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Wind-farm project costing over $600M  

The target cost to build a wind farm in the waters off Jones Beach ballooned well past $600 million as of last fall, according to a source briefed on the LIPA-backed project, who said the escalations have put the proposal “on life support.”

In addition, the updated fall proposal by contractor FPL Energy requested new contingencies that would require the Long Island Power Authority to bear some of the risk of the project beyond FPL’s set costs. LIPA could benefit, however, if the project – FPL’s first off-shore wind-farm – came in under budget, according to sources familiar with it.

When it won the bidding from LIPA three years ago, FPL pegged construction costs at $356 million, according to documents obtained by Newsday under a Freedom of Information Law request. That figure – well beyond LIPA’s 2003 estimate of $150 million to $200 million – did not include millions more to install and connect an underwater cable from the 40-turbine farm to land, costs that LIPA would bear.

Cost has been a central criticism of the project since Newsday reported last November that the price for energy from the wind-farm would escalate over 20 years to more than double that from conventional power plants. Those figures, based on the original estimate of $356 million, would increase proportionately with any new construction cost increases.

Newly named LIPA chairman Kevin Law has ordered a full economic analysis of the project. “While I support renewable energy I am not going to do it on the backs of ratepayers,” he said in an e-mail.

FPL Energy, based in Juno Beach, Fla., declined to discuss costs, though an FPL director in 2005 testified in New Jersey that off-shore wind-energy costs from $2.5 million to $4 million per megawatt installed. For LIPA’s 140-megawatt farm, that would translate to a cost of $350 million to $560 million.

“We continue to work hard, along with LIPA, to make this project a reality,” FPL Energy spokesman Steve Stengel said.

In an e-mail exchange, LIPA chief executive Richard Kessel initially labeled the $600-million-plus figure “completely wrong and inaccurate.” In an updated statement, he said: “LIPA is continuing to discuss the terms of a contract with FPL. Once we have an opportunity to review some new numbers and concepts regarding the project, we will make the numbers and any terms public.”

Kessel added LIPA “will not enter into any agreement that would be uneconomical to ratepayers [as compared to the costs of a traditional power plant, including fuel costs] or put our customers at risk.”

Babylon Supervisor Steve Bellone said the $600 million figure was “not surprising based on the information we have” on equivalent wind-farm costs globally. The town has been a chief critic of the proposal.

An economist said construction costs of $600 million-plus could set a milestone. “If those are the numbers, it would be by far the most expensive wind farm ever constructed” on a cost-per-megawatt basis, said Mark Greer, a professor of economics at Dowling College who recently issued a study critical of the contract costs.

Several crucial challenges lie ahead for FPL Energy. The federal agency overseeing the project requires the contractor to complete $8 million worth of geo-technical surveys to finish an environmental impact statement, the source said.

Last month, a spokeswoman from the federal Minerals Management Service said preparation of the draft impact statement was delayed pending information from FPL.

Stengel acknowledged the delays, saying they were “due to the complexity” of the project.

Still, he expressed optimism that the wind farm “will bring a significant amount of emission-free energy to LIPA and its customers.”

By Mark Harrington

newsday.com

18 April 2007

This article is the work of the source indicated. Any opinions expressed in it are not necessarily those of National Wind Watch.

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