The cost of offshore wind power could be cut in half if all Delmarva Power customers were required to participate, a state consultant said in a report issued Thursday.
The report, which was mostly favorable toward the offshore wind project, could give Bluewater Wind momentum going into Tuesday’s decisive meeting in Dover. And it could give a basis for the Public Service Commission to spread out the costs.
The PSC will join three other state agencies to decide whether to direct Delmarva to sign a 25-year deal with Bluewater in an effort to stabilize prices and curb emissions.
Barry Sheingold, who was hired by the state to evaluate the latest proposed wind power contract, praised the developer, Bluewater Wind, for submitting a new wind power price that was significantly lower than its previous bid in September. He also said the project would be one of the largest carbon-free electric generators in North America, a “major step both in itself and as an example of what can be done to address climate change.”
The directive from the Legislature is for the agencies to seek power bids for Delmarva residential, small business and light industrial customers. But the Massachusetts-based consultant wrote that the legislation allows the Public Service Commission to spread out the costs among all Delmarva customers, including heavy industries, if the commission wishes.
Sheingold, the principal author of the report, wrote that he expects the average household will pay about $6.50 per month above market prices to add the environmentally friendly power. That’s down from $8 per month in Bluewater’s previous proposed contract.
If all Delmarva customers, including heavy industrial customers, were included, that average monthly price to residential customers drops to $3.37, he wrote.
The project could result in a big price spike at first, when the wind farm is scheduled to open in 2014, he wrote. The first price is expected to be about $13 more per month than market prices, Sheingold wrote. If spread out to all Delmarva customers, it would be about half of that.
But as time went on, the difference would level out, and toward the end of the 25-year contract, Delmarva customers would be paying less than market cost, he wrote.
In his 27-page report, Sheingold said out-of-state wind projects with shorter construction times are an alternative. The offshore wind farm would take longer, about seven years, to bring on line, he noted.
Onshore wind farms offer prices 24 percent to 36 percent lower than Bluewater’s project, he said. Delmarva contends the savings would be about 45 percent.
But he included a pointed caveat: As onshore wind developers build, they will use up the good sites. Developers will eventually focus on less windy sites, resulting in higher costs. When that happens, there will be a move to build offshore, he said.
The contract “reasonably mitigates the risks” to Delmarva and its ratepayers, through financial penalties to Bluewater if the developer fails to deliver the wind power, he wrote.
Sheingold also raised the question of spreading the costs to customers of the Delaware Electric Cooperative and the municipal electric utilities. This could result in even lower costs, as low as a $2.24 monthly premium to the average household.
But this approach faces several procedural hurdles, mainly requiring approval from the General Assembly and governor.
Both parties put a positive spin on the report, but focused on different points.
“This is an excellent report that reinforces the fact that the state agencies’ process was both thoughtful and thorough,” Bluewater Wind spokesman Jim Lanard said. “We are confident that the Legislature recognizes the cost of delay, and moving this process back to the Legislature will likely shut this initiative down.”
Delmarva spokesman Bill Yingling said the report reinforces the company’s belief that it can obtain onshore wind power at a significantly lower cost, “and we can do it while achieving the same environmental benefits and at much less risk. And we can have it in place much sooner.”
Costs could be lower with a natural gas backup facility, Sheingold wrote. The agencies will consider that proposal at a later date.
By Aaron Nathans
14 December 2007
|Wind Watch relies entirely
on User Funding