In a well timed move two of the Delmarva peninsula’s Electric Cooperatives, have joined with Delmarva Power in accepting bids for land based wind.
Maria got there first .
At first glance this sounds like it may do damage to Bluewater’s proposal to build wind off the Delaware coast. Common knee jerk reaction would be to say “Oh no, they are going along with Delmarva to get wind from Pennsylvania. All our new jobs are going to be lost…”
But if one takes a close reading, that it not what it says.
The Delaware Electric Cooperative and Old Dominion Electric Cooperative have joined Delmarva Power’s competitive bidding process to acquire land-based wind energy to supply their customers, the companies announced today.
Keep in mind that the earliest that a Bluewater Wind contract could provide Delmarva customers with clean, cheap, renewable energy, would be in 2014…..The average length of a bid for power is currently three years. So this being 2008, we would bid one for 2008 through 2011, one for 2009 through 2012, one for 2010 through 2013, and perhaps one more ranging from 2011 through 2014. If those utilities did not order energy from wind, ……it would during the interim, still come primarily from coal and gas fired turbines……So by purchasing from land based wind, which will be cheaper than any carbon based fuel, (although not as cheap as offshore) until Bluewater Wind comes on line, we will actually save Delmarva and the electric coop’s and their customers…….money. Not a bad thing at all.
The utilities made the announcement after Delmarva Power received more than 35 price bids from land-based wind developers from across the region.
Obviously there were too many bids for Delmarva to keep to themselves.
Early indications from the bids are that buying land-based wind power through this competitive process could save customers an estimated 50 percent compared to Bluewater Wind’s current proposal to Delmarva Power for a 25-year contract.
For those of you who read legalese, this doesn’t really say what one at first thinks it says: Here is how one focuses on the document itself:
Early indications from the bids are that buying land-based wind power through this competitive process could save customers an estimated 50 percent compared to Bluewater Wind’s current proposal to Delmarva Power for a 25-year contract.
Early means anything can happen. But the principal word in this clause is could. Of course it “could” happen. Anything is possible. A comet could smash into the Pacific ocean tomorrow…we just didn’t catch it. A tornado could hit the New Castle Courthouse and break windows. An elephant could break loose and tear up Terry Strine’s mobile home park, much to the chagrin of its residents. In any legal document, the word “could” is something most good lawyers try to have removed, or meticulously defined if the other party insists. The word “could” in a legal document, removes all accountability away from the person defending the claim. The word “could” allows me to make a preposterous statement and not be held liable, because…….it…..could……just……happen. Therefore I “could” say John Atkins “could” be back to his old tricks at Seacrets, and nothing “could” happen to me because I used the word “could“..
(Talk about running one word into the ground, wow.)
But the final clue is the word “estimated“. That word means a “guess”. It could be a rough “guess”, it could be an average “guess”, or it could be a “guess” that is quite close to the mark because a lot of effort went into analyzing the data leading one up to that guess…….
So when we are told the onshore wind will (no, remember it said “could”) save an estimated 50% over offshore wind, will it save that 50%? To do so Delmarva will have to buy the onshore wind at a price below 1/2 of what Bluewater is offering. And we know what Bluewater offered.
Bluewater’s price is 9.89 cents per kilowatt/hour. Currently Delmarva has just announced their bid over the next three years to buy electricity at 10.99 cents per kilowatt/ hour. That means that every kilowatt hour we pay TODAY, costs 1.1 cents more than Bluewater wind will be costing us twenty five years from now…….. Use 600 kilowatts/hour a month, the cost savings from Bluewater wind alone would save you 600 times 1.1 cents or $6.6 dollars a month.
Therefore, land based wind needs to come in at 4.95 cents per kilowatt hour to be 50% cheaper than Bluewater Wind. Theoretically that is possible if a big turbine works at 90% capacity, but in truth, it is very unlikely. After all, as Delmarva said……it could be 50% cheaper. But even if we haven’t yet seen the bids, we already know the claim is quite doubtful…….why? Because they used the word “could“…..
So if we reread that passage again, we see it says:
Early indications from the bids are that buying land-based wind power through this competitive process could save customers an estimated 50 percent compared to Bluewater Wind’s current proposal to Delmarva Power for a 25-year contract.
very little, really. We have to read that as maybe, …..or…….then again, maybe not. The same way a jaded person would take this next remark perennially coughed up at the end of every August.
“With a veteran quarterback, a series of strong running backs, and a top rated secondary, the Eagles could win the Super Bowl this year….”
Ummm. Let me place my bet in mid season.
Next the press release continues………
Final bids from wind providers are due at the end of March. The utilities will conduct a thorough analysis of the bids. The analysis will likely be complete by the end of April.
“Will likely” equals another synonym for “could“. If they were serious, they would have left out the word “likely” stating that the analysis WILL be complete by the end of April.
Here we see the whole mechanism behind this press announcement. They are stalling for time. It took very little time for the Coops to jump on board. Obviously they were able to digest the information rather quickly. But as one approaches the end of the General Assembly, it becomes easier to kill the wind power deal. Stick it in a drawer and say let us deal with it next year…..
That is the whole drive behind leaking these teasers in order to postpone any decision leading up to a final verdict, until it is too late. Everyone intuitively knows right now, that the price will not come close to that of Bluewater Wind. Everyone knows right now, that the economic benefits from out of state wind, will do nothing for Delaware. Everyone know right now, that when other states need green wind as much as we do, that the price will soar since they are not locked into a low costing contract as we would be with our own offshore wind…..but is it human nature to hesitate when buying a mortgage at 4% interest because you hear rumors that it may soon go to 3%? Yes!. But what if those rumors were planted to make you hold out until the rates shot up to 5%? In a nutshell, that is what is being done right here, right now.
In addition to a lower price, most of the onshore bids have no built-in price escalators. The Bluewater Wind proposal, by comparison, automatically increases the price to customers by 2.5 percent each year, starting in January 2008.
This is hilarious! Delmarva will be wiping the egg off their face as soon as this one gets out. I can only guess in their dealings with the Legislative committee, that they think all Delawareans are stupid. Well most of those I know are not; we just get fooled sometimes and elect stupid people to represent us……
Now here is what’s so funny. During the negotiations last August, the ones leading up to the September 13 decision by the Public Service Commission, around the negotiating table the 2.5 % increase was called the “Delmarva” escalator. That is because under the rules of the State of Delaware, Delmarva Power is entitled to an inflationary increase of 2.5% a year. Bluewater argued that they too should also be allowed the same arrangement, since the Delmarva Corporation had been getting it for years. Delmarva agreed it was fair, and it went into the contract. What is amusing and one has to shake their heads in disbelief at how dumb this corporation is, ……these land based companies will not have escalators because they are not contracted, the same way non union workers work cheaper with no guarantees because they have no contract, and afterwards, Delmarva will still tack on their inflationary hedge of 2.5 % and we still will have to pay for it!
Isn’t that funny?
Let’s move on:
“Onshore wind energy provides consumers with the same environmental benefits as offshore wind energy”Here the truth is being stretched a little. It should read that
“Onshore wind energy provides consumers with (some of) the same environmental benefits as offshore wind energy”
A couple of facts. Offshore wind provides more energy during the summer months than do land based wind farms, which are often stalled when a high pressure system sits on the Appalachians. Even during a summer High, offshore wind turbines benefit from the breeze causing temperature gradient existing between the sea and land during the summer months. Offshore platforms also provide artificial reefs for fish (which no land based unit can), and no forest habitat is destroyed in the placing of an offshore tower.
If the wind is blowing strong enough off Rehoboth, then less mercury, cadmium, and sulphur land on top of Millsboro’s residents. Finally mountaintop onshore wind farms run at 30 to 40 percent capacity, whereas offshore wind farms run up to 75 to 90 percent capacity. More carbon is offset with off shore.
Got to move on.
“We are pleased to join with the Delaware Electric Cooperative and the entire family of Old Dominion Electric Cooperatives in this groundbreaking process to bring clean, affordable renewable energy to the region up to five years ahead of any offshore proposal,” said Delmarva Power President Gary Stockbridge. “Together we can achieve considerable savings for our customers, establish a long-term source of renewable energy for both Delaware and the region, while doing what’s right to help protect the environment. The addition of the family of Old Dominion Cooperatives to Delmarva’s ongoing wind power bidding process should expand the growth of wind energy throughout the entire Delmarva Peninsula and the Commonwealth of Virginia. This is an exciting day for the development of renewable energy in the region,” Stockbridge said.
Question: who is doing all the talking? Isn’t the whole point of the press release that someone other than Delmarva is also seeking land based wind bids? Why then, do I see only one name repeatedly?
” J. William Andrew, President and CEO of the Delaware Electric Cooperative, said the cooperative is pleased to join with Delmarva Power on this issue. “This agreement demonstrates that Delaware’s largest electric utilities are acting responsibly and aggressively in obtaining renewable energy for customers at a time when issues of climate change and energy sustainability are at the forefront of the public agenda,” he said. “We see this as a great opportunity to bring renewable energy to our members and maintain the low rates our customers expect from us.”
Oh, there he is. But wait…. he doesn’t say anything about not going with offshore Wind. He is talking about what I mentioned in my first paragraph, that buying wind now was much better then coal, natural gas, or oil……Basically he says let’s buy cheap renewable power now…. no one can argue with that. When Bluewater comes on line, he never says that he will not buy from them as well. And some of you may remember, the Coops already bought rights to Bluewater Wind months ago contingent on if it was passed and would go into effect.
One gets the perception from this press piece that Mr. Andrews was suckered by Stockbridge to be tied in with Stockbridge’s denunciation of Bluewater Wind. ” Hey, Bill! Let’s get together and pool our bids on some of this outside wind deal until they figure what will happen with this Bluewater thing. Let’s announce it on Monday….Don’t worry, just come up and say a few words and our guys will set this whole thing up.”
Surprise, surprise.
Jackson E. Reasor, President and CEO, of the Old Dominion Electric Cooperative, said the Cooperative is pleased to join this process and expand the opportunities to the region and the over 500,000 members of the cooperatives they serve. “Wind power will play a strong role in moving us all toward cost effective renewable energy for our future and we are excited to get in early on this rapidly growing technology.”
Again, no argument there. Once again, notice that he just said “windpower”; not as Stockbridge said: “land based windpower.” Better to buy cheap wind now instead of expensive coal.
Finally:
The benefits of any potential agreement will be spread to more than 90 percent of the electric ratepayers on the Delmarva Peninsula and an additional 400,000 on the Virginia mainland.
Whoa…..did I just read potential? I did, didn’t I? Let’s read that line again…P…..O….T….E….N….T…..I….A….L… Well, I’ll be darned. Unlike Toby Keith, this is a lot more talk, and a little less action…..
Wasn’t this the same company that just last year, said that a gas fired plant was cheaper than Bluewater wind’s proposal, and could never prove it. They were of course proven wrong this year by 1.1 cents a kilowatt hour.
Wasn’t this the same company that just last year that said renewable energy was too costly for their consumers, and now… they are joining up with Coops to buy land based windpower?
Wasn’t this the same company that said they were looking out for all their customers and then bid 1.1 cents more than Bluewater Wind would charge us twenty five years from now?
Wasn’t this the same company that based their predictions on their costs versus those of Bluewater Wind, by using their 2006 prices, you know the one’s we had before the 59% increase?
Wasn’t this the same company that based every one of their estimates on the premise that gas prices would drop back down to where they were years ago?
Bottom line…………..Maybe, perhaps, in a rare circumstance…..it could happen.
Based on this company’s track record, I will have to see that 50% before it can be believed. Remember: those bids need to be 4.95 cents per kilowatt hour. Apparently all we have now……… is his word.
kavips 
20 comments
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March 26, 2008 at 5:47 pm
Shirley Vandever
Kavips, this is a fantastic analysis. I can relate, as in my line of work (designing databases), it is extremely important to determine the requirements EXACTLY. If there is one ounce of ambiguity, the whole project can be delayed and extra costs incurred.
The people who release these statements purposely allow a lot of wiggle room. This way, they can never be held accountable. It drives me crazy.
March 26, 2008 at 6:14 pm
Perry Hood
Superb analysis, Kavips. I hope our legislators take it into account. It would be a real shame for us to see the decision put off for another year, then perhaps forever, while other coastal states reap the benefits of off shore wind power. It’s all on McDowell and Adams who are mysteriously on the side of DP&L instead of ratepayers. It’s pathetic!
March 26, 2008 at 9:42 pm
john kowalko
The presumption that Delmarva is getting a true comparison of land-based vs offshore based wind costs is disingenuous at the least. One has to ask very pointedly and specifically for a cumulative amount of land based wind (300 mgw??) at a specific price that is guaranteed for twenty-five years. Stockbridge will try to roll and bundle increments of wind generated power spanning a multitude of fragmented contracts. He must answer very specifically what the guaranteed price is for the 20 remaining years on the 5 year bids and the 15 year remaining costs on the 10 year bids and so forth. He should also be asked percentage exactly of REC purchases to satisfy the 300 MGW comparison and be challenged on the invalid comparison to actual wind generated by BWW and REC values of BWW. Yesterdays announcement should be welcome news to Delawareans but it is obviously a delaying tactic to cast doubts in the minds of those who are not as informed in the complexities of the matter. I asked Gary Stockbridge in private, in public (at the Energy Committee Heraing) and on numeropus occasion if the purported price/bid comparisons would involve 25 year guaranteed prices for 300 MGW of wind generated electricity and he assured me , in no uncertain terms, that it would not be the case. He quite specifically refused to disclose anticipated amounts and said that it would be a cumulation of piecemeal contracts ranging from 5 to 25 years and including significant REC purchases to make up the total. There is no fair or equal comparison to be made if the contract lengths average less than 25 years because there is no accurate prediction of the price increase for the years added on to arrive at 25 years. The only honest supposition is that costs will rise and rise dramatically. Delmarva and Stockbridge are being dishonest and disingenuous in their manipulation of facts and it may be time to hold hearings regarding their activities.
John Kowalko
March 27, 2008 at 2:15 am
kavips
Dear John:
In regards to your last statement,
“and it may be time to hold hearings regarding their activities.”
I would clarify that by saying it is way past time, for it truly is.
And allow me to elaborate upon another thought that occurred to me as I read your comment above.
When we buy a house, we buy it for thirty years. That is because only a very few of us can rent, save up the total purchase simultaneously and buy our house outright. If such were the case very few houses would be sold. But if we can afford a steady monthly payment over a long span of time and we can reap the benefits which we all deem as a basic American right, of owning our own home.
But to do so, we agree to pay a certified amount each month. We and our creditors at signing, deduce that this amount of steady repayment, will create a safe investment for all sides. But how many of us could do so, if our house payments could jump up and down at will, over which we would have little or no control?
We see the problems of ARM’s today. What Stockbridge is offering is exactly the same. A sweet deal up front, with fluctuating rates 5 years down the line, and no limit on how high they can go…..
Everyone who has had their mortgage payment skyrocket these months, now wishes they had gone the fixed rate approach. Not doing so has destroyed our entire economy.
Let us not make the same mistake twice. We can’t take many more shocks as it is………..
L
March 27, 2008 at 3:32 am
john kowalko
It is an absolutely fair comparison to the potential damage an ARM can wreak on the unsuspecting buyer. I find it very difficult to accept Delmarva’s honesty or interset in representing the interests of the ratepayers when it conflicts with their own business interests. An example is their push for decoupling of rates before the PSC Regulation Docket 59. See following for my written comments to the PSC in that regard.
Dear Ms. Price,
I respectfully submit the following as my written comment in response to the matter before the PSC reference Regulation Docket 59.
Please let the record reflect that I strenuously object to proceeding forward to allow Revenue Decoupling as proposed at these proceedings.
A true-up to proven cost savings will disincentivize the users (consumers) from continuing any aggressive conservation initiatives by denying the financial motivation to participate. As a ratepayer and representative of the people, I can assure you that most effective conservation efforts will rely heavily on, at the least, a minimal financial reward/return for their (the ratepayers) efforts. The discussion before you seems to have taken the direction that the PSC will somehow encourage consumer conservation by providing financial incentives to the utilities (guaranteeing their revenue stream). This appears to be a contradiction in terms that involves artificially generated revenue guarantees rewarding the utility companies for not interfering in user conservation efforts. These revenues will result from savings accrued by a disciplined reduction in energy use on the part of the consumer. To pass that back to the utilities or to allow the utilities to reap that benefit will discourage user-end conservation and efficiency investment. A “reasonable rate of return” should be the percentage mark-up for each unit of energy distributed/sold and not a guaranteed flow of cash from the ratepayer to the shareholder.
My objections to the proposal are more defined and obvious when you put the discussion in the context of affecting the fixed-income senior and low to moderate income communities. These consumers are the least likely to be able to afford conservation measures (energy-efficient purchases, weatherization and efficiency investments etc.) therefore they will not benefit economically from conservation and efficiency measures. They will, however, be paying the increased costs that decoupling would bring and that would result in higher shutoff/foreclosure rates and a discriminatory practice targeting our most vulnerable community.
Even our most conservation minded would feel a sense of betrayal if the economic benefits of using less energy were displaced from their pockets into those of the utility shareholders. The perception and reality of permitting such a practice is that it is inherently unfair to the ratepayers, creates a guaranteed cash flow from the consumers to the utility while failing to incentivize conservation at the user level. In fact it would discourage conservation efforts by burdening the ratepayers with defacto financial penalties via decoupled rate increase allowances.
I would suggest that the PSC delay/postpone these proceedings immediately and look at the “Flat Monthly Fee” options as a measure to allow recovery of some of the utilities’ fixed costs. Fixed costs should not be defined as a guaranteed revenue stream nor should fixed costs be intermingled with the fixed rate percentage on energy delivery.
Thank you,
John Kowalko
State Representative
25th District
March 28, 2008 at 3:12 pm
kavips
To paraphrase John:
Delmarva, if they do not get as much money as they want, they want to be able to charge you more next year in order to meet their projection, on top of whatever the energy price will be at that time.
So if you use less electricity, let us say it is a very cool summer, they want to have you give them money for nothing …..while they get their chicks for free.
March 30, 2008 at 2:43 am
Michael Hogan
Wow, it’s amazing how much you can get wrong in one analysis. First, Bluewater’s price is not 9.89 cents/kWh. That’s the energy charge component, in 2007 $s. There’s a REC charge that’s another approximately 2 cents/kWh, and a capacity component that at a 40% capacity factor works out to about 2 cents/kWh. So Bluewater’s price is nearly 14 cents/kWh, again all in 2007$s, and thanks to the fixed 2.5% escalator that just keeps going up and up. And if the Production Tax Credit that BWW is counting on is no longer available in 2014 (as is likely to be the case), expect them to exercise their contractual right to force a renegotiation to get that additional 2 cents from Delaware ratepayers rather than from US taxpayers. As a reality check, European offshore wind farm data available to date indicates that they need to get at least 15 cents/kWh to break even, and that’s using low-cost government debt. BWW is planning to project finance their project, and no one has ever project financed an offshore wind project (fact), so we really don’t know how much more expensive that will be. Next, for BWW to be 50% more expensive than onshore alternatives (which is what the Coop is saying), onshore wind would have to be about 9-10 cents/kWh, which is about right. That’s what our Texas windfarms need to get. Not 4.95 cents. Your analysis, which gets an A for effort, sadly gets an F for accuracy. Next, there’s not a wind farm in the universe that achieves “75 to 90 percent” capacity factor. A really good onshore site will achieve capacity factors approaching 40%, and a pretty good onshore site will see between 30 and 35%; most onshore sites will achieve less than that. A really good offshore site might achieve close to 45% (again, we really don’t know for sure, given the lack of experience, but that’s what the Danes, the Germans and the Brits are expecting). So where you’re coming up with these fantastical numbers I really don’t know. Next, Bluewater’s operations will have virtually no more impact on the amount of mercury, cadmium and sulfur falling on Millsboro residents than would the production of the same amount of windpower from another source in PJM. This is because of the realities of operating a reliable, low-cost-dispatch regional power grid, and PJM has been crystal clear on this point. Whatever you may think of DPL’s agenda, PJM has no dog in this fight, and they see no significant incremental operational impact locally from BWW vs. a windfarm elsewhere in PJM East. I could go on and on, but you get the point. It is not only plausible, it is nearly certain that DPL has onshore options available to them that are much cheaper, lower risk and offer almost exactly the same level of local benefit as BWW; even the PSC’s own consultants, in their December 13 2007 report, acknowledged that fact. And whatever you might think of DPL’s commitment to Delawareans, their obligation to their shareholders is to buy that windpower, since they fact financial penalties for not doing so that are many times those BWW would incur should they exercise their multiple contractual options to walk away from their project. I’m sorry, folks, but them’s the facts.
Michael T. Hogan
March 31, 2008 at 1:08 am
Perry Hood
14 cents per kwh is about what we are paying today, correct? So what is the big deal about cost, Michael T. Hogan. And by the way, BWW’s price is indeed $9.89 cents per kwh, contrary to your wording, Michael T. Hogan.
“And if the Production Tax Credit that BWW is counting on is no longer available in 2014 (as is likely to be the case), expect them to exercise their contractual right to force a renegotiation to get that additional 2 cents from Delaware ratepayers rather than from US taxpayers.”
First you make an assumption without substantiation about the demise of the PTC, then you do not take account for the reasonable speculation that by 2014, six years from now, the DP&L charge to the ratepayer could be much higher. You know well that at the end of the past six years of regulation, over a year ago, DP&L ratepayers were suddenly socked with a 60% increase. And that was before we had $100 per barrel crude oil. Who are you trying to kid, Michael T. Hogan?
As far as the NRG plant pollution, I am counting on the permitting process combined with public pressure on both NRG and the legislature to force improvement.
What is your projection, Michael, on the cost of on shore wind in six years, when inevitable carbon capping will put greater demand on those out of state generators? Moreover, you commented elsewhere that DP&L could sign a 20-25 year with on-shore wind providers. Where is your evidence for that comment?
Look here, Michael, you wrote: “It is not only plausible, it is nearly certain that DPL has onshore options available to them that are much cheaper, lower risk and offer almost exactly the same level of local benefit as BWW; even the PSC’s own consultants, in their December 13 2007 report, acknowledged that fact.”
“Nearly certain” does not constitute a “fact”, Michael. The way you throw around words makes me very suspicious that you have some professional connection to DP&L, one of it’s corporate partners or parent, or are you on McDowell’s staff or in his employ, or Thurman Adams’, or are you an attorney associated with the coal industry (Google), or are you a shill for their cause. I would appreciate it if you would identify yourself in more detail, for the sake of full disclosure. Now I will make a prediction: You won’t!!! Surprise me!!!
March 31, 2008 at 4:40 am
Michael Hogan
Perry,
I fear you’re a lost cause. If you want to know what the contract price for BWW is, all you have to do is read the contract. If you don’t have a copy of it, I’d by happy to send you one. If you can’t even accept that you’re wrong about the contract price, how are we ever going to make progress on anything else? I’ll try this one more time: the energy charge component in 2007 $s us 9.89 cents/kWh; the REC charge in 2007$s is just a hair under 2 cents/kWh; and the capacity component at an assumed 40% capacity factor works out to an additional approximately 2 cents/kWh in 2007 $s. That’s just a skosh less than 14 cents, in 2007 $s. As it’s now 2008, the price is already over 14 cents, and climbing. Read the contract. Now I’ll make a prediction of my own: you won’t. Surprise me. Please surprise me. I don’t want to get into the price increase in 2006 – except to say that if someone had capped your salary six years ago, and the cost of living had gone up 60% in the meantime, when the cap was lifted I suspect you’d be quite interested in a 60% raise. That’s roughly what happened with rates in Delaware, except it was fuel prices, not the cost of living, that went up while your rates were artificially capped. Price caps aren’t regulation…they’re price caps. Price regulation ended the day the price caps were imposed in 2000. As for the PTC, if you’re happy for the US taxpayers to subsidize your Bluewater fantasies then fine. But it hasn’t been extended yet, and I say it will be allowed to expire long before then, but I grant you I could be wrong. As for who I am, I told you already once, but I’ll expand. I am an industry veteran of 27 years; I have developed power projects around the world, about $8 billion worth, and my company developed wind farms onshore and offshore in the UK. I am currently doing research at MIT on renewable portfolio standards in the Environmental Policy & Planning Department. The counsel for the Energy Committee, Randall Sparks, asked me to provide testimony regarding the project financing aspects of the Bluewater project because I’m a project financing expert. I approached the hearings with no preconceived notion of the project and little knowledge of its particulars. I am now very familiar with it as a result of the research I did in preparing my testimony. If you want to concoct some conspiracy theory about my motivations because I was retained by the Energy Committee counsel, there’s nothing I can do to stop you (heck, you’re desperate for anything that will mean that you can ignore what I’m saying). But you’d be dead wrong. I could care less about DPL or Senator McDowell. After sitting through the hearings, though, I can’t say the same thing about BWW and their shareholders. I was shocked at some of the misrepresentations and inaccuracies in their testimony, and that day I promised myself I’d do what I could to make sure that the decision on the BWW contract was made on the basis of fact, not emotion and misinformation. So there you have it. If you want to label me a shill for DPL, I’ve got a theory to sell you about a second gunman in Dallas in 1963….
Michael T. Hogan
March 31, 2008 at 4:43 am
Michael Hogan
Oh, and as for your first comment, I’ve already tried to correct you on this. 14 cents is what you’re paying for DELIVERED electricity. I don’t know what the generation part of your bill is exactly, but it’s typically about 40-50% in the Northeast. So the number you need to compare BWW’s price to is that generation portion, not the entire delivered price (which includes transmission, distribution, administration and taxes). Write it down this time…I don’t want to have to say it a third time.
Michael T. Hogan
March 31, 2008 at 4:49 am
Michael Hogan
Oh, one more thing. You’re counting on “the permitting process and public pressure on NRG and the legislature to force change” in the “NRG pollution.” Interesting. But even if that scheme succeeds against all odds, it has nothing to do with whether or not you sign the BWW contract. You see, BWW is intermittent and stochastic, and therefore it’s capacity value is quite small. At the best wind sites in Europe they only qualify for about 12% of their nameplate ratings as capacity credit; in Texas it’s about 8%. So if you shut down Millsboro, which is a critical source of capacity on the peninsula, you’ll have to replace it with something other than Bluewater, which is only worth about 40 MW of capacity for reliability purposes. If you don’t believe me (after all, I’m a shill for DPL aren’t I), read PJM’s testimony. Or do you think they’re part of the conspiracy as well?
Michael T. Hogan
March 31, 2008 at 5:38 am
kavips
Wait,..my read of the contract is that the REC’s cost and capacity costs are included in the 9.89 cents. You have the contract? Post it here?
Inquiring minds would like to know…..
March 31, 2008 at 6:35 am
Michael Hogan
I don’t know how to post pages from a hard copy. It’s Article 4.2 on pages 54 and 55. The formula is quite clear, the energy component, capacity component and REC component are additive.
March 31, 2008 at 6:39 pm
Perry Hood
I appreciate your responses, Michael, but I continue to think you are in error in some respects.
I already pay almost $0.14 per kwh, so the BWW wind price is similar now. Moreover, until 2014 when BWW’s off shore power would be available, there would be no charge to the rate payer. Based on the way fossil fuel (oil, natural gas and coal) prices have increased, isn’t it reasonable to predict that prices will be much higher six years from now in 2014? That was my point about bringing up the $60 per month increase ratepayers had in 2006 following six years of the price cap. Therefore, it is reasonable to predict that the fossil fuel portion of the electricity bill will be significantly higher than the BWW portion in 2014 even with the 2.5% inflation escalator, wouldn’t you agree? So for BWW’s approximately 17% of the total supplied power in 2014, there will be a savings for the ratepayer, correct?
It is worth reminding folks that BWW’s construction and related costs will be at their expense totally, so the DE taxpayers assume no risk whatsoever. If the project fails, which I doubt based on the European experiences with off shore wind, they lose, we don’t.
Then there is the question of my BWW “fantasy” and my “emotional” support for the off shore project. Clean energy, long term price stability, 500 construction jobs, 80 permanent jobs, a tech training center at Del Tech — where’s the fantasy Michael? I’ll accept your charge of “emotional”.
You said: “I was shocked at some of the misrepresentations and inaccuracies in their testimony, and that day I promised myself I’d do what I could to make sure that the decision on the BWW contract was made on the basis of fact, not emotion and misinformation.”
I think you would do a service to come forward now with your allegations about significant BWW misrepresentations. Innuendo will not do without factual detail. I await your response.
Finally, regarding NRG, I have not stated that the BWW project will offset their pollution directly, nor even close their facility. As stated, I rely on the permitting process now occurring to force improvements. My hope is that it will hasten the closure of the old units 1 & 2, the dirtiest ones, and force better practices regarding cooling and pollutant emissions to the water and air.
March 31, 2008 at 9:09 pm
Michael Hogan
Perry,
Glad to see we’re off the topic of nefarious agendas. On your point about what you pay now, I continue to believe that you’re referring to your total bill, which would include transmission, distribution, administration and taxes and would therefore not be the right comparison to what BWW is charging, but I accept that I could be wrong. You should check your bill for what the generation component is – I suppose it could be $0.14/kWh on average for the year, though I’d be surprised if that were the case. My bill breaks these charges out explicitly, but I don’t live in Delaware. On construction costs, the BWW price already reflects what they assume those costs are going to be, so DE is assured of paying at least that level of higher construction costs; you’re right that DE has no obligation to agree to even higher costs should BWW seek to renegotiate later, but these things acquire a certain momentum, and five or six years from now there may be a certain level of additional pain that DE officials might be prepared to endure to avoid this high profile undertaking simply disappearing. Your point about the fossil fuel alternatives possibly being higher in the future is again misdirecting the conversation – we’re talking about BWW vs. onshore wind options, not BWW vs. fossil. But on that point, even with an aggressive assumption about higher future fuel prices, BWW’s prices don’t fall below the fossil alternatives until many years in the future, well beyond 2014. On NRG emissions, I applaud your mission, but your answer only affirms what I said – the plan to take on emissions at Millsboro is a separate matter from whether or not you enter into the BWW contract. Mixing the two discussions obscures the questions relevant to whether or not the BWW contract is a good idea. On BWW’s misrepresentations and inaccuracies, just a few examples from memory: in answer to a question of whether their contract included any charges other than the 9.89 cent energy charge, they said no, which is not true; they repeatedly insisted that there are big local reliability and air quality benefits to locating BWW offshore Delaware rather than buying from a wind farm elsewhere in PJM, which the should know is not true (that they may not know that may be more disturbing, actually) – PJM has been crystal clear on this point; they repeatedly insisted that the only onshore wind sites that could offer comparable economics to BWW’s offshore site would be in North Dakota or Illinois, which they know (or should know) is not true – at the prices BWW is offering in the contract, there are numerous wind developers much closer than Illinois who would line up for a comparable long-term contract; the Babcock & Brown official admitted on the stand, apparently with no shame at all, that he had not been aware that Delaware is a summer-peaking system, which is unbelievable coming from someone proposing to invest over $1.5 billion in a power plant to be interconnected with the Delaware grid (I told one of my project finance banking friends that story a few days later and he couldn’t stop laughing – one of the funniest and dumbest things he’d heard in a while). Basically the BWW officials testifying that day didn’t seem to know, nor did they seem to care as far as I could tell, whether or not what they were saying was true and accurate. Their main agenda seemed to be to reinforce what many Delaware officials and the project’s local supporters want to hear, whether or not it is true.
Michael T. Hogan
April 1, 2008 at 10:08 pm
Jeremy Firestone
A quick look at Michael T. Hogan’s post shows that he is not correct. Here I quote from him:
“Wow, it’s amazing how much you can get wrong in one analysis. First, Bluewater’s price is not 9.89 cents/kWh. That’s the energy charge component, in 2007 $s. There’s a REC charge that’s another approximately 2 cents/kWh, and a capacity component that at a 40% capacity factor works out to about 2 cents/kWh. So Bluewater’s price is nearly 14 cents/kWh, again all in 2007$s, and thanks to the fixed 2.5% escalator that just keeps going up and up. And if the Production Tax Credit that BWW is counting on is no longer available in 2014 (as is likely to be the case), expect them to exercise their contractual right to force a renegotiation to get that additional 2 cents from Delaware ratepayers rather than from US taxpayers.”
Well, wow, indeed.
Mr. Hogan makes several mistakes.
First, he adds the REC charge. RECs are based on the RPS–not HB6 and Delmarva would be required to by the RECs whether BWW farm is built or not, so it makes no sense to add it on to BWW unless you are also going to add 2 cents on to Delmavara ratepayers bills to compare it to. Also, Delmarva is buying more RECS than it needs in the early years, presumably because it has determined that it is paying less than the likely market price and thus will be able to sell them at a profit.
Second, his capacity factor calculation is way off. The capacity price is set in the PPA at $70.23/kW-year. Based on 1106 GWH/yr and 105MW of capacity, again both from the PPA, this translates to $6.67/MWh or 0.667 cents/kWh. He also ignores that Delmarva has an energy only option at 10.423 cents/kWh.
Third, BWW has no contractual right of renegotiation.
Jeremy Firestone, J.D. and Ph.D.
April 1, 2008 at 10:10 pm
Perry Hood
Michael, in consulting with people much, much more knowledgeable than I, here is one response that should interest you:
“In short, Mr. Hogan writes with a good deal of bluster and self-assurance, but he doesn’t really know his facts, nor does he know how to calculate basic electrical finance quantities like capacity charges. All of his errors, like inflating the BWW cost, by adding RECS and PTC to the energy cost, are in the same direction, incorrectly inflating the cost of the project.”
April 3, 2008 at 3:13 am
Perry Hood
So Mr. Hogan, several significant errors have been found in your statements written here and on Tommywonk: https://kavips.wordpress.com/2008/03/26/land-based-wind-takes-a-giant-step/#comments
I note that you have yet to step up to them.
April 11, 2008 at 2:27 pm
Fresh Air « kavips
[…] interrogation of Arnetta McRae, and the floozy evidence they tried to spring upon her. Later we debated one of the Queen’s court hired guards (the Joker”) on several of our blogs, and […]
April 20, 2008 at 2:38 am
delmarva peninsula | Hottags
[…] Land Based Wind Takes a Giant StepThe addition of the family of Old Dominion Cooperatives to Delmarva’s ongoing wind power bidding process should expand the growth of wind energy throughout the entire Delmarva Peninsula and the Commonwealth of Virginia. …kavips – https://kavips.wordpress.com […]