Wind power for Dummies

No one knows everything about offshore wind, not even me. But since many of you have asked for a primer that is a relatively quick read, and because there are many mis-perceptions floating around Legislative Hall and the educated public, most of which were intentionally floated by one company to sow seeds of confusion, ……….here is what we know so far.

It started with a rate hike that in the common lexicon became know as the “Damn! A 60% increase!” To create some form of relief, the Delaware General Assembly passed a sweeping bill that is called House Bill 6 or EURCSA, which is short for ” Electric Utility Retail Customer Supply Act”

Most of the bill concerned itself with allowing Delmarva customers to spread the utility increase over the space of a year. But embedded in that document, was one paragraph, that explicitly states that Delmarva should seek out a new local source of energy that was low cost and environmentally friendly. At that time everybody and everyone thought the only bid would come from Connectiv who would bid on a new gas fired turbine to be built at Fox Point, which releases far less carbon than NRG’s Coal. Thus, Delmarva or more appropriately its holding company, Pepco, was thrown a big, juicy bone by several well connected legislators. But NRG, the state’s other large national utility company, did not take kindly to losing its market share, and came up with a coal sequestration plan which takes the pollution going out their stacks, and pumps it deep underground. Just one small problem with that concept. No one has tested it yet. It was theoretical bid at best.

So on the surface we had at least a two way race with the edge going to Delmarva’s sister Connectiv, for their gas turbine. Things looked rosy for Delmarva, as well as those legislators who were about to benefit from smoothing things through for the company that had just shocked Delaware by jumping rates 60%.

Then things took an unexpected twist. Encouraged by William Kempton and Jeremy Firestone, two University of Delaware professors, Bluewater Wind put forth a proposal to build an offshore wind farm off the southern coast of Delaware. It seemed to tailor exactly what was called for by EURISCA. Here in this proposal, we had clean energy with no pollution, from a facility that was built right here locally, that would create electricity with no contribution to global warming. The News Journal front paged the story with a picture showing the wind farm off Rehoboth, and the public snapped it up.

Suddenly Delmarva/Connectiv was a shoo in no longer. They would have to pull out all stops to effectively kill a proposal that 94% of Delawareans openly supported. They filed a lawsuit to stop the process from going forward.

But Delaware’s Public Service Commission was bound to no sentimental ties to Delmarva. Used to dealing with that whining company, they rather liked the positives that Bluewater Wind had to offer. After much discussion, and much debate, in which many of you participated by letting them know your support, they acted independent of those few legislators, and ordered Delmarva and Bluewater Wind to negotiate. Delmarva/ Connectiv decided to postpone both court cases until they could see what hand Bluewater Wind held. Then, if losing, they would play the Justice System card. The negotiations between Bluewater and Delmarva continued though out the summer of 2007 behind closed doors, with final reports being filed before the commission as evidence.

As expected, independent commissions closely tied to Delmarva and Connectiv, painted wind in a bad light, and those completely independent of Delmarva painted wind in a good light. And with so many confusing testimonies, it was up to independent researchers to delve through the documents and publish the results for public consumption.

Here is what they found. Everybody and everyone is getting into wind. China, Australia, India, all of Europe, Texas, the Midwest, were all building wind farms like they were going out of style. Most of these were being built by large corporations, not small independent operators. Royal Dutch Shell is building the largest one off England’s Thames River that will have over a thousand offshore generators! Wind power has gone mainstream. There is nothing experimental about offshore wind.

Denmark has had offshore wind for years. They also build most of the world’s wind turbines. But looking too close at Denmark brough up the one problem with wind. We don’t control it. Sometimes it blows, and sometimes it doesn’t. Therefore we always need another method of creating power, or risk brownouts. Hence the concept was floated by the Public Service Commission that a gas turbine would be built in Bridgeville (Thurman Adams home) to kick in whenever the wind failed to blow. That would increase the cost of the overall project, over that of just wind power alone.

Another issue that occurred in Europe was the lack of high density transmission lines. When the wind surged and created excess electricity, there was no way that power could get to the urban markets where it was needed. Often the turbines had to be taken off-line, just as they reached their peak efficiency. Northern Germany is forced to route its power to Southern Germany though Holland, since its own power distribution system is incapable of handling the load. Denmark has to send power to Norway and Sweden, since no transmission lines run from rural western Denmark to the populous urban centers on the islands. Most of Denmark’s cities’ electricity is fired by gas, simply because the inability to pipe in wind generated power to where it is needed.

What about cost? To truly determine the cost of wind, one must divide the calculations into three groups. The first is the cost of wind itself. The second, is the cost of not going with wind and using alternative sources of power, and the third is calculating environmental and secondary costs into each proposal.

America grew up on cheap energy. Originally covered coast to coast with forests, wood was our first fuel. Then cheap coal became our bread and butter. Towards the end of the Nineteenth Century we begin drilling for liquid gold, and as we found we had to burn off natural gas as waste, we began supplying that waste to make electricity. Gas was cheap, since it was being burnt off anyway. There was no end in sight to our power generating capabilities. Not to mention nuclear; build a plant and keep it running 24/7. It costs the same whether it is running full capacity or not.

Then two oil men took over the White House. Whether that had consequential effect or was just a coincidence in rising worldwide energy costs, is as debatable as global warming.

So how much does wind cost? Before we tell you let’s examine how wind cost is procedurally different from conventional carbon burning utility costs. Wind is costed similarly to hydroelectric, solar, and geothermal power. There is no cost for the fuel. The cost is determined by taking the estimated capital cost of the infrastructure, adding maintenance costs, and spreading that over the length of the contract, in this case twenty five years. That differs from investing in a gas turbine plant, because not only does one have to determine the cost of the metal and the labor needed to put it together, but they need to add the cost of a volatile fuel that could change immensely day to day, month to month, year to year. That is why there are no twenty five year contracts for gas and coal. Imagine the poor sucker who guaranteed $1 a gallon for gasoline over the last fifteen years. Guaranteed, he is out of business now. But wind does exactly that. It guarantees the current price for twenty five years….and it will not go out of business. It will do quite well financially, which of course is why Shell and other big oil companies are jumping into offshore wind power with both feet.

So how much will wind cost? The first estimate was for a 600 MW. When that was trimmed by the PSC to 450MW, the cost jumped because the fewer the number of turbines, the higher the per turbine cost will be. Then as controversy swirled over the potential for an increased commodity cost, by including those rare metals, the costs shot up even more. This time it was too high even for Bluewater, and that option was taken off of the table by Bluewater Wind. They decided to bite the bullet on that cost itself should they materialize.

In fact Bluewater Wind is footing the bill for all costs of construction. Unlike Delmarva who whines about every little expense and raises our rates to compensate, the Bluewater Wind Farm will not cost the state a single penny. But it will save quite a few billions for the state over what Delmarva will be charging for electricity.

Bluewater originally proposed 9.82 cents kWh, then it rose to 10.59 cents, higher to 11.44 cents, and then the final price dropped back to $9.89 cents per kWh. Compare this to Delmarva’s actual SOS bids in 2006 which ranged from 9.96 cents kWh to 11.76 cents, which averaged to 10.30 per kWh spread over the next 37 months or 3 years. Note that Bluewater’s future contracted price is lower than what Delmarva is paying for energy today. When Delmarva says Bluewater will cost more, ask them to show you what they pay! Then ask them how 9.89 cents per kWh costs more than 10.30 cents per kWh? (It doesn’t. just curious as to what they would say.)

So what will Delmarva charge? Now this is the fun part. Did you ever ask a child a question and if he wants you to know the truth he comes right out and tells you, and if he doesn’t he kind of talks in circles, without really saying anything? That is how Delmarva comes across whenever it finds itself predicting how much its energy will someday cost you.

Here is one example. Currently they tell you wind power will cost more than what they provide. “You can’t afford to take the chance.” So what do you got, we asked…..”well, trust us, until will give you our figures…we are still working on them right now…..etc. etc.” Well, after paying 60% more for my electricity, if there is anyone out I will trust less than Thurman Adams, it is Delmarva. Finally if you break down their cost analysis, they anticipate the cost of natural gas will go down. Tongue in cheek, I replied that if they are so confident, why don’t they guarantee it for the next twenty five years, eating any incremental cost increases of that commodity out of their shareholder’s dividends. That’s what Bluewater did. They declined, because they didn’t believe it themselves. Natural Gas has tripled in cost over the last ten years. During cold spells, the price has spiked over forty times the price current ten years ago. Why will Natural Gas climb, as did our gasoline prices? Because we are running out! When you hear about our excessive amounts of Gas reserves, remember that the Federal Government outlawed most of them off the Florida coast as being environmentally unsound. If one takes those reserves off the table, we produce less natural gas than we use. We import the rest. Most will come on Liquid Natural Gas ships from the Mid East. We know what the Mid East does for energy prices…….

We are running out of coal as well. A hundred years ago we estimated we had 11,000 years left. Now we say maybe 250. But the coal that is left, is not easily extracted. Most is under National Park, municipal boundaries, or other lands that would be almost impossible to exploit, and should not be disturbed. Probably we are down to a 30 years supply. And that is if we do not build any more power plants. Oops…too late. Especially if one counts China. One new coal burning power plant goes on line every week…..So will gas go down, or up? Will coal go down…..or up?

At today’s prices wind is competitive. If the price of Gas and coal soars, which every living human being who is not connected to Delmarva expects it to, Wind becomes not only cheaper, but a basement bargain.

So is Delmarva lying? I will let you be the judge of that. But would you lie if you had legislators working for you, doing your bidding against the wishes of 94% of Delaware’s population? You would do everything to spin it, to confuse the public , so those legislators could continue doing what they are doing, wouldn’t you?

If you want an explanation of why Delmarva estimates the cost of natural gas will go down, I just gave it to you.

Finally one should take other supplemental costs that one incurs by switching suppliers. There is a less pollution health benefit, estimated to be 100 million. There is a global warming cost to combat the oncoming rising sea level expected to begin shortly. There is the possible benefit from incoming sports fishermen wanting to catch the bounty that will relocate under the offshore wind platforms. There is the benefit of some tourists, there is the beneifit of good jobs being added to the economy. There is residual benefit of new manufacturing business relocating into Delaware to get away from the high cost of other states electricity.

If we stay with Delmarva power, we get no benefits.

Most likely Delmarva is putting up a fuss, because Bluewater Wind is another competitor moving in on its turf. Obviously it would like to remove itself from the costs of generating electricity, and shift its focus to that of Enron, and just buy, up charge, and sell electricity. But that system is what put California in such an energy crises back in the early Bush years. We found out later that shortages were created to jack up prices. There was plenty of electricity available, it just wasn’t being sold. The only ones who were insulated from that type of manipulation, were those communities that had their own wind farms. As surrounding communities lost power, they were unaffected.

Delaware needs to be wiser. Delmarva is the Eva Longoria of utilities. Caught in so may lies already, only those hearing them for the first time believe anything they have to say. Delmarva may spin truth extraordinaire, but they still have two cards left. One is the before mentioned court case. The other card being played is a tiny minority of legislators moving behind the scenes who are willing to let us suffer the slings and arrows of outrageous pricing, so they can continue being friends with Delmarva.

Thurman Adams, Tony DeLuca, Harris McDowell, and Charlie Copeland. Kick all four of these out in November, and we will have wind power. Make enough noise so they see the inevitable threat, we may get it sooner.

Other questions:

What about SES as an option to drive down demand and lower prices?

What about buying Land based wind power which costs less that offshore?

What about letting other companies such as Connectiv bid on an off shore wind farm?

What if the off shore wind farm goes under before it is built?

Why do we need a contract at all? Why can’t we build an off shore wind farm and then sell electricity on the open market?

Why does the cost have to be borne by homeowners and small businesses? Why can’t everyone share in on the cost of Bluewater Wind, especially big business and the state itself?

If wind power is so good, why can’t we drop our costs further by extending the size of the wind farm. Why limit it to 450MWs ?

How much carbon will a wind farm save?

How soon will the seas really rise due to global warming?

How much does it cost to make a kw from wind?

These and other questions will be answered in Chapter 2 of Wind Power for Dummies

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