The Journal | August 14, 2019
In 2015, the wind energy industry and business groups brokered a compromise to end renewable energy mandates in Kansas. The agreement had its detractors, notably environmentalists, who weren’t invited to the table. Four years on, Kansas now produces more than 36% of its power from wind, the most of any state. The Journal looks at how the key players evaluate the deal’s long-term effects.
Just a few years ago, the growing wind energy industry in Kansas felt the political breezes in Topeka shift.
Renewable energy boosters and free market advocates were clashing over whether the Legislature should keep renewable energy mandates. Opponents wanted state government out of the business of telling utilities how much renewable energy they should be generating. The wind industry feared new taxes and an uncertain business climate.
The conflict led to the renewable energy compromise of 2015. Wind energy advocates, free market groups and legislators agreed to remove the mandate from the Renewable Energy Standards Act of 2009, which had specified that 20 percent of the state’s energy must come from renewable sources (primarily wind) by 2020, and change it to a goal.
Free market advocates agreed to drop a proposal to impose excise taxes on wind farms, which had lifetime property tax exemptions. The compromise included limiting the exemptions to 10 years for new wind farms. After 10 years, they are taxed at lower rates as commercial properties, not utilities, because they don’t serve retail customers.
The compromise ended the battle. But it had its critics. Environmental groups, which weren’t directly involved in the compromise, expressed concern that the wind industry had caved while gaining little.
Four years later, perceptions of the deal are now being shaped not by the number 20, but by the number 1. In 2018, Kansas became the top state in the U.S. for the percentage of electricity generated by wind, at 36.4%, according to the American Wind Energy Association. Iowa ranks second at 33.7% and Oklahoma third at 31.7%, according to the executive summary of the association’s “U.S. Wind Industry Annual Market Report 2018.”
As a result, the 2015 compromise on renewable energy appears to be accomplishing a rare trifecta by pleasing the wind energy industry, free market advocates and environmentalists in its outcomes.
Kimberly Gencur Svaty, Kansas public policy director for the Advanced Power Alliance (formerly called The Wind Coalition), says she is unequivocally happy with the outcome of the compromise, and she thinks the wind energy industry is, too.
The state’s interest in requiring utilities to generate a significant portion of power from renewable sources dates back to the administration of Gov. Kathleen Sebelius. In 2006, she proposed a renewable portfolio standard (RPS) with a goal of 20% renewable energy by 2020.
Wind energy was the resource best positioned to meet that goal. The standard became law as part of an energy bill brokered by Gov. Mark Parkinson, who succeeded Sebelius, to permit Sunflower Electric Power Corp. to build a coal-fired power plant in southwest Kansas (the plant has not been built).
Protecting the mandate quickly became a moot point. Kansas utilities had met the 20% standard by 2015 and were well on their way to surpassing it by 2016. Although advocates supported keeping the mandate in place, the wind industry already had plenty of momentum.
The price of wind energy has kept decreasing, technological innovation and reliability has improved, and integration has continued, Svaty says. Several of the biggest wind energy buyers are companies including Google, T-Mobile, Target and Royal Caribbean. This is driven mainly by the stability of fixed-price contracts for 10, 15 or 20 years and by customer demand.
“Wind is renewable; the fuel is free,” Svaty says. “The cost is in the hard assets. You do have a small cost of annual operations and maintenance.”
Since the 2015 deal, Kansas’ investment climate has been very stable, she says, with billions of dollars of new investment for projects that have come online or are being built. That figure is expected to hit about $12 billion by the end of 2019.
Jeff Clark, president of the Advanced Power Alliance, worked with Svaty on the 2015 compromise. Although he favored keeping the mandate, he thinks the deal has aged well.
“I think it could have continued to do great things for Kansas,” Clark says. “I think the parties came together because it was impractical to have continued political battles and better to set a goal and get back to the business of trying to grow the economy.”
But it’s not clear yet what the long-term effects of the policy change will be.
Wind energy advocates such as Clark see tax incentives as a way to help their industry gain solid footing, “reach adolescence” and stand on its own, as many other industries have done. That’s good for Kansas, because wind energy can help the state broaden its economy to be “diversified in agriculture, aerospace, energy, tech and other fields … (and) make Kansas a leader in energy and providing energy to America.”
The state’s largest utilities took a neutral position on the changes, says John Bridson, vice president of generation for Evergy, a company formed by the merger of Westar Energy and Kansas City Power & Light Co. Both utilities generally support the idea of expanding their renewable energy footprints, he says in a written statement.
“Adding more renewable energy as part of our generating capabilities made sense for our customers and our company,” Bridson says.
Instead, the driving force for the changes came from business groups. The deal that unfolded in Kansas was just one example of a nationwide push against renewable energy mandates made, in part, by groups with ties to the political network of brothers Charles and David Koch.
The Libertarian-minded Kochs contend they don’t oppose renewable energy but want a smaller government that doesn’t subsidize some businesses over others. Some critics argue that there’s corporate interest at work, too, citing Wichita-based Koch Industries, one of the nation’s largest privately held companies, of which Charles Koch serves as chairman and CEO, and its lucrative business dealings in fossil fuels.
In Kansas, supporters of removing the mandate, which include some of Koch Industries’ home-state political allies, are pleased to see the deal paying economic dividends while making government less intrusive into business affairs.
Kansas Sen. Rob Olson, a Republican from Olathe, was a key player in the 2015 compromise. He’s happy with what he’s seen so far and thinks the changes it ushered in will continue to boost rural economies.
Kansas is part of the Southwest Power Pool, a regional entity that helps ensure the reliable distribution of power. The pool is the “greenest power pool in the country, with about 60% green energy,” Olson says.
The Kansas Chamber of Commerce, another group with a free market stance, initially wanted to go further, removing any target altogether, says Eric Stafford, the chamber’s vice president of government affairs. But he’s satisfied with how the compromise, which includes a goal, has played out.
“We wanted to ensure that we had an energy policy in place that didn’t pick favorites among energy sources,” Stafford says. “Wind generation is expensive for the initial investment but less expensive down the road.”
Mike O’Neal, a Lawrence-based independent lobbyist and owner of O’Neal Consulting, was the Kansas Chamber’s CEO at the time of the compromise and led negotiations on its behalf.
“In my estimation, this really was a win-win,” O’Neal says. “We’re free market guys and want a level playing field, competing with the same set of rules. We weren’t happy about mandates that supported one market over another in terms of competitiveness. But we saw that Kansas was a strong wind energy state. The market would take care of that.”
The real threat to the wind energy industry was that states were starting to consider production or property taxes, which the chamber opposed, he says.
“The compromise not only resulted in legislation but also an ongoing commitment to partner together in future years if there are efforts to go against wind,” he says. “I think wind energy is good for Kansas’ economy. I also support traditional energy. You shouldn’t have to subsidize something that’s probably going to be successful on its own.”
Jeff Glendening, state director of the Topeka-based Kansas chapter of Americans for Prosperity, a group with financial ties to the Kochs, was also involved in brokering the compromise and shares similar sentiments.
“We’re not big on government picking winners and losers, in the energy market and business in general,”Glendening says. “We’re happy it’s no longer a mandate. We want energy of any type to be the cheapest possible, and that’s what the market dictates.”
‘We weren’t invited to the table’
Environmental groups, however, tended to be among those most leery of the deal initially, in part because they weren’t given a voice in the proceedings, despite their long-standing support of renewable energy portfolio standards in the Legislature.
But they’re pleased to see the state’s wind industry continue to grow in the aftermath of the policy changes, although some groups still have major qualms about the potential long-term effects.
Rabbi Moti Rieber, executive director of Lawrence-based Kansas Interfaith Action and a social justice activist in Overland Park, says that the organization is very happy that “the wind industry is gangbusters in Kansas.” The organization was surprised to be excluded from the compromise, though. It had worked since at least 2012 to keep the mandate.
“The wind industry and the utilities worked it out,” Rieber says. “It was taking a lot of resources to fight it every year. They wanted stability. … So it was better to remove the mandate.”
Starting a few years before the compromise was reached, the Hutchinson-based Climate + Energy Project worked to support the mandate, Executive Director Dorothy Barnett says. She’s been happy to see wind energy continue to grow in Kansas.
However, while she sees wisdom in reaching the compromise, she’s disappointed that wind industry seemed to give up a lot. She’s not sure what the opposition gave up in the deal. Furthermore, the 20% goal is well off the levels of renewable energy that her organization would like to see in place across the state.
“We weren’t invited to the table,” she says. “Our mission is to reduce greenhouse gas emissions because we’re concerned about climate change. We thought we should expand the mandate to 50 percent.”
One downside of the deal, in the eyes of Joe Spease, chairman of the legislative and energy committee of the Sierra Club’s Kansas chapter, is that it has constrained the growth of the transmission lines necessary to carry wind power generated in Kansas to other states. In his opinion, instituting higher goals would have spearheaded greater investment in those lines.
He says that Kansas has the capacity to add at least an additional $50 billion worth of wind projects that would export power, and that it could easily happen within 10 years if sufficient transmission projects were to be built.
“We thought it was important to increase the goals,” Spease says.
A wider reach
Meanwhile, the development of wind farms continues, reaching levels of greater intensity and spreading to more parts of the state. It hasn’t been smooth sailing everywhere. The proposed development of a wind farm in southeastern Reno County sparked a bitter permitting fight and Sedgwick County’s planning board has endorsed banning commercial wind farms in the county. But wind turbines are becoming a common part of the landscape in many parts of the state.
EDP Renewables North America, based in Houston, operates three wind farms in Kansas: Meridian Way I and Meridian Way II, about eight miles south of Concordia, and the Waverly Wind Farm just south of Waverly. Its fourth, the $318 million Prairie Queen Wind Farm, is located in Allen County, near the cities of Moran and La Harpe. That location, in the southeast quadrant of the state, is notable because most wind farm development has been in southwest and north-central Kansas.
The wind farm was expected to become operational this summer, says Rorik Peterson, EDP’s director of development for the central region. The project created the equivalent of as many as 350 full-time jobs during construction and will provide 15 permanent jobs over the plant’s life, which Peterson says could extend to 2050 or later.
Such farms carry with them a profound economic boost for rural areas, says Evan Vaughan, spokesman for the American Wind Energy Association based in Washington, D.C. And they do that without changing “the primary economic drivers in the communities.”
“Wind farms help to preserve the rural character of the community, providing supplemental income that can be very helpful to farms and ranchers,” he says. “Rural communities can continue traditional economic pursuits because you can grow crops or graze livestock almost up to the base of the turbines.”
Making a good compromise?
From the vantage point of 2019, at least, the renewable energy compromise of 2015 appears to have worked out relatively well for nearly all of the groups with a vested interest in the issue. Could it be a model for deal-making on a multitude of difficult issues facing local, state and national governments?
Brokering such deals is challenging, in part because compromise requires the political actors to give something up, without surrendering something so important that it undercuts the value of the agreement.
Svaty with the Advanced Power Alliance suggests that a good compromise requires identifying what needs to be discussed and the possible ripple effects of changing those elements.
“Try to reach agreement among different parties with different philosophical viewpoints, and try to reach compromise on as many elements as possible without undermining the key elements,” she says.
Olson says that a good compromise is when “everybody gets 80% of what they want” after working toward a middle ground, and they “shake hands at the end.”
But what that middle ground looks like is key. Compromise often requires giving up something while trying to get what’s most important, “as long as you’re not abandoning your principles,” says Glendening with Americans for Prosperity.
And for a good compromise to be meaningful, it can’t completely please all involved. If everyone involved isn’t “at least a little unhappy,” Rieber with Kansas Interfaith Action says, “it’s probably not a good compromise.”