When Gregg Heide installed a photovoltaic solar panel with a 25-year lifespan on his farm in Pomeroy, he hoped to diversify his income and contribute to environmental health.
Now, he worries about how he will pay back his investment when his five-year contract with the local utility runs out.
“I don’t know what’s going to happen to me in year six,” he said in a news release. “I’ve got a wind project I’ve been wanting to construct, but I’m prevented from doing so by a lack of public policy in Iowa.”
Heide isn’t the only farmer faced with this dilemma. 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.
Research funded by the Leopold Center’s Policy Initiative hopes to address those barriers with a public 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.
If implemented, FITs will create a more resilient power grid in Iowa, one designed to strengthen rural economies and contribute to cleaner water and air.
FIT programs have been used successfully in Europe and parts of the United States since 1990. To date, only one Iowa utility has adopted a 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 from customers for renewable energy.
FEC sets 10-year contracts for wind and solar energy at 20 cents per kilowatt-hour — almost double its usual rate — and offers rebates to help with installation costs.
All Iowa utilities are required by law to offer a “green-power” program, but the funds are often invested in renewable energy projects thousands of miles away.
FEC’s program, in contrast, returns the money to local farms and communities.
The benefits to local economies come with advantages for 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.
Carole Yates, facilitator of the Farm Energy Working Group (FEWG), said feed-in tariffs fit with the group’s goal to reduce fossil fuel use on small to mid-sized farms by promoting renewable energy and energy efficiency.
The FEWG, housed at the University of Northern Iowa’s Center for Energy and Environmental Education, has helped farmers install small wind, solar and biomass projects with funding from the Leopold Center.
Many farmers have expressed interest in renewable energy, but high upfront costs remain a barrier, Yates noted.
“We have subsidies that support oil and coal,” she said. “It seems time we have some kind of policy that would support more introduction of renewable energy.”
Utilities also benefit from a distributed-power system. With more renewable energy on the grid, they can buffer their customers from the rising costs of fossil fuels.
They also have less risk of blackouts and brownouts.
Solar panels produce the most electricity on hot days when demand spikes, and distributed energy makes the grid more stable and reliable.
FIT programs have proven successful at bringing more renewable energy on-line, since the cost of technology goes down as more and more projects are installed.
Additionally, because utilities only pay for energy delivered to the grid, the owner has a strong incentive to maintain and improve his or her system.
While the investigators hope that more Iowa utilities will follow FEC’s lead and begin adopting FIT programs voluntarily, they also note the need for comprehensive public policy at the state and federal level.
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.”
The investigators compiled their findings in a white paper, “Renewable Energy Incentive Rates: Potential Opportunities for Iowa Farmers,” available on the Leopold Center website: www.leopold.iastate.edu.