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Updated on June 23, 2010

When More Is Less More or Less

Cape Wind is going to cost retail electric customers more money if they buy energy from National Grid in Massachusetts, period. This will be a short post because its message is simple and does not need to be crowded by lots of language and a long story.

National Grid has negotiated a fifteen year power purchase agreement (PPA) with Cape Wind Associates, LLC. The PPA is currently undergoing the same strenuous scrutiny that the Massachusetts Department of Public Utililies applies whenever the fix is in and they want to make people think they are actually doing their job. The numbers and the claims for what they mean are simply magnificent. You be the judge.

The PPA calls for a price of 20.7 cents per kilowatt. At present most National Grid customers can receive electricity for approximately half of that. At least one other energy supplier, TransCanada, could have offered the same electricity (all electricity is the same) for less than 11 cents. But, Cape Wind has become the Holy Grail of renewable energy for Massachusetts.

So, let's see what happens to an ordinary electric bill. Cape Wind supporters are correct when they say that the National grid monthly rate will ijncrease by less than $2.00 based on the stated price of 20.7 cents/KW. But that is only the beginning. The goal, found written into Massachusetts law (The Green Communities Act) and subsequent regulations is for the Commonwealth to receive 25% of its energy from renewable sources by the year 2025. Here is what an electric bill would say in this brave new, windy world:

1. Assume all renewable energy comes form wind. Wind is cheaper than solar anyway.

2. Assume $100 as the charge for generation, for actual electricity. (This omits the other side of the bill that shows transmission and other charges.)

3. Assume a monthly generation charge of $150.00 for an average residential customer.

Wind energy, 25% of $150 = $37.50 ----------- if we double that we get $75.00

Adding that $75.00 back to the original generation charge we get a new total of $187.50. That new generation charge is 25% more than the original $150.00 charge. If the wind energy costs three times the price of conventional energy, which is what will happen after fifteen years with the legal annual escalatuion of 3.5%, the increase will be $112.25, making a total generation charge of $225.50 or an actual increase of 50% above the original generation charge.

Now for the bad news - an energy expert or two I have consulted tell me that the actual cost of Cape Wind's energy, or the levelized cost as it is known, the true current measure of value, is 28 cents/KW. Do you really want to see how that price runs in the fifteenth year? Or even in the first?

This all gets to be a little messy but the simple fact remains that 20.7 cents/KW is close to double what National Grid customers pay now and the price for wind power will automatically increase every year, by 3.5% compounded. If Massachusetts reaches its goal of 25% renewable energy and if most of that is from wind....electric rates will soar. And all this without even discussing the huge federal subsidies and tax breaks. Take a look at the money in your pocket, at the green in it....that is the green in green energy.

Isn't it amazing - supposedly intelligent people who think we believe that by doubling the price for part pf our electric bill we will save money overall?

Copyright 2010 By Peter A. Kenney


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