The projected construction cost to build a 40-turbine wind farm in the waters off the South Shore ballooned to $697 million at last year’s end, according to a June 25 letter from the winning bidder of the project, FPL Energy.
The cost – roughly double FPL’s initial winning bid of $356 million in 2003 – has cast a shadow over the project. FPL, noting it is still “very interested” in the project, told the project’s sponsor, the Long Island Power Authority, the ball is essentially in LIPA’s court. LIPA has yet to finalize a power purchase agreement needed for FPL to move ahead, and FPL said it had already spent “several million dollars” on the project.
While LIPA would not pay the cost of constructing the wind turbines, energy purchased by LIPA from FPL would cost more to help cover the construction costs. Newsday last year reported that based on the initial cost estimate of $356 million, LIPA would pay two to three times the regular cost for energy from the wind farm. The latest estimate pushes it well beyond those estimates. LIPA also would have to pay for cables to deliver the energy and other costs, which are estimated at $100 million.
“These numbers confirm our worst fears,” Babylon Supervisor Steve Bellone said. “How much more do they think ratepayers can take here?”
LIPA chief executive Richard Kessel, the project’s most ardent supporter, noted that wind farm costs aren’t the only ones rising. “While the offshore wind project costs have increased, so has the price of oil, which the wind park will use none of,” he said in a statement.
He noted that LIPA has commissioned a study, due out next month, to examine the costs.
When it first proposed the wind farm earlier this decade, LIPA estimated the cost to build it at between $150 million and $200 million.
But demands for wind turbines and related equipment have increased markedly since that time, as have costs for raw materials, construction equipment and labor, FPL noted. The FPL letter, provided to Newsday by LIPA, also notes a “reduced offshore market appetite” since 2003.
As previously reported, the prospect of LIPA sharing some of the risk for the project was discussed, but LIPA declined to accept “any commercial exposure” or construction-cost overruns. One such cost was a $75- million cancellation fee in the event FPL ordered turbine equipment but decided not to go forward with the project, the letter said. An FPL spokesman declined to comment.
Martin Cantor, director of the Long Island Economic and Social Policy Institute at Dowling College, said the latest estimate “should drive a nail in the wind-power coffin for LIPA” given the price of the power.
Meanwhile, a spokeswoman for the Minerals Management Service, the federal agency overseeing offshore energy projects, yesterday said a draft environmental impact statement for the Long Island project has been stalled because technical studies from FPL required to complete it have not been provided.
“MMS has not received the needed information to complete the draft EIS, so at this point we no longer have a projected release date” for the report, said spokeswoman Nicolette Nye.
BY MARK HARRINGTON
June 28, 2007
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