$81 BILLION IS JUST THE BEGINNING FOR WIND POWER
ALWAYS READ THE FINE PRINT PART 1
They probably just forgot. I mean they have all been in such a rush to save the world from evil oil, big coal and smelly natural gas. First it was just Jim Gordon, CEO of Cape Wind, selling his snake oil energy plan. Then President George W. Bush made very sure that the Cape Wind plan to clog the heart of Nantucket Sound with 25 square miles of steel forest called a wind farm made it to federal approval. He almost had enough time in office to have his own Secretary of the Interior make the final announcement, but President Barack Obama's man at the Department of the Interior, Slick Salazar, came across with the right decision and gave Cape Wind not only his approval but a glowing report. Nowhere in the press praise lavished on the Cape Wind project has there been an honest reckoning of what this project will cost ratepayers and taxpayers. Certainly the national press has not discussed these nasty not-so-little details. They probably just forgot.
Of course, in his remarks in Boston when he approved the Cape Wind project Salazar made some, no other way to describe them, dumb comments. But, as the BP disaster in the Gulf of Mexico has shown us, Slick is capable of being remarkably dumb. He spoke of the conditions he had placed on the Cape Wind project and in so doing he simply lied. These matters, such as the number of turbines and their locations had been settled years before Salazar was even a member of the Senate, let alone Interior Secretary. Then there was his remark, "Nantucket Sound hosts bridges and cell towers." None of us up here on Cape Cod can find one bridge or one cell tower in Nantucket Sound. Yup, Slick's hat is too tight. He obviously thinks we are too dumb to question his bizarre remarks. Guess again, Slick.
But the real prize in all this mess is the vast pile of cash, public funds, that will flow into subsidizing offshore and indeed all wind projects: 30% of the capital costs for each project. There is a catch, maybe. A project must be under construction by the end of December of 2010 and must be producing electricity by the end of 2012. However, there is universal agreement that without this level of federal subsidy U. S. commercial scale wind power will not be developed. And, even as the ARRA subsidy deadline approaches people are asking why future wind developers should be penalized for attempting to develop sites that have not already been determined as appropriate for development. The word descrimination has been heard in certain quarters. The current level of subsidy must be maintained in order to reach Slick's stated goals for wind energy. There will be Son of ARRA, or at least an extension of the current subsidies.
It is very simple: if this government wants to see continued commercial scale wind energy development there will have to be continued subsidies at the same level as presently available. The ugly fact of these huge subsidies has been carefully avoided, omitted from otherwise glowing press coverage of Cape Wind and indeed all wind. No statement of how much money is involved has come to my attention in the press, so here is my contribution to the pile of facts about wind energy that we have been denied. This little exercise concerns itself just with the 54 gigawatts of wind energy that our government claims we can reap on the Atlantic coast.
Some basic facts are in order: 1 gigawatt (GW) = 1000 megawatts (MW). So, at 468MW Cape Wind is .468GW. To simplify matters we shall use $2.5 billion as the capital cost for Cape Wind. This is a little high just to round off the numbers. Looking at what the costs are for various offshore wind farms either under construction or recently completed in Europe and adjusting costs for construction in the United States we arrive at an approximate capital cost per megwatt of $5 million. This translates to $5 billion for one gigawatt, or $270 billion for 54MW. Offshore wind energy is roughly five times as expensive to build as an onshore gas fired power plant. A 30% subsidy for 54GW totals $81 billion. You read it correctly: $81 billion.
With an anticipated capital cost of roughly $2.5 billion Cape Wind expects to receive roughly $750 million in ARRA funds....tax free. Because the Cape Wind project has been skillfully cited to avoid being in Massachusetts waters it will pay no state income or excise taxes. Also, various depreciation allowances and other tax breaks will doubtless appeal to potential investors and provide hundreds of millions of dollars in further indirect public subsidies. And this is just for the Cape Wind project. Of course, the defense offered by wind supporters when the subject of subsidies is raised is always to bring up the subsidies other forms of energy generation receive. Good point...to a point. the fact that energy companies (oil and gas) that receive public subsidies and/or tax breaks also make enormnous sums of money as profit in no way makes it reasonable or wise to do the same thing, perhaps on an even larger scale, for wind. Each issue should be dealt with on its own merits and no one will find in these posts my approval for the way in which we deal with energy producers generally. However, should we follow earlier mistakes with new ones?
Back to Cape Wind: the total cash subsidy of $81 billion is for the 54GW of capacity estimated to exist offshore. But, this 54GW is a myth; it is what is known as nameplate capacity. Nameplate capacity is the same as the horsepower rating for an automobile. How many people ever use the full horsepower rating shown on their engine specifications? By the time we deduct all the horsepower used to drive accessories such as air conditioning, power steering, pumps and heaters how much is left? If an offshore wind turbine actually produces 30% of its nameplate capacity, 54GW shrinks to 16.2GW, but the subsidy is calculated on the entire capital cost. Therefore, the cost of each gigawatt of delivered energy is dramatically higher than advertised. Each megawatt, having started out at $5 million for nameplate capacity will actually cost 3.33 times more when we calculate actual energy produced. The true subsidy for the total 54GW is actually $81 billion X 3.33, or $269.73 billion for the actual energy delivered. How is that for sustainable energy? If the actual capacity of those 54GW offshore turns out to be 25% that $81 billion becomes $324 billion in real terms. ($81 billion X 4)
Why have we not read this method of calculating the wind subisdies in the New York Times, the Wall Street Journal, the Boston Globe, the Washington Post, or - in fact - anywhere but here? For that matter, why have the undeniable economic facts of this and indeed all offshore wind projects been so carefully concealed by our government agencies?
Stick around for Part 2 and read about how unreliable and often usless commercial scale wind power can be.
Copyright 2010 by Peter A. Kenney