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em Iowa Publications Online (IPO) - State Library, State of Iowa (Iowa), United States


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Likemanystates,Iowafacessignificantchallengesontheenergyfront.Energypriceshave surgedinrecentyearstorecordlevelsbeforedecliningprecipitouslyfollowingthefinancial crisisthatbrokeinSeptember2008.Despitethispullback,thefundamentalsthatcontributedto higherenergypricesareexpectedtoreturnonceeconomiesrebound.Oilpriceshavegoneup onincreaseddemand,driveninlargepartbydevelopingcountriessuchasChinaandIndia, whoseeconomieshavebeenrapidlyexpanding.Naturalgaspriceshavealsofluctuated dramatically,tradinginarangefrom$4.50to$13.00/MMBtuoverthepastyear,butareunlikely toremainatlowlevelsoverthelongterm.Asshowninouranalysislateroninthisreport,the differenceinlevelizedcostofelectricityfromagasfiredcombinedcycleplantcanvary significantlydependingonthefuelcost. Dependenceonothersforenergysupplyinvolvessignificantrisksanduncertainties.Thus,if IowawishestoreduceitsdependenceonothersorevenachieveenergyindependenceIowa needstopursueactionsonanumbersoffronts.Followingthestatusquoisnotanoption. AcarbontaxwouldchangetheenergylandscapeinIowa.SinceIowaiscurrently75% dependentoncoal,acarbontaxcouldmeanthatgenerators,andinturnratepayers,couldbeon thehookforhigherelectricityprices,thoughitremainstobeseenexactlywhatthetaxscheme willbe.Inadditiontoexistingplants,acarbontaxwouldalsohaveasignificantimpactonthe costofnewgenerationplant.Wehavemodeledcarbontaxesrangingfrom$050/toninour analysisintheAppendix.However,ifamoreaggressivecarbonpolicycameintoplayresulting inmarketvaluesofforexample,$100/tonoreven$200/ton,thenthatcouldraisethecostofcoal andgasfiredgenerationsignificantly,makingalternativessuchaswindmoreeconomical.