Some logic still prevails – Cape Wind loan guarantee on hold
The famous project to install 130 massive industrial wind turbines in the Nantucket Sound off of the coast of Massachusetts has hit another stumbling block. Financing for the project was dependent on approval of an application for a large Department of Energy loan guarantee, but the project has been notified that their application is no longer being considered at this time. The review process is not being terminated, but it has been put on the shelf in order to allow reviewers to focus on those projects that have a reasonable chance of reaching financial close by September 30, 2011.
One of the reasons that Cape Wind was not on the list of the projects that will continue to move forward is the not surprising fact that the project developers have not been successful in finding customers for the 50% of the projected output that remains to be sold. Back in May 2010, I wrote about the contract that National Grid signed to purchase 50% of the output for 20.7 cents per kilowatt hour with a guaranteed rate of escalation of 3.5% per year for 15 years. In June 2010, I pointed out that Wal-Mart had joined the ranks of the power customers who were not happy about that deal.
The project promoters have not found a taker for the remaining 50% despite working for a year to market their product. It looks like no one really wants to pay 4-6 times the going rate for power, especially when the high priced power depends on the whim of the weather.
As a former off-shore sailor who has spent a few pleasant afternoons on Nantucket Sound, I know there are many who are breathing a sigh of relief that their breezes will not be chopped up. I expect they are joined by the fishermen whose productive areas will not be disturbed by the construction project, annoying low frequency noises, and underwater infrastructure.
I suspect the happy participants are joined by the people who love to gaze out over the ocean to see a vast horizon. There is something awe inspiring about looking out over the ocean; there is a reason why ocean front homes are so darned expensive. Fortunately, there are public access areas that allow the rest of us to occasionally experience those restorative vistas.
If a corporation is going impose their project into a public space that is already providing valuable uses, I would hope that they would at least pay for the damage themselves and that the project would at least provide a valuable product at a reasonable cost. With the DOE decision to halt efforts to review the loan guarantee application, Cape Wind now has the chance to really puts its sales skills to work in finding more dupes who will sign up to buy really expensive, but unreliable power.
4-6 times the going rate, eh? And the “renewables” people have the gall to say nuclear is “expensive”! If I tried to charge people 4-6 times the going rate for the services my business provides, I’d lose all my customers and go out of business. I sure wouldn’t get any loan guarantee from anybody.
Well, there seems to be no strong business case for renewables in the US, but looking at the number of newly built nuclear power stations during the last 30 years, one might conclude the same is true for nuclear energy – so why this ironic undertone in this post? It only shows that CO2-based energy sources are way too cheap in the US.
Looking at the number of new NPPs in the USA would be a deception as doing so you would be conspicuously ignoring the number of NPP that have had their capacity uprated. Not to mention other improvements in the capacity factors. All of which have vastly increased the supply of nuclear-generated electricity, keeping up its market share even as the market has grown.
Well, there is a strong business case for the low-cost, zero-emissions, 90+% capacity factor (reliable) electrical energy that nuclear plants provide. Unfortunately, non-market forces have an undue influence which derails that option.
@msit – there is a strong business case for nuclear energy facilities, but the same investors who are needed happen to also invest heavily in the competitive fuel sources whose prices would be driven down by an abundant quantity of emission free energy.
We are thus in a conundrum – when will energy consumers recognize that it is in their interest to finance (not give away) the investments needed to build reliable facilities that can produce power for 60-80 or more years without burning fossil fuel and without providing revenue to companies like ExxonMobil, Chevron, BP, Shell, Anadarko, and Peabody? When will they realize that just because “Wall Street” is not interested that does not mean that “Main Street” should not take the lead and directly invest in technology that will disrupt the establishment?
@msit – one more thing. Are you aware that Jim Gordon, the main developer of Cape Wind, made his fortune by selling natural gas?
I was just wondering, I haven’t seen anything in the news or blogs about the corrosion issue with offshore wind. A quick google indicates there are a lot of standards/measures taken to prevent it, but I didn’t see any info on wind turbines actually failing because of it. I would think a lot on land near the coasts have to be struggling by now too, just like any infrastructure near the ocean. Does anyone here know of any major problems like that, or have the wind farms aged pretty much as expected? Thanks!
From what I’ve read, offshore wind is a relatively new trend. Even Denmark hasn’t installed much offshore wind power yet, but they do it now because of mounting on-shore opposition. For maintaining these, special ships are required, often the same ones that service oil platforms. Also it is generally understood that offshore wind power is more expensive than onshore wind power.
For maintaining these, special ships are required, often the same ones that service oil platforms.
That’s one of the reasons why offshore wind power is so politically popular in Scotland — note the victory of the anti-nuclear and pro-renewables SNP in the recent Holyrood elections. Aberdeen was a North Sea Oil boomtown, and it is hoped that it can switch from offshore oil rigs to offshore wind turbines.
It is not just “understood” that off shore wind is more expensive. It has been proven by the accountants that it costs about twice as much per unit of energy produced – and that is without even a real acknowledgement of the risk of corrosion and other forms of deterioration that are an inherent part of operating machinery in an exposed location above salt water.
Cape Wind is far more expensive than on-shore wind projects in other parts of New England, that is why NSTAR and other utilities have refused to sign up for the other half of the projects output. I heard Cape Wind starts at around 21 cents per kwh and then escalates annually by 3.5%. The other projects were 12-15 cents per kwh. If you are in the regulated utility business (or any business for that matter) and your trying to pass on costs for products and services that are 50% higher than from other vendors your customers (and probably your regulator and consumer advocates, and non-greenie politicians) won’t be too happy with the rate impacts.
In regards to new electric generation plants, there are very few plans being built that are not guaranteed by customers or government entities. If not given a guaranteed loan or long-term contracts for the majority of unit output, most of these generating facilities will not obtain financing to construct these facilities. That is what makes nuclear power so difficult. Try building a $6-10 billion nuclear plant without some guaantee. The only new nuclear plants that were proposed were down in Florida, where the legislature allowed the utilities to charge current customers to pre-fund future nuclear plant construction. This happen a few years ago and I heard there was pressure to reverse this, but I am not sure what happened on this.
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