By CBJ Editorial Board
What is it going to take to prevent the shutdown of the Duane Arnold Energy Center, Iowa’s only nuclear power plant located in Palo?
One hundred and twenty million dollars, give or take.
That is essentially the subsidy a wind farm with the equivalent power output would receive, based on 2.3 cents per kilowatt hour in production tax credits from the federal government. Unfortunately, nuclear power has never enjoyed those same tax benefits even though it is equally free of harmful emissions and its reliability is unparalleled among the major sources of electric power.
The economic disparity occurring in the energy market is a result of unintended consequences from those tax incentives for renewable energy sources like wind and solar and the enormous supply of inexpensive natural gas due to fracking. Those combined are forcing the announced closure of the DAEC five years earlier than planned, and that’s not good for the region or the state.
The potential economic impact of shutting down the DAEC, a move recently announced by its majority owner NextEra Energy could rival anything that the region has experienced in more than a generation. The 550 employees at the facility are well paid with an estimated $85 million in annual salaries. The facility uses a significant number of union contractors and invests in capital expenditures. The annual property tax paid is estimated at $3 million. The biggest impact, however, will be the loss of clean, baseload power, which is difficult to underestimate since the level of wind and solar output are unreliable and coal and natural gas aren’t clean.
The economics of shutting down the DAEC make sense to NextEra Energy and Alliant Energy, which has a purchase power agreement for about 430 megawatts, or 70 percent, of the plant’s 615 megawatts of electrical generation. But as is often the case with publicly-traded companies, the desire to meet short-term financial expectations – not to mention cash in on the generous tax benefits from renewables – may overshadow the long-term advantages of keeping the DAEC in operation.
It remains to be seen how this shutdown will impact its two minority owners: Des Moines-based Central Iowa Power Cooperative and Humboldt-based Corn Belt Power Cooperative, which own 20 percent and 10 percent, respectively.
So, if most of the shareholders associated with NextEra Energy and Alliant Energy will benefit as well as ratepayers then why should the DAEC be saved?
The economic impact of the plant and its employees by itself should give economic development and officials enough of a reason to try. After all, the state has given generous incentive packages for facilities and companies that are nowhere near as economically significant as the DAEC. But the bigger, more complicated and long-term reason is ensuring that our state and nation’s energy portfolio is diverse. Relying solely on wind and solar with supplemental power from natural gas when the wind isn’t blowing and sun isn’t shining could very well put us into an unforeseen energy quandary.
The likelihood of preserving the DAEC at this point is remote, but it’s worth a shot.
