With ever-increasing needs for electricity, Delaware is on the brink of making a critical decision about its energy future.
Four state agencies will decide Tuesday whether that future includes wind power from 150 turbines off the coast of Rehoboth Beach. In making that choice, they’ll have to make a lot of predictions.
In one scenario, four state agencies would order Delmarva to lock into a 25-year contract with Bluewater Wind in the hopes of offsetting increases in fossil fuel costs, heavy taxes on carbon emissions and fierce competition for a limited supply of renewable resources.
In the other scenario, the agencies turn down the contract, entrusting Delmarva to largely set its own course. Such a path could include a heavier dependence on transmitting power in from out of state, including a bet that less-expensive wind power would be available from onshore facilities.
A state consultant report and a review by Public Service Commission staff this week may have given momentum to the Bluewater Wind scenario.
Under the Bluewater contract, Delaware could make a major financial commitment to buying renewable energy. The $1.6 billion project would lessen the state’s reliance on fossil fuels, resulting in less regional pollution.
Delmarva President Gary Stockbridge believes there’s a more cost-effective way to promote renewable energy. He said there will be plenty of wind capacity available onshore from other states. Wind power merchants are knocking down his door to strike a deal, he said. Delmarva can get a better price if the state will only let it listen to offers, he said.
Brian Parsons, project manager for wind applications at the National Renewable Energy Laboratory in Colorado, said there are problems with banking on land-based wind power. He questions whether there will be adequate supplies to meet the growing demand. And he said transmission systems may not be capable of bringing in all the wind power from out of state.
“You might be able to get it quicker onshore, you might be able to get it cheaper onshore. But those are some ‘mights,’ without any bird in the hand,” said Parsons, whose lab leads renewable power research for the U.S. Department of Energy. As for the Bluewater project, “It’s certain, you know something about it, you know the costs. You don’t know what the other alternatives are.”
A need for green power
The East Coast is growing at a time when electric generation is stretched thin. Existing power lines and equipment are ill-equipped to transmit electricity to new homes and businesses.
In Sussex County, between 1990 and 2005, the population increased by 56 percent. The state’s population of 853,476 is expected to swell to 1.1 million by 2030.
In the 13 states that make up the regional PJM electric grid, demand is likely to increase by about 1.6 percent a year, said Ray Dotter, PJM spokesman. That translates into a 17 percent increase in demand for electricity over the next 10 years.
That trend doesn’t take into account the impact of global warming, Dotter said. If it gets hotter, and people crank up their air conditioners more, that would add to demand.
Dotter said there are three ways to attack the problem. One is to get the public to reduce consumption. Another is to build new power lines, importing capacity from power plants in other parts of the county. The third is to build new power plants closer to where it is consumed. All three need to be employed to get electricity to the people who need it, he said.
But growing demand for electricity collided with another trend: deregulation.
When the state decided to end regulation of the wholesale electricity industry in 1999, it was advertised as a way to spur competition for electricity, which would drive down prices.
It did not. Nationwide, prices have spiked. After rate caps came off in Delaware in May 2006, Delmarva residential customers saw their bills increase by 59 percent. They got angry. And they called their legislators.
Rather than reregulating the power company, the General Assembly asked four state agencies to seek out bids for new, innovative in-state power plants that would help Delmarva stabilize prices.
Having local generation would reduce the need to rely on power generated in other states, lawmakers said. Those volatile prices tend to be a little higher on the Delmarva Peninsula because it’s an area of high electricity congestion.
Alternatives to wind power
Delmarva has resisted the idea of building new power plants in Delaware, in part because its proposed 500-kilovolt power line that could carry electricity in from the west would ensure a steady supply to the peninsula. PJM approved the power line in October.
But the full power line remains anything but a sure bet. Delmarva’s parent company, Pepco Holdings Inc., still needs permits, including one to cross the Chesapeake Bay, and needs to acquire new rights of way through parts of Maryland.
Meanwhile, the state process for new sources of generation marched on. For a while, the front-runner to build a new power plant in Delaware appeared to be a coal gasification plant proposed by NRG Energy, on the site of its existing Indian River power plant.
But the agencies tapped Bluewater because wind turbines, as costly as they are to build, offer a stable price that no fossil fuel can. The fact that it was environmentally friendly didn’t hurt, either.
The turbines would have an environmental benefit because the wind power would displace up to 300 megawatts of traditional electricity. Those fossil-fuel-fired power plants may not be in Delaware. So Delaware’s impact on regional and global pollution would be significantly lower, but the environmental benefits would be spread out among neighboring states.
It could conceivably negate the need for a new, polluting power plant in southern Delaware. But that’s hardly a sure bet, considering state officials are talking about backing up the wind farm with a new natural gas plant. This question is on hold while the Bluewater contract is sorted out.
If the Bluewater project goes through, Delaware would be among the inaugural class of American states to build offshore wind projects, which could also include Massachusetts and Texas. There are a number of offshore wind projects in Europe, heavily subsidized by government.
But Delmarva officials pushed back against the plan. Offshore wind was untested, they said. The wind doesn’t blow much on the hottest peak days, they say, and too few customers would have to bear the significant added costs.
Renewable energy required
Delmarva officials were sensitive to strong public support for the offshore project, but they spoke of a different scenario: buying onshore wind power from out of state. It would come from a more tested source, at costs of 45 percent less than offshore wind power, they said.
Bluewater project or not, this conversation was coming. Twenty-eight states, including Delaware, are enacting laws, or extracting voluntary commitments from utilities, that require a sizable portion of their power purchases to come from renewable sources. In Delaware, by 2019, Delmarva and the state’s smaller utilities will be required to fill 20 percent of their electricity portfolios from renewable sources like wind, solar, geothermal and hydroelectric.
By far, onshore wind figures to be the largest source of new renewable power generation in the region in the next five years, based on projects filed with PJM. There are currently just 715 megawatts of wind production connected to the 165,000-megawatt PJM regional grid that covers the Middle Atlantic States, running west to parts of Ohio, Indiana and Illinois.
But roughly 5,935 more wind-related megawatts are expected to be built in the PJM area in the next five years. None are planned for Delaware.
Parsons, of the renewable energy lab, said he expects a significant buildout of wind farms in the coming decades. In the coastal mid-Atlantic, more than two-thirds of that power will come from offshore wind farms if demand continues to escalate. But with each state required to buy so much renewable power, demand could still outpace supply, he said.
An independent consultant hired by the state, Barry Sheingold, said in a report released Thursday that an onshore wind contract would currently be 24 percent to 36 percent less expensive than offshore wind. But he also said developers will use up the windiest sites, resulting in higher costs, and the action will soon move offshore.
Parsons said it’s difficult to depend on new transmission lines, as citizens fight the power companies who want to build them in their backyards. That means it can take a long time to get the power lines built. Without new lines, it’s unsure whether the power from new, onshore wind farms can travel long distances, he said.
Energy credits a factor
In addition to costs, there is the issue of whether Delmarva, left to its own devices, would actually buy as much green power as it would under the Bluewater contract. It could instead buy renewable energy credits.
Environmentalists say Delmarva can displace a lot more pollution by purchasing actual wind electricity. RECs help support the wind industry by helping developers recoup their construction costs.
When asked whether Delmarva would commit to buying as much or more actual renewable electricity as Bluewater is offering as part of its contract, Stockbridge declined to make that pledge.
Willett Kempton, associate professor of marine policy at the University of Delaware, said there’s a value to buying the wind electricity itself.
“You’re actually putting power on the grid there. You’re not just buying paper,” Kempton said. “If I’m buying renewable energy credits from some wind farm in West Virginia, that’s fine for meeting the renewable portfolio standard. If the lights are dimming in Rehoboth Beach, that’s not going to do me any good.”
Buying the credits, Stockbridge said, is just as beneficial as buying the electricity itself, and can simplify things for Delmarva.
“There’s more complication to owning the energy than there is to owning the REC’s,” Stockbridge said. For instance, it’s hard to schedule wind energy a day in advance, he said.
A long-term deal
Onshore wind farms can be built much more quickly than offshore facilities. By signing the long-term deal with Bluewater, Delmarva will have to forgo certain short-term opportunities as it waits the seven years for the offshore wind farm to be built.
And it’s easier to get federal permits for onshore wind farms. Washington is still putting together rules governing offshore wind farms.
Charles Copeland, the Republican Senate minority leader from West Farms, said there’s a risk to a long-term investment in one big renewable energy project.
“I still think locking in Delmarva’s residential customers for 25 years is a pretty large thing to ask Delawareans. The largest construction project we’ve ever done in Delaware was Route 1; that was about a billion dollars. This is, at minimum, $1.6 billion, and we’ve never built anything out in the ocean,” Copeland said.
Stockbridge said it makes more sense to spread out the company’s investments in different projects, some short-term, some long-term, some actual wind power, and some credits.
If the agencies defeat the wind farm, Delmarva would immediately enter a long-term planning process where it works with the Public Service Commission to line up its future supply of electricity, including renewables.
But Carole Womeldorf, assistant professor of mechanical engineering at Ohio University, said it’s worth considering a contract in hand.
There is the potential that the price of wind power could come down with time, said Womeldorf, who is director of the Southeast Ohio Wind Resource Assessment, looking into the possibility of harnessing the wind in Ohio.
But there’s also a good possibility that as a leader in the offshore wind industry, businesses that support that industry in North America could center around Delaware, which could be an economic boon for the state, she said.
“A fixed price tag, even if it’s a little high right now, as long as it’s got some quantity to it, may be worth it. The price of energy is just going to go up. Demand is just going to be enormous,” she said. “My gut says there is going to be really unexpected benefits from getting in on it early like this. It will cost something, but in the long run, it will really stabilize things, it really will open windows and doors.”
By Aaron Nathans
16 December 2007
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