Buffett Puts $1.9 Billion into Iowa Wind Energy

Terry Branstad, Iowa Gov., stepped out on a ledge last year by bucking his party in order to lobby with Democrats. Why? To extend a key federal tax credit for wind power. After a major battle in Congress, the credit was eventually extended and Branstad’s gamble looks to have paid off big time. Warren Buffett announced that MidAmerican Energy, a Berkshire Hathaway subsidiary, is going to put $1.9 billion into new wind farms in Iowa.

Who loses out on this deal?

Other Fuels Are More Expensive Than Iowa Wind Power

When Buffett and company announced their latest investment, it provided full credit to extending the production tax credit and expanding wind generating capacity in Iowa.

In total, this new investment is going to put another 656 turbines into MidAmerican Energy’s wind portfolio. Since 2004, the company has already brought 1276 turbines into Iowa. Buffett is also bringing wind power into many other states as well.

Once they have the new turbines fully operational, MidAmerican believes that they will produce 39% of its retail generations strictly from wind power.

To make a comparison, by the year 2011, the energy mix of the company was predominantly coal at 47%, and wind was only about 26%. 20% more of their production was from natural gas and oil, with hydro, nuclear and “other” making up the last 7%.

MidAmerican believes that the rates are going to go down by $10 million each year when all the new turbines are in place by the year 2017. They believe an initial savings of $3.3 million is going to kick in much earlier. It makes sense that Iowa ratepayers are not going to be upset over the latest investment in Iowa wind power.

Green Jobs for Iowans

Over the next 30 years, MidAmerican Energy believes that the new wind projects will create 48 more permanent jobs, 460 part-time construction jobs and another $360 million worth of new property tax revenue.

To try and figure out what this new construction may mean for local economic development, let’s take a look at the Atchison County, Missouri wind farm. Ibderola Renewables, creators of this project, leased the property of 44 different landowners and gave them added revenue. The payments were around $365,000 each year. This project tax revenue ripple effect created about $1 million in taxes annually.

Atchison County believes that local fiscal stability is due to the wind tax base, as noted by the county official in 2010:

“Every county in the state of Missouri almost has experienced a decline in their sales tax revenue and Atchison County has not. We attribute that directly to the construction of the wind farms.”

Now moving back into Iowa, residents are not only going pick up a few dozen jobs, but wind production will provide a much broader ripple effect since the wide distribution of land leasing will also come in to play. This will provide the local governments with a much more sound fiscal footing, giving them the ability to tend to bridges, roads, schools and other civic duties.

The Wind Gamble Pays off for Branstad

Gov. Branstad ends up looking like a genius too, when all is said and done. Branstad did more than just sign his name to a letter when he lobbied for the extension of the production tax credit for wind power. Right after the November election, when the issue really began to heat up, he came out strong at a joint press conference along with Sam Brownback, fellow Republican governor of Kansas, as well as two other Democratic governors, John Hickenlooper of Colorado and John Kitzhaber of Oregon.

Here’s what Branstad had to say:

“My state has directly seen the negative impact related to the PTC not being extended earlier. For example, Siemens recently laid off 400 employees at its plant in Fort Madison, Iowa, and ClipperWind Power laid off 100 workers at its plant in Cedar Rapids, Iowa”

Now if we go forward to last week, after MidAmerican Energy announced the new wind farm investments, Branstad who is quite often referred to as “a champion for wind energy in Iowa,” had to say this about the state’s new prospects:

“MidAmerican Energy’s proposed project will be the largest economic development investment in the history of the state, bringing needed jobs to Iowa, as well as significant economic benefits.”

This is going to look really great on campaign literature during the next election cycle, especially since the governor only has a less than perfect 45% approval rating according to the poll in February 2013.

As a matter of fact, it appears that the only potential loser is the candidate that will be offered up by the Democrats to run against him as governor of Iowa next year. Even though the Iowa voters have mixed reviews; the poll also showed that Branstad has a wide margin lead over all of his potential opponents.

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