University of Delaware wind experts continue to back Bluewater Wind’s proposal for an offshore wind farm amid rising concerns over the price of the electricity it would produce. Opponents also note wind farm proposals in other parts of the country have been scrapped due to rising construction costs.
Delmarva Power is currently evaluating a proposal from Bluewater Wind to build an ofshore wind farm off Rehoboth Beach to provide electricity to its Standard Offer Service (SOS) customers. Matthew Likovich, Delmarva Power spokesman, said that the concern Delmarva Power has about the project is the high cost the power provider believes its customers will have to pay over the next 25 years. In an email, Likovich said, “Because the proposed generation projects for Delaware fall under the ‘supply’ side of the business, that means the cost of whatever project(s) are approved will be passed through to residential and small business customers who account for only 28 percent of the energy used in Delaware.”
The size of the wind farm has been reduced since the original bid. University of Delaware professors Willett Kempton and Jeremy Firestone found that reduction would push the cost to 11 cents per kilowatt-hour rather than the original 10 cents.
Firestone does not expect the cost to the ratepayer to be significantly more.
Bluewater Wind continues to point out that offshore wind power will be a reliable source of energy, resulting in stable costs. In contrast, Firestone said, “In the natural gas bids, the fuel costs are completely uncontrolled between now and 2040.”
Concerns over construction costs have been compounded by the pricing troubles faced by other offshore wind farm proposals in the country. In October, plans for a wind farm off Long Island, N.Y., to be built by FPL Energy of Florida were discarded after the estimated cost to build the farm more than quadrupled from the original price bid.
Both Firestone and Bluewater spokesman Jim Lanard said that the Bluewater bid differs from the FPL bid in that Bluewater’s is based on a fixed price, whereas the FPL bid was not. The potential for an increase in Bluewater’s price comes from the potential for commodities to rise in cost between now and 2012.
Firestone says that in the Long Island case, because the power authority chose to not lock FPL into a contract price, the cost escalated. Price increases resulted from factors that included the weakening of the dollar against European currencies, a shortage of turbines and an increased price of steel.
Lanard explained that Bluewater would take certain steps to try to keep the cost of the project as close to the bid price as possible. Down to the price of the original bid, the wind company is willing to compensate for commodity price increases with the decreases seen in the prices of other commodities. In addition, Firestone said that the Bluewater contract does not include an escalator for turbine prices. Should the value of the dollar increase between now and 2012, the prices of any components purchased from Europe will decrease as well.
The UD professors maintain their recommendation that a cap be put on escalators in the contract.
Kempton and Firestone wrote in an Oct. 14 opinion piece, “A formula also allows Bluewater to pass on higher materials costs should they arise, but only until financing is fully in place. Other than a 2.5 percent inflation factor, there will be no increase in electric prices from this wind farm for 25 years.”
A study released by Firestone, Kempton and doctoral student Andrew Kruger in January 2007 indicated that over 90 percent of Delawareans were willing to pay increased rates for electricity generated by an offshore wind farm. The study suggested less than 10 percent of study participants would be interested in continuing to pay current rates for power generated by natural gas or coal.
By Leah Hoenen
30 October 2007
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