I Can See Clearly Now…….

As the cold front passed though this area, the fog of the afternoon and early evening moved off the charts and into the Atlantic….

So it was on November 13th, when in answer to Delmarva’s PACE letter, Bluewater Wind had their consultant’s version of the facts land upon the PSC’s docket………………..

The clarity it provided if compared to Delmarva’s Pace Global Energy Service Report, mirrored the change in weather at the time…….

We will begin with this chart. It shows us both of what Delmarva and Bluewater Wind have been talking about. Delmarva says wind power will cost more than market. As you see by the chart, they are not lying, at least for the first ten years. But then, neither is Bluewater Wind, for if we take the whole twenty five years as one unit, we see that over the entire range of the plan, Bluewater wind is cheaper than market……and to boot, we acquire cleaner air, with less CO2 created in the process. Any money spent by consumers over the market price during the first ten years, could be easily saved by one less doctors visit during that decade…..

Now that first chart was made with Delmarva’s rosy picture of future fuel sources as being lower than they are today. Most of us looking sideways at the gasoline market, find such a rosy scenario rather unrealistic. This chart accounts for the future shortages and impact or REC’s (Renewable Ehergy Credits) in what is probably a more realistic scenario. As we can see, rather quickly in three short years, Bluewater starts performing under market…. As you see in this scenario, going with Bluewater will save us at least 50 million a year….Yes I know it is chump change, but still 50 million saved is 50 million earned…….each year, don’t forget?

Now the high cost of the hybrid proposal which the PSC proposed, has to account for the high cost of natural gas, when the wind does not blow, and the market cost is higher than the cost of burning ones own gas. Here is how the plan is to work.

The hybrid concept is organized to supply 300MW to Delmarva Power. If the wind happens to blow over 20mph then all 300MW comes from off shore. But if wind can supply only 200MW, then the gas turbines fire up and supply the additional 100MW. Likewise if wind can supply 150MW, then the gas fired turbines supply 150 MW to make up the difference towards the 300MW mandated. Any time the wind factor drops the offshore supply below 100MW (since the gas turbines will be maxed out at 200 MW), the additional 100MW is to be bought off the grid……Just as Delmarva wants to be able to do 24/7.

Therefore the price of natural gas becomes part of the equation as to how much Delawareans will have to pay to receive wind power for their homes.

The price of natural gas is rather volatile. (Duh..go figure) One would not realize such reading the Pace report, since they use only one figure for gas, and borrow that from 2005. Obviously natural gas prices will rise and fall seasonally. So we take that into account.

Obviously between 7 and 8 pm, during December through February, the price peaks…. Interestingly enough, this is wind blows the strongest, driving most of the turbines offshore to full efficiency…..Therefore just as most of the gas is being used to heat homes, less will be needed for power at that moment and hopefully the price for natural gas stays down a little more than it would if 200MW were suddenly fired up at that very moment…..

So the question before the panel is which of the options, is the better alternative, Bluewater and NRG’s newly installed gas turbines, or Bluewater and Connectiv’s facilities to be built outside Bridgeville, Delaware?

Just exactly, where do things stand within the large picture. The PJM grid has grown during the Bush administrations tenure. It used to be Pennsylvania, New Jersey, Delaware, Maryland, and Virginia. Through acquisitions of neighboring grids, it has grown from what was the original area, now called the PJM classic, to covering an area stretching from parts of Illinois and Michigan to upper North Carolina. It has become the largest power market in the world.

So where does PJM get its energy? Before we go there let me again explain the difference between capacity and energy generation. When both Delmarva and Bluewater Wind are talking about MW, you will need to pay attention whether they are talking about capacity ( their maximum potential), or energy generation, (how much raw electricity is actually produced).

For instance, you could build a 600MW capacity wind farm, and if the wind did not blow, you would have a total 0MW energy generated. That is the difference between capacity and energy generated. It holds true for all forms of energy, not just wind. In fact, natural gas has a great capacity, but due to its high cost relative to all other forms of energy, it is used only as a last resort, when all other sources have been maxed out and more energy is still needed……Therefore even though natural gas capacity of the PJM market is 27.6 %, it was only used to fill 5.6% of the energy generated.

So here is how the math breaks down. If a onshore wind farm like those Delmarva wants to receive energy from in Pennsylvania, has a 40MW capacity, and operates on a yearly average of 20% or 1/5th of its capacity, you and I can correctly understand that we can count on 8MW out of that wind farm. The beauty of off shore wind, is that they run at a higher percent of their capacity, usually between 30 and 40 percent. Therefore the higher cost of building offshore, is countered by the fact that with sometimes twice as much electricity being generated as a cheaper onshore wind farm, the cost per kwh is cheaper coming from offshore……Delaware could provide power to the largest power grid in the world, cheaper than any other source…….

So as the chart shows, coal and nuclear which are the two cheapest forms of energy, are used at a higher percentage than their capacity. Coal which has 40.6 % of the overall markets ability to produce energy, is constantly on line and actually produces 2/3rds or 66.6% of all of PJM’s electricity. Likewise nuclear, which costs so much to start and to stop, and is so cheap to run, usually once started runs full out until something goes wrong, supplying its maximum amount of cheap energy to the grid.

Here is the same information in graph form……

Sadly as one can see, only 1.7% of the energy we use is carbon free. And relative to the size of the largest energy grid in the world, even if a 600MW wind farm were built, and it ran at 33.3% capacity, the total relative to the grid, would still not arise above 1.7% level of the energy consumed. So the CO2 argument is not where we need to look. Our focus needs to be on the cost savings that we will receive. And with wind, we WILL receive them.

For only if wind power is competitive with the other forms of creating power, will wind farms continue to be built, and only with the accumulation of large numbers of wind farms, will a significant amount of carbon remain unburned……

This detailed chart shows the least amount of power currently is generated by wind. A 600MW wind farm operating at a 33.3% capacity, will generate on average an output of 200MW, which more than doubles the amount of the current wind capacity within the grid. Great journeys begin with small steps. As we can see looking at these large numbers, holding back at 300MW is rather senseless. Shouldn’t the “kavips Compromise” be implemented, thereby allowing Bluewater to build the 600MW wind farm and sell the remaining power to the world’s largest power grid at market rates? Doing so would drop Bluewater’s operating costs per unit, lower than that total negotiated over the summer for the 300MW capacity wind farm. Again doing so would drop our cost lower than those featured in the charts at the top of this piece.

But if Bluewater is to sell power to the grid, how will it get it there?

The above map shows the dilemma. Obviously high powered tension wires will need to be developed into Southern Delaware if Bluewater Wind is to make money. The plans for such a system have been approved, and now must go through the process of acquiring permits and the right of way’s. With help they could be built and ready by 2014 when Bluewater brings their wind farm on line….. Currently there is a backlog within the transmission system across the Appalachians, that creates a bottleneck that stifles energy from flowing into the Philadelphia market, thereby driving up the price of electricity from which Delmarva must buy,

…….To keep our costs in line, permits for the new transmission lines across Delaware, need to be granted quickly without delay. Failure to do so COSTS US SO MUCH MONEY.

Likewise, what good would having a wind farm do, if no one could receive any cheap power from it. Therefore the lines need to be built for no other reason than to funnel the cheap excess energy created on good wind days directly into the DC market, with little loss in efficiency.

Soon some type of Carbon tax will be installed. Whether by the Feds, or by each state legislature…….in either case, the cost of carbon fuels will rise. To offset the high cost of carbon, many legislatures are mandating a certain percentage of those state electrical needs must be met by renewable energy sources. Credits can be bought and sold among utilities to insure that all are in compliance with the states law. These are know as REC’s, (Renewable Energy Credits).

This chart shows just how many REC’s will come due by the time Bluewater Wind opens in 2014…..There will be a very high demand, especially within the largest power grid in the world, for these mandated credits. Bluewater Wind with its high capacity and higher percentage of energy generated, if it is allowed to go forward with the 600MW plan under the kavips Comrpomise, then more credits within Delaware, mean cheaper energy for us all. If we do not have Bluewater off our shores, we will be buying REC’s from Bluewater off Ocean City, Md, or Ocean City, NJ..Future generations will think it pretty stupid if we did not capitalize on this opportunity first, and have them pay us……instead of vice versa…….

So if one combines all these factors, the market, future carbon fuel prices, the capacities, their operating efficiencies, the cost of power transmission, and the REC’s and runs them thorough a computer model, which determines average cost per hour for every hour over the twenty five years span of the contract, one gets this result, first on the high end.

And then on the low end……