The municipal utility’s community solar garden at Traer.

Iowa Association of Municipal Utilities

The municipal utility’s community solar garden at Traer.

Expanded Iowa incentive likely to nudge some utilities toward solar

Iowa utilities historically have been tepid about investing in solar generation, but some may find it more enticing now thanks to an expanded incentive signed by Governor Terry Branstad on Friday and passed by the Iowa legislature hours before it adjourned on June 5.

HF 645, which passed both chambers nearly unanimously, will increase from from 53 to 63 MW the amount of solar power that can qualify for a production tax credit of 1.5 cents per kilowatt hour. The bill also boosted from $4.5 million to $5 million the pool of tax credit funds available each year for individuals and businesses that invest in solar panels.

The bill extends an invitation to utilities in particular by reserving the additional 10 MW for solar generation owned by or contracted for by power companies. Also, it makes the credit available to municipally-owned and investor-owned utilities, whereas previously, it was available only to rural electric cooperatives.

“We are trying to get utilities to do more solar,” said Iowa state Sen. Rob Hogg, who was instrumental in shepherding the bill through the legislature. “They wanted a production tax credit and they asked for it.”

Will utilities use the incentive?

Hogg said he understood that the state’s large investor-owned utilities may pass on the opportunity, largely because of the cap on the size of array that can qualify for the tax credit. It applies only to systems no greater than 1.5 MW.

Alliant Energy could not be reached for comment. Ruth Comer, speaking for MidAmerican Energy, wrote in an e-mail that, “At this time, it is unclear if the legislation will have a significant impact on our company or our plans, given the fact that it is geared toward projects of 1.5 megawatts or less.”

The smaller players on Iowa’s utility scene seem more enthusiastic about the possibilities. Municipal utilities appear poised to move forward with more solar – whether utility-owned or community projects developed by municipal utilities.

“I think there is significant interest in taking advantage of this for both utility solar and utility-led community solar projects,” said Joel Logan, director of energy services for the Iowa Association of Municipal Utilities. “I’ve heard more about community solar projects being developed, but non-community projects are under development too.”

Municipal utility opportunities

Logan expects the expanded tax credit to be “instrumental” in bringing municipal utility solar projects to fruition. One important feature of the bill made the tax credits transferable, he said, giving non-taxable municipal utilities and rural coops a way to capitalize on the tax incentive.

The Cedar Falls utility began planning a community solar project long before the tax credit bill was passed, but public information officer Betty Zeman said, “If we are lucky enough to get that credit, we are hopeful that it would reduce our share price.”

She pointed out that there’s a waiting list of applicants seeking the tax credit.

In late May, the Cedar Falls utility began offering shares in its planned community solar array, at $399 for 170 watts of installed capacity. The size of the array could be anywhere from 500 to 1500 kilowatts, depending on the number of shares sold, Zeman said. As of mid-June, they’d sold about 1,200 shares. She said that a 500-kilowatt array will require 3,000 shares.

Most of the shares sold so far have gone to residential customers, and in light of some promising discussions with larger commercial and industrial customers, Zeman said it appears likely the utility will reach the 3,000-share threshold.

Rural electric cooperatives interested

Iowa’s rural electric cooperatives also lobbied for the legislation, and are looking for ways to make solar power work for them and their members, according to Jim Lauzon, chief executive officer at the Maquoketa Valley Electric Cooperative.

“The key as to when utilities are going to get into the solar market is when the economics finally make it a viable generating alternative,” Lauzon said. “I think we’re close, but our analysis shows….the cost of solar now is still slightly too high to make it an economically viable option.”

Even so, he said, “I know our company and several other coops have been and are continuing to investigate both community and utility-scale solar.”

In July, he said, the Central Iowa Power Cooperative (CIPCO) will issue a request for proposals for a utility-scale solar project that would provide power for the 13 rural electric cooperatives served by CIPCO. He said the coop members envision it as about 1.5 MW, the maximum amount eligible for the tax incentive in the new bill. But nothing in the bill would stop the coop from building more than one 1.5 MW system, Lauzon noted.

“We are going to test where the economics are right now,” he said. The Maquoketa Valley coop, which he heads, is one of the 13 members of CIPCO.

“There is a chance it will come back as an economically viable project, and that we’ll be able to move forward,” Lauzon said. “Our thought is that it’s very close.”

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