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THE MATHEMATICAL MAGIC OF CAPE WIND

Updated on May 9, 2010

Ponzi Would Be proud

Scam is an ugly word. I heard these words in a movie long ago, what movie does not matter because the sentiment is perfect for the current situation. In the absence of a national energy policy, much less a national energy plan decisions are made about major energy projects based on....who knows what? Political influence, the latest fads in energy technology, energy market manipulations, catastrophes such as war or oil spills or extremes of weather, current environmental moods....who knows? One thing is certain, in the absence of a carefully planned energy policy the United States is destined to continue enriching energy developers at the expense of energy consumers and the national treasury. Cape Wind is just one example of this folly, and certainly it will not be the last.

Here is a brief history of the conflicting statements about the projected cost of Cape Wind's energy. Nowhere in the American press has this history ever been presented so that we may ask, "What happened?"

1. In 2002 Jim Gordon, Cape Wind's CEO said that wind energy will be cheaper than conventional energy because the wind is free. After six months of constant questioning about how much cheaper Cape Wind would be he said ten to twelve cents per month less than conventional energy sources, for a monthly residential electric bill. Gordon said that although these savings on a monthly bill, to be spread across New England, were slight, Cape Wind would exert a downward pressure on New England Electric rates.

2. Somewhere during the time between 2002 and 2007, when he was pressed on his cost assurances, the words he himself had spoken, Gordon changed his claim slightly. His new mantra was that the business about exerting a downward pressure on New England Electric rates had actually come from the Massachusetts Energy Facilities Siting Board, in a report they had issued on certain aspects of the Cape Wind project. This was not correct. This claim had in fact been made by a consulting firm hired by Cape Wind Associates, LLC. (Gordon) to present the Cape Wind case to the Siting Board and the Siting Board had merely accepted and then reiterated it.

3. For the entire time Cape Wind has been under review it is a well established fact that offshore wind is twice as expensive to build as land based and that its actual cost of energy is at least twice as high as the conventional mix of energy sources. But, Gordon continued to claim he would achieve savings for the consumer.

4. The U.S. Department of the Interior's Minerals Management Service (MMS) released its Draft Environmental Impact Statement (DEIS) two years ago. In Appendix F of that document MMS published a partial analysis of Cape Wind's economics. MMS refused to publish its entire analysis, claiming that to do so might tend to confuse people. However, the agency did publish five peer reviews of the project's economics and all five were critical of Cape Wind's economics. All five indicated that Cape Wind's cost of energy would raise electric bills and that financing the project was a dubious prospect at best. MMS arrived at a projected cost of 12 cents/KW. The Cape Wind project leader at MMS, Rodney Cluck, has a PhD in sociology.

5. On February 8 of 2010 the self-described important consulting firm Charles River Associates released a brief analysis of Cape Wind's economics claiming that Cape Wind would generate savings of $4.6 billion over twenty-five years ($185 million/year), presumably for the New England region.

6. On May 7 of 2010 Cape Wind and National Grid announced that they had agreed to a fifteen-year Power Purchase Agreement (PPA) at a price of 20.7 cents/KW, more than double the prevailing rate available on Cape Cod and throughout southeastern Massachusetts.

While it is difficult to know exactly how much the overall cost increase will be without seeing the actual draft agreement, the PPA, it is clear that Cape Wind, its consultant before the Siting Board and Charles River Associates are either dishonest or incompetent. Mere mortals have known for these past nine years of Cape Wind debate that their cost would be substantially higher what we ordinarily pay for electricity. An example of the hubris of Cape Wind and its flunkies is this: Charles River Associates, by their own admission, did not include the capital cost of the wind farm in their calculations. I wonder when the Boston Globe will get around to asking questions about these glaring contradictions.

One final point: it was never possible for Gordon to speak in terms of Cape Wind's effect on New England electric rates because he was always headed for a PPA with a transmission company or companies who would serve only a limited area, not all of New England.


Copyright 2010 By Peter A. Kenney

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