A long-term commitment to energy policy in the Midwest is transforming the region’s energy system, economy, and environment. By tapping into its enormous renewable energy potential and manufacturing know-how, the Midwest is poised to become a world leader in renewable energy.
The roots of this growth were planted more than 20 years ago. In 1993, the Union of Concerned Scientists released Powering the Midwest, a study that laid out a vision for wind, biomass, and distributed generation. At the time, three-quarters of global wind capacity was in California, with most of the rest in Denmark — and none at all in the Midwest.
Big parts of that vision have come true, and with smart, stable policies the Midwest can lead the U.S. — and set a standard for other countries — in building huge, new clean energy markets.
Wind Picks Up Speed
The first Midwestern wind farm was built in Minnesota in 1994. Since then, wind has expanded to 21,390 megawatts (MW) in the 12 Midwestern states stretching from North Dakota and Kansas in the west to Ohio and Michigan in the east. This capacity constitutes an investment of over $30 billion in the region’s economy.
Wind now supplies as much as 25 percent of the power demand in Iowa and South Dakota. In fact, the top five states in terms of wind market share are in the Midwest, with North Dakota, Minnesota, and Kansas all exceeding 12 percent.
This number keeps growing. MidAmerican Energy, owned in part by billionaire Warren Buffett, recently announced plans to add 1,000 MW of new wind in Iowa, raising the share of wind energy in the company’s portfolio to 39 percent. This $1.9 billion investment “will be the largest economic development investment in the history of the state,” according to Governor Terry Branstad. “As wind energy goes, so does Iowa’s economy.”
Companies have invested nearly $10 billion in Iowa wind, employing more than 6,000 people and paying $16 million per year to landowners. At the end of 2012, the U.S. wind industry supported 80,700 such jobs, 30,000 of which were in the Midwest. In fact Iowa, Illinois and Kansas are among the top fives states in terms of wind-related employment.
The massive deployment of wind has spurred a vibrant manufacturing sector, all along the component supply chain. Building on a traditional strength of the Great Lakes region, small manufacturers of mechanical equipment have retooled to supply wind components, from ball bearings to cables and towers. The Ohio Department of Development has cataloged over 600 firms in the wind energy supply chain, including machine shops, foundries, and gear makers. “Ohio’s long history of manufacturing excellence?and the continued transformation of its industrial base,” the agency writes, “makes Ohio the ideal location for global leadership in the wind energy industry.”
Remarkably, this growth has happened without a significant net cost to the region. Wind went from zero to a quarter of Iowa’s demand, yet MidAmerican, the state’s largest utility, hasn’t increased rates in 18 years. The next build-out of wind, the company says, will help reduce rates by $10 million per year by 2017. This is corroborated by official reports from the Michigan utility commission, which determined last year that new wind power is one-third cheaper than new coal. And more wind means more savings. Synapse Energy Economics looked at scenarios involving an additional 50,000 MW of wind in the Midwest, and concluded it would create a net savings of as much as $4 billion a year.
Strong energy policy has triggered and sustained this growth. Every state in the region has a renewable electricity standard (RES), which requires or encourages utility companies to produce a portion of their electricity from solar, wind, and other renewable resources. All but one were adopted with bipartisan support through legislation; Missouri’s RES was approved by voters.
The Governors’ Wind Energy Coalition, a bipartisan group of 23 governors working to promote wind power, has described the RES as “a market based policy, using competition to drive down technology prices and move technologies to maturity — all at the lowest cost. It motivates action by the private sector, by creating a market opportunity for project developers to pursue. The government’s role is to set the standard that will be met by utilities and project developers.”
Thanks largely to effective energy policies, Midwestern wind energy capacity has surged in the last 10 years. Credit: Energy Foundation.
More than 35 U.S. states have used a mandatory or voluntary RES as a way to achieve a suite of policy goals, such as:
- Creating a diverse energy supply, reducing risk to consumers and stabilizing prices;
- Adding to domestic U.S. energy production and creating energy production in states that lack fossil fuel resources;
- Creating jobs and economic development opportunities, both in deployment and in manufacturing, and especially in hard-hit rural areas; and
- Reducing air emissions and other environmental impacts
An RES sets a long-term direction for energy development, giving guidance to regulators, utilities and power plant developers, transmission line developers, investors, manufacturers, economic developers, job training programs, and even university researchers. The Ohio Department of Development acknowledges the benefits of these policies when it touts the state’s “easy access to profitable markets” and its “close proximity to 46,104 MW of new renewable energy capacity required by (RES policies) in neighborhood states,” including 4,457 MW in the Ohio standard.
Policy also enables long-term planning for infrastructure. The regional grid operator, known as the Midcontinent Independent System Operator (MISO), approved $5.2 billion of new transmission projects in 2011, specifically to enable the fulfillment of RES targets in the region. This marriage of state energy policy with regional transmission planning was a breakthrough, and became the basis for a national order from the Federal Energy Regulatory Commission, known as Order 1000. The order establishes regional utility planning to help integrate renewable energy into the system, expand the grid, and incorporate public policy goals such as RES laws.
The prosperity created by this new industry, in rural income and urban manufacturing jobs, has built support across the political spectrum, breaking down partisan divides around energy and climate. Karl Rove, former deputy chief of staff to President George W. Bush, told a wind power conference in 2012, “We need conservative Republicans who can say, ‘This means jobs to my district,’ … and we need Democrats to say, ‘This is a way to expand the range of options that we have in this country for energy.'” According to the American Wind Energy Association, 76 percent of all members of Congress currently have operating wind projects, wind-related manufacturing facilities, or both in their districts.
The Midwest is a national power base for this support. Some of the strongest national champions for renewable energy are from the Midwest, like Senator Chuck Grassley of Iowa and Governor Sam Brownback of Kansas, both Republicans.
Coal, Gas, Clean Energy: From Opposition to Integration
Wind power isn’t the only success story in the Midwest. Energy efficiency funding is also soaring in the region. The Midwest Energy Efficiency Alliance projects $1.8 billion in annual funding for electric and natural-gas efficiency programs in 2015 — a 15-fold increase over 2000 levels. Much of that growth has been since 2007, and primarily for electric efficiency. State energy efficiency resource standards (EERS), comparable to an RES, have helped boost these improvements. The EERS sets long-term savings goals, which drive utility spending on efficiency programs. Seven Midwestern states have adopted EERS laws, out of 25 nationally.
Energy efficiency policies also create jobs. Johnson Controls, headquartered in Milwaukee, Wisconsin, was born with efficiency: founder Warren Johnson invented the thermostat in 1885. The company now provides energy efficiency services, building and refrigeration controls, and automobile components and advanced batteries, and has expanded to 500 branch offices in 150 countries. Last year Johnson Controls building efficiency services earned revenues of $14.7 billion.
The region’s power system is undergoing a rapid transition away from coal. In the 12 Midwestern states, there are 499 coal units with a total capacity of 111,000 MW — and an average age of 46 years. As aging coal plants face new competition from cheaper options like energy efficiency, wind, and gas — plus stricter environmental regulations — their owners are deciding their best option is to shut them down. Utilities have announced as much as 58,000 MW of coal retirements in the next three years, with potentially 18,000 MW in the Midwest.
Meanwhile, natural gas is rapidly growing. Directional drilling and hydraulic fracturing, known as “fracking,” has driven down gas prices 60 percent since 2008, making natural gas power cheaper than coal. The gas revolution has been a mixed blessing for the growth of the cleanest power sources: While low-cost gas has helped push coal out of the market, it has made efficiency and renewables less competitive. Moreover, significant questions remain about the environmental impacts of fracking, such as water pollution and methane leakage.
All of these factors are contributing to a future power system that will be more diverse and less dependent on a single fuel. It will be more flexible, more reliable, and more efficient, saving consumers money, making industry more competitive, and reducing environmental damage.
Every new wind turbine manufactured and every efficiency program successfully completed helps to build the political base for new energy as part of a continuing cycle of progress: Political support leads to policy, policy spurs the growth of industry, industry creates jobs and prosperity, and prosperity generates still more political support.
Making the Midwest the Leader
Just as 1993’s Powering the Midwest presaged today’s renewable energy present, the National Renewable Energy Lab has described a future that takes it to the next level. The Renewable Electricity Futures study lays out a number of scenarios where the U.S. grid is powered by up to 90 percent renewables by the year 2050. In a central 80 percent scenario, Midwestern states account for 8 of the top 10 spots for wind energy production, and 9 of the top 10 for biomass power.
But more must be done to realize this vision. America’s Power Plan, a project of the Energy Foundation and Energy Innovation, taps 150 experts to develop a policy roadmap for a clean power system.
America’s Power Plan recommends that the U.S.:
- Develop new business models for utilities that reward renewables, efficiency, and innovation.
- Refine the regional electricity markets rules to reward greater operational flexibility, allowing new technologies to blossom.
- Provide stable policies to increase energy efficiency and renewable energy markets. Financial policies must be predictable and affordable to public budgets, and efficient for investors.
- Encourage customers who want to generate their own clean energy and compensate them fairly for it.
- Allow all options to compete to provide clean, affordable electricity services, including central and distributed generation, transmission, efficiency, and demand-response.
- Reduce siting conflicts by engaging stakeholders early and often; be transparent and respect landowner rights and land conservation values.
“The moment is approaching when our nation must decide how it’s going to power the future,” says Kansas Governor Sam Brownback. “The importance of renewable energy to the nation becomes clear… as we examine the importance of true energy independence and security more closely, and as we continue our work on rebuilding the economy and job creation.”
“We, as a nation, have been waiting for the moment when a true balance between environmental concerns, economic benefits and energy needs is in view. I believe that moment has arrived.”
The Midwest is starting to achieve a vision of clean energy security: a domestic energy supply, local economic development, and low carbon emissions. The region can lead the transition to smart energy policies that benefit people, businesses, and communities across the nation.
Ben Paulos is the principal of PaulosAnalysis, an energy consulting firm, and was formerly Program Director for Renewable Energy at the Energy Foundation. Eric Heitz is the CEO and Co-Founder of the Energy Foundation, and Gregg Ander is the Vice President of the Power Program.
This essay originally appeared in the Energy Foundation’s 2012 Annual Report and is being redistributed with the foundation’s permission. America’s Power Plan is curated by the Energy Foundation in partnership with Energy Innovation.