Renewable Energy In U.S. Heartland: How States Make It Work

In the U.S. heartland, where retail electricity costs less than the national average, states from Iowa to Utah to Nevada are investing in renewable energy to protect against fossil fuel price volatility and save customers money. Operating in these states, Warren Buffett’s Berkshire Hathaway Energy is a perfect example, recently announcing goals to double its investment in renewable energy to $30 billion.

States and utilities are doing more than just investing. They are actively pursuing ways to lower the cost of renewable energy. PacifiCorp, serving six western states including parts of California, is increasing grid reliability and efficiency by participating in the Energy Imbalance Market. Joining an energy imbalance market lets utilities buy and sell power much more widely and increase the share of renewable energy. Other states and utilities are using special rate structures called green tariffs to allow large corporate customers to access additional renewable energy more easily. Northern and southern Nevada already have these rates, and Utah granted approval for a green tariff in March.

States’ and utilities’ increased investment and new service offerings underscore what’s become increasingly clear: renewable energy makes good business sense and can provide attractive returns for utilities and benefits for customers.

State Economic Development Attracts Big Business

Investment in renewable energy brings additional economic benefits to a region, helping retain and attract the increasing number of large, iconic corporations looking for renewable energy. These companies know it’s good for their bottom line and helps meet their sustainability goals.

Jonathan Weisgall, vice president at Berkshire Hathaway Energy, made this point last week at the Utah Energy Development Summit in Salt Lake City. One of Berkshire Hathaway Energy’s subsidiaries, Iowa-based MidAmerican Energy, has utilized its significant wind power capacity to meet the renewable energy needs of large data center customers, making Iowa more competitive in the site selection process.

Why Renewable Energy Works for Utilities

Traditional investor-owned electric utilities rely on a guaranteed return on equity set by electricity regulators. Utilities typically earn this return by investing in generation systems such as coal and gas power plants or solar and wind farms (assets) and selling electricity to recover their investment, plus a return. In Iowa, MidAmerican has gone beyond this model to lower retail costs by selling their excess wind power to the local regional transmission organization. This let them increase the total amount of wind power on the grid and balance overall power generation. This has been so effective that MidAmerican plans to invest another $900 million in wind energy in Iowa, bringing the company’s total wind investment to $6.7 billion. The western Energy Imbalance Market, in turn, may let other Berkshire Hathaway Energy subsidiaries replicate this success.

Expanding Returns from Renewable Energy

Utilities have helped customers by investing directly in renewable energy, using electricity markets to increase system efficiency and integrate more renewables, and enabling large customers to access renewable energy from new projects through emerging green tariffs. And there are new configurations that have the potential to help even more. For example, regulators in Utah approved a tariff, schedule 32, which pays Rocky Mountain Power for brown power – supplemental power needed when renewable generation does not meet demand – and other services when customers sign contracts for renewable energy from independent generators.

There remain untapped opportunities to design more renewable energy offerings and increase their effectiveness, including new green tariffs. Utility participation in energy markets also creates new opportunities for customers to utilize innovative technologies such as dynamic load management and customer-side storage. Seizing these opportunities will require continued open dialogue between utilities, large customers, regulators and other stakeholders. But the payoff may be the ability to attract new businesses and reduce costs for the utility and all customers.

[About the authors: Priya Barua is an Associate in the Energy Program, where she supports Charge, WRI’s global renewable energy initiative. Josh Ryor is a Research Analyst with World Resources Institute’s signature energy initiative, Charge, and the Energy Program.]

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