When Cape Wind was first proposed in 2001, offshore wind projects were believed to be far more cost effective than onshore alternatives, or even some traditional generation. Early estimates pegged the cost of Cape Wind at a little more than $1 billion. Although developers have been working on the project since then, formal cost estimates have been kept secret since the beginning.
Even when developers were pushing for the major Massachusetts utilities to buy the power, construction costs were not released by any of the parties involved, including Cape Wind, NStar, National Grid or the Massachusetts Public Utilities Commission. Construction costs appear to be one of the few secrets the NSA hasn’t cracked over the past 10 years.When Cape Wind was first proposed in 2001, offshore wind projects were believed to be far more cost effective than onshore alternatives, or even some traditional generation. Early estimates pegged the cost of Cape Wind at a little more than $1 billion. Although developers have been working on the project since then, formal cost estimates have been kept secret since the beginning.
It is in the public’s interest to know the cost however, and independent groups have attempted to fill the gap. In 2006, the Beacon Hill Institute estimated the project would cost $1.2 billion. Just two years later, that estimate was increased by over $1 billion. And in 2010, the Attorney General’s Office released an estimate of $2.5 billion. That was almost four years ago, about the time it took the project cost estimates to more than double from 2006 to 2010. The question we have to ask today is: How much is it going to cost now?
For reference, let’s take a look at the cost (in U.S. dollars)of major offshore projects in Europe:
- The London Array: 630 megawatts — $3.1 billion, commissioned in 2012
- Greater Gabbard: 504 MW — $2.55 billion, 2012
- Thorntonbank: 325 MW — $2.0 billion, three phases from 2009 to 2013
The United Kingdom subsidies for projects like these have typically guaranteed payments for the developers at rates of $200-$240 per megawatt-hour. That is equivalent to the high electricity prices we see in winter in New England, but it is guaranteed for these projects year-round for 10 years. That is how these projects got off the ground, but ratepayers are the real ones footing the bill through electricity costs. According to the British Department of Energy & Climate Change, electricity prices in London have gone up more than 125 percent from 2003 to 2013 as these projects have come online. Remember that the next time that wind advocates argue that wind power brings DOWN the cost of electricity.
Furthermore, there are several large-scale projects that have recently been canceled because the economics don’t add up, even though large-scale projects are typically more economical. In other words, even the massive subsidies being paid by the ratepayers in Europe are not enough to make these billion-dollar boondoggles worth building. For example, two of the largest projects were canceled over this past year
- Argyll Array: 1,800 MW — $9.1 billion
- Atlantic Array: 1,200 MW — $6.8 billion
There are dozens more on the drawing board that may not come to fruition because a 125 percent hike in electricity rates is not enough to feed the hungry maw of the offshore wind industry. Read that again: More than doubling the electricity rates is not enough to make these projects work.
Back to Cape Wind, a project that at best would provide the equivalent of 187 MW of power. At 187 MW of equivalent capacity and a cost of $2.5 billion (2010 estimate), we are considering paying almost $14,000 per Kw of intermittent power. And Cape Wind’s power comes with Power Purchase Agreements guaranteeing rates starting at $200/MWh and escalating annually. Sounds like those European projects, doesn’t it? And this is based on a 4-year-old cost estimate.
In the end, it is the ratepayers who cover the cost of these projects. They pay through higher utility bills, and they pay through the loss of businesses and industries moving out of the region, or not locating here in the first place. What will those elected officials in Fall River, New Bedford or Cape Cod say when jobs move away and they are trapped in an economic funk by a $3 billion white elephant that is destroying the local economy?
The United Kingdom is figuring it out. They can’t keep gouging ratepayers to fund multi-billion-dollar wind projects that won’t provide any real benefits to anyone, except the developers reaping the subsidies. It’s time we figure it out as well, and stop trying to force a bad deal on New England ratepayers and taxpayers.
Marc Brown is the Executive Director of the New England Ratepayers Association, a nonprofit dedicated to protecting ratepayers.
(A version of this column originally appeared on SouthCoastToday.com.)