Wind power for Dummies

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

This question often never gets resolved. So we will resolve it here. Bluewater Wind, now a subsidiary of Babcock and Brown is a company. It is independent of the state of Delaware, sort of like Delmarva, which is also a separate company and is also independent of Delaware. But each company must comply with state law. And Delaware Code requires Delmarva to answer to the Public Service Commission, as do also the Electrical co-ops, telephone companies and cable companies. The original thinking behind creating the Public Service Commission was that since these companies would most likely be monopolies, that some type of counterbalancing control needed to be added to keep prices from taking off through the roof.

So the Public Service Commission stays these companies hand.

So, again: What if the off shore wind farm goes under before it is built?

With Bluewater Wind we are talking about a private company, not a project being built by Del dot nor a government contractor. We are discussing a business like any other business that sets roots in Delaware and begins to earn money. Perhaps the best way to explain it is to compare it to the building of a new McDonalds, many of which have gone up in our area over the last ten years.

Now if a nearby McDonalds were built but never came to fruition, ie they stopped building in the middle of construction, you probably wouldn’t loose sleep over it. You might be upset you had to pay Burger Kings higher prices forever, but it wouldn’t cost you a dime of your own money because it failed. McDonalds would pay for the failure. It is basically the same with the wind farm.

Bluewater Wind once it has the green light, will offer bonds for investors willing to invest on a sure thing. So if you have an extra thousand laying around the house collecting dust, you could become an investor too, albeit a small one. You would ante up your K note and receive a piece of paper with a lot of legalese scripted across it. This would be your security ( not much, huh?). At the end of the term you would return the security and collect your original money plus whatever interest you had agreed to earn beforehand.

If the unthinkable happens and the Bluewater Wind farm fails, you are out a thousand dollars. It is called risk. Your only hope now is that someone will swoop in and want to buy your security so you have somewhat minimized the loss of a thousand dollars. Let’s say they will pay you $500 for it. Bottom line, you who are the investor are the person who stands to lose,….. or win big should the project go forward without a hitch. So does a failure of this magnitude affect you, the average citizen in Delaware in some way if you don’t invest? It could,… but in a roundabout fashion. If the person losing between five hundred or a thousand dollars, just happened to buy produce from you every day and suddenly stopped coming in,…. you would feel some ripple effects of Bluewater not meeting expectations.

Some people may have the misconceived notion that the State of Delaware is giving Bluewater all the money to build the wind farm. No, not at all. There is no more cost from Delaware taxpayers being put towards Bluewater Wind, than there is Delaware tax money being put towards the building of the aforementioned McDonalds. This is just another private concern being built.

But it is so much money, and it is so new? The amount of money is estimated to range under 2 billion, by the time all is over.

The way this works, is that the 2 Billion will come from many of the investors we mentioned above, so if Bluewater fails, each investor may lose a little, but none will lose all their capital. This concept is called balancing the risk or minimizing the risk by spreading it across as many people as possible. If any of you have stocks, you do this every day. You are putting money into a project hoping you will get it back….(Today the stock market appears far more risky than Bluewater wind ever will be.)

But there is in truth, some expense that may be charged back to Delmarva Customers if the Bluewater wind deal does not materialize. You have already heard that you will be billed for all the polling, legal and consulting fees that Delmarva has contracted in its attempt to ineffectively disprove the benefit of wind power. It would be safe to assume you would also be billed to pay for Delmarva’s grid improvements in Sussex County, and transmission lines to the transfer point, should they not be needed. This request would have to come before the PSC, and be reviewed, before it would be allowed to go forward. Since Delmarva did build infrastructure, in good faith, for us the electric customers to receive cheap power for our benefit, the PSC will most likely allow the hike to go through.

What happens if Bluewater cannot raise 2 billion and the project dies that way?

This may have been a concern before the middle of October, but the entrance of Babcock & Brown with assets above 52 Billion, has abated all such fears. They could build a 2 Billion project on their own, without investors, if needed…..

Due to the marketability of this project, investors should not be hard to find.

So is there is a risk for Delawareans if the Bluewater Wind goes bust after being signed to go forward? Not as far as capital costs would go. But having to pay Delmarva’s prices on gas energy as they continuously climb, would forever bear everyone’s curse for losing wind……….