking to situate renewable generation sources in Wisconsin. The longer utilities go on building projects that benefit the host state more than their home state, the greater the risk of seeing Wisconsin’s construction and manufacturing prowess, along with our highly skilled workforce, migrate to those states with the most viable renewable energy markets. Beyond a certain point, such utility preferences and practices will also cause harm to their customer base. How would that serve the public interest?
If Wisconsin truly desires to provide a home to a viable renewable energy economy, it will have to redefine the public interest standards that govern the expenditure of ratepayer dollars. This means giving such economic benefits as job creation, component manufacturing, workforce participation, increased tax receipts to local and state government, and reduced dependence on future transmission upgrades as much due consideration as cost per megawatt-hour. Granted, this is a form of industrial policy. However, if state policymakers don’t take steps to build a solid market structure for generating more renewable electricity here at home, Wisconsin’s ability to compete for good jobs and business opportunities could become hopelessly compromised.
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Snapshot
Midwest Windpower Development Activity (all figures in MW)
July 2009
Iowa
Operating capacity -- 3043
Under construction -- 409*
Minnesota
Operating capacity -- 1937
Under construction -- 40
Illinois
Operating capacity -- 1016**
Under construction -- 92**
Indiana
Operating capacity -- 531
Under construction -- 505
Wisconsin
Operating capacity -- 449
Under construction -- None
Michigan
Operating capacity -- 129
Under construction -- 14
* Total includes WPS’s 99 MW Crane Creek project
** Total includes EcoEnergy’s 100.5 MW EcoGrove project
*** Total includes Iberdrola’s 300 MW Streator Cayuga Ridge South project
Source: American Wind Energy Association, RENEW
RENEW Wisconsin (www.renewwisconsin.org) is an independent, nonprofit 501(c)(3) organization based in Madison that acts as a catalyst to advance a sustainable energy future through public policy and private sector initiatives.
