Iowa Power Fund off to a slow start
Source: RYAN J. FOLEY, Associated Press • Posted: Friday, April 20, 2012
Chet Culver’s signature program for renewable energy research and development is off to a slower and rockier start than the former Iowa governor predicted, with a fraction of the money spent five years after its creation, according to a review by The Associated Press.
Culver pitched the Iowa Power Fund as a $100 million program that would invest in ethanol, wind, and other technologies to reduce pollution, break the state’s dependence on foreign oil, and add jobs. In a speech when he left office last year, he said the fund “allowed Iowa to become the silicon prairie of the Midwest” and its breakthroughs would secure Iowa’s energy future.
But the fund never turned out to be $100 million, after lawmakers diverted nearly 30 percent of the money for other purposes. Few breakthroughs have occurred thus far while some projects have failed. And $23 million — less than one-third of what ended up in the fund — has been spent while some projects struggle to raise money and overcome other hurdles to get started, according to state data and project reports requested by AP under the public records law.
Culver didn’t return a message seeking comment, but his former Iowa Power Fund Board appointees say the slow start was partly the result of the recession and partly deliberate. They say they carefully scrutinized applications and required recipients to raise matching funds to ensure tax dollars would be used on worthy ideas. They are confident the investment will pay off and has helped cement Iowa’s status as a leader in ethanol and wind energy.
“We will probably have to wait decades to take the full tally of what this investment meant,” said former board member Carrie La Seur. “I give Chet all kinds of credit … It was a political risk. It was the kind of long-term vision that very few politicians are willing to push.”
Culver played up the program’s potential impact while seeking re-election in 2010, when the bulk of its projects were in their infancy. Republican Terry Branstad criticized the program as a failure, and let it wind down after unseating Culver.
Branstad moved responsibility for managing projects to the Iowa Economic Development Authority. Spokeswoman Tina Hoffman said recipients were not required to track how many jobs they created and it’s too early to judge the program. If the projects happen as envisioned, the state’s $71 million investment could leverage hundreds of millions of dollars in private and federal funds.
“In the short attention span of an election cycle, voters sometimes expect results quicker. And I just don’t know that’s fair. You have to be patient with new technologies, particularly in energy,” said Gary Radloff, an expert on Midwest energy policy at the University of Wisconsin. “These are long timelines, big projects and new technologies. Some will succeed and some will fail.”
He said renewable energy projects proposed during a boom in interest in 2007 have been slowed by the economic downturn as lenders avoid risky bets, and low prices in natural gas make them less attractive.
SynGest represents the program’s slow start and lingering promise. The company, proposing to build a plant near Menlo that makes fertilizer from crop residue, missed a deadline to raise $3.5 million to qualify for $2.5 million from the fund. State leaders threatened to yank its aid. But SynGest executive Don Frazer said the company recently raised the funds to qualify and will move forward with design and engineering work
Frazer said fundraising difficulties slowed the project’s initial phase but that it would’ve been even slower, if it happened at all, without the Power Fund. He remains confident the $100 million plant will be built.
Results have been mixed for projects that have received money.
Backers of a plan to expand wind energy in Iowa by creating a massive storage space learned it was not feasible after spending $2.8 million. One company accidentally wasted nearly $1 million buying equipment from a New Hampshire supplier that went bankrupt and has pledged to pay it back. An ethanol startup relinquished its $1.5 million award after failing to raise matching funds. A wind turbine manufacturer spent $83,000, then cancelled the rest of its aid because of a contract dispute.
But others are showing promise. BioProcess Algae, which wants to commercialize algae production as an ingredient in food and animal feed, is expanding in Shenandoah after receiving a $4 million state investment. The company is using carbon dioxide leftover from ethanol fermentation to grow substitutes for fish oil and proteins for feedstock.
Construction began last month in Emmettsburg on a $230 million plant to make ethanol out of corn cobs and other biomass material, a project that received the fund’s biggest promised investment of $14.6 million. Plans for a second large cellulosic ethanol plant, promised $9 million from the fund, are advancing. Radloff said he expected the fuel to be commercialized within a decade, if not sooner.
The state has not received any money from companies under contracts that require “success payments” if they commercialize technologies, but some executives predict they will make the first this year.
“There’s always risk when you are talking about new businesses and technologies. There are winners and there are losers,” said Ken Kaplan, president of Ames-based Cellencor, Inc., which is developing microwave technology for the ethanol industry. “But if you knock two or three out of the park, overall you’ve done great.”