New research funded by the Leopold Center for Sustainable Agriculture at Iowa State University explores a valuable public policy option for creating a more resilient power grid in Iowa, one designed to strengthen rural economies and contribute to cleaner water and air. This new policy tool can help Iowans invest in renewable energy.
Small-scale distributed energy projects, scattered widely across farms and communities, offer many benefits to Iowa's economy and environment. But people who want to produce renewable energy face significant hurdles, including high upfront costs, only one buyer for the energy produced and uncertain returns on their investment.
A competitive grant project from the Leopold Center's Policy Initiative focused on how to address these barriers with a policy option called feed-in tariffs (FITs). By offering long-term contracts at a fair price, FITs encourage farmers, homeowners and businesses to invest in small-scale renewable energy projects like wind turbines and solar panels.
New policy tool can help Iowans invest in renewable energy, reap the rewards
"We're adding a lot of wind energy assets to the state, but we're using a business model where none of the profits stay here," says Gregg Heide, a member of the Iowa Farmers Union and co-investigator for the project. "Most of the gross revenue that is being generated by Iowa's wind energy industry just leaves the rural economy. I think we have a golden opportunity here to change the local rural economy for the better."
The benefits to farms and communities come with advantages to the environment as well. Each kilowatt-hour produced by solar power or wind energy reduces the need for fossil fuels, contributing to cleaner air and protecting Iowa's water. Utilities also benefit from a distributed power system. With more renewable energy on the grid, they have less risk of blackouts and can buffer their customers from the rising costs of fossil fuels.
FIT programs have been used successfully in Europe and parts of the United States since 1990. To date, only one Iowa utility has adopted an FIT program. In 2009, Farmers Electric Cooperative (FEC) in Greenfield began offering incentive rates to its consumers with funding from its "green power" program, which collects donations for renewable energy. FEC sets ten-year contracts for wind and solar energy at 20 cents per kilowatt-hour—almost double their usual rate—and offers rebates to help with installation costs.
Need comprehensive public policy at both the state and federal levels
While the investigators hope that more Iowa utilities will follow FEC's lead and begin adopting FIT programs voluntarily, they point to the need for comprehensive public policy at the state and federal levels. The research resulted in three recommendations:
Iowa utilities should begin offering FIT incentive rates now.
Iowa policymakers should craft a comprehensive FIT policy and set long-term requirements for renewable energy development.
Federal policymakers should provide states with the authority and flexibility they need to adopt FIT programs.
"There's enormous potential for distributed renewable energy projects in Iowa," said Nathaniel Baer, energy program director at the Iowa Environmental Council and principal investigator of the project. "Really the sky is the limit."
There is enormous potential for distributed renewable energy projects in Iowa
The investigators compiled their findings in a white paper, Renewable Energy Incentive Rates: Potential Opportunities for Iowa Farmers, available at www.leopold.iastate.edu/pubs-and-papers/2012-02-renewable-energy-incentive-rates.
The Leopold Center's Policy Initiative awarded the grant for this research in 2010. The Energy Foundation and REAMP Global Warming Strategic Action Fund provided additional funding. Rich Dana, Dave Ryan, and Mary Challender of the National Center for Appropriate Technology and Sarah J. Else, MBA, contributed to the paper.