Senator Lamar Alexander is one of the more energy literate members of the United States Senate. He was recently quoted in a Knoxnews.com article titled Alexander calls Mass. offshore wind farm ‘a taxpayer rip-off’ as saying the following about the Jim Gordon led project to build a 130 turbine, 468 MWe (max output) wind farm in Nantucket Sound.
“It’s a taxpayer rip-off,” the Maryville Republican said. “It creates a puny amount of very expensive electricity. Taxpayers in Tennessee will be paying extra for it because of the taxpayer subsidies. And it will destroy a very beautiful Nantucket Sound.”
There are numbers that can be used to quantify the “very expensive” description. According to the power purchase agreement that Cape Wind and National Grid have signed, National Grid will be purchasing 50% of the output of the wind farm. Starting in 2013, National Grid will be paying $207 per megawatt-hour. That price will increase by 3.5% per year for 15 years, so the electricity will cost $335 per megawatt-hour by 2028.
According to the New England Independent System Operator (ISO) the wholesale price of electricity at peak demand varied from $45 to $90 per megawatt-hour for the period between April 2009 and April 2010. Paying $207 for a product that is otherwise selling for less than $90 seems illogical. But wait, there’s more. That price is conditional upon Cape Wind qualifying for the full set of federal and state subsidies that are currently available. If the project gets delayed a bit and the federal subsidy is not extended once more, the price of the electricity for National Grid will increase by at least $21 per megawatt-hour to make up for the loss of direct taxpayer support.
In addition, the electricity that will be supplied by the Cape Wind project is less valuable than the stable electricity from a reliable, controllable source. It comes into the grid at the whim of the wind; if the wind speed drops to half of its previous velocity, the power falls by a factor of eight. If the wind velocity cranks up, system operators must take aggressive action to ensure that the grid frequency and voltage remain stable and do not harm any of the millions of devices that are plugged in. The topic is way too complex to cover here, but for those with some electrical knowledge, I will also mention that controlling reactive currents is significantly more challenging in an area with a high concentration of wind power.
The Cape Wind project might also turn Nantucket into one of those locations where there is a large wind installation with a limited capability to move the power elsewhere. In those locations – some parts of Europe and western Texas – the grid operators actually pay people to turn on electrical loads when the wind is blowing hard to try to absorb the excess power. Of course, when the wind dies down, the good deal disappears and the real cost of operating the grid has to be collected from other customers and taxpayers.
Of course, the people who operate National Grid and supply electricity to millions of customers are smart enough about electricity to have figured all of the above out on their own. One might ask – “then why did they sign the power purchase agreement?” The first part of the answer is that they are subject to a law that requires a certain portion of their power be chosen from a list of approved “renewable” energy supply choices. The second part of the answer is that their monopoly supplier status allows them to pass the cost of the purchase to their customers. The news reports and press releases minimize the impact of that cost with statements like the following:
The utility projected a monthly bill increase of $1.59 for a typical residential customer in the first year through the deal.
What they do not do is show how the cost will affect customers who are not quite typical residential customers. It would be interesting to find out what the potential cost will be for small businesses, commercial property owners, and large, industrial enterprises – if there are any left in Massachusetts.
Fast Company profile of Jim Gordon and Cape Wind (July 2007) – Jim Gordon May Have an Answer to our Energy Problems