Wind contract deemed highly symbolic 

Delaware lawmakers took an $800 million step toward a cleaner energy future last week, endorsing a 200-megawatt offshore wind farm likely to spin off more noise than light – at least for now.

The Bluewater Wind venture on average would power only one out of 15 light bulbs in Delaware’s homes and small businesses when it begins operation in 2013.

That 6.7 percent share of nonindustrial power sales would pose no threat to coal as king of overall electric supply in Delaware and would barely register on regional and national power grids dominated by coal and nuclear.

But experts inside and outside Delaware say the Bluewater venture could encourage others to wade into offshore wind, as energy planners look beyond cheaper onshore windmills for affordable ways to prune emissions of heat-trapping carbon dioxide.

Global and national attempts to reduce or eliminate carbon dioxide from power plants has risen to a clamor in recent years. The United Nations warned anew last year that rising pollution concentrations from human activity is warming the atmosphere and potentially triggering changes that will cause more drought, severe storms, rising sea levels and dramatic climate changes.

“The first wind project off the East Coast of the U.S. is going to be a big deal, and it’s going to be meaningful whether it happens now or a few years from now,” said Tom Tuffy, an energy analyst for Penn Future, an environmental policy group based in Harrisburg.

“I think we’re going to see a lot of offshore wind along the East Coast, but it’s probably 10 years away,” Tuffy said.

Delmarva Power last week agreed to purchase 200 megawatts of Bluewater’s eventual output, down from the 450 megawatts proposed for the original 600-megawatt project. The present commitment could prove too small for Bluewater to be economically viable, and organizers can cancel the contract during the next two years if they are unable to attract more customers.

On Friday, representatives of the venture had hoped to contact New Jersey officials about Delaware’s decision, according to Jim Lanard, spokesman for Bluewater. Lanard said company representatives wanted to encourage New Jersey Gov. Jon Corzine to consider ways that his state can tap into Bluewater’s project 11 to 17 miles east of Rehoboth Beach

Earlier this week, Hunter Armistead, head of Babcock & Brown’s North American energy group, said chances of building the project will increase if other states join the deal, which would increase the number of turbines.

“You can’t say that it’s 100 percent, when you look at the challenges associated with it,” Armistead said. “If we regionalize it, that increases the likelihood of everything happening.”

Bluewater also is seeking New Jersey’s help in developing a second, larger wind farm off Atlantic City, as well as projects in Maryland, New York and Rhode Island. New Jersey’s Board of Public Utilities is currently scheduled to choose among five competing offshore wind projects, including one from Bluewater, in August.

Delaware’s project has already spurred excitement about wind generation along the Atlantic Coast.

“There has been interest from every company of the offshore wind industry like we’ve never seen before,” Lanard said. “This has become a very real project to the investors and businesses that will make this project a reality.”

The America Wind Energy Association underscored Delaware’s new status, scheduling a two-day workshop on offshore wind project issues at the Doubletree Hotel in Wilmington. The workshop, scheduled for early September, will include sessions on developing new wind farm plans.

Wind power represents a sliver

But the Bluewater project would be a small step indeed.

Coal, the dirtiest fuel, accounted for 49 percent of U.S. electricity production in 2006, and 65 percent of Delaware’s electricity during the same year.

For now, those shares aren’t likely to change much.

“If you look at the energy that was produced during the year, not surprisingly, most of it came from coal and nuclear power. Those units are built to run all the time,” said Ray Dotter, a spokesman for the PJM Interconnect, a 13-state, 51 million-resident electricity management region that includes Delaware.

Coal accounts for little more than 40 percent of the electricity generating capability across PJM, but produced 55 percent of the electricity last year because it was cheaper than other power plants.

Natural gas turbines, which produce 38 percent less carbon dioxide than coal per kilowatt of electricity, make up nearly 30 percent of the region’s capacity, but generated only 7.7 percent of the juice used in 2007, largely because of fuel costs.

Wind power, while growing rapidly, still represented less than a tenth of a percent of the region’s capabilities. Because of negligible fuel costs, though, wind produced 0.2 percent of total electricity in 2006. Wind generation produces no carbon dioxide.

“Wind is certainly a good thing, but it will always be on the margin,” said Jeffrey R. Holmestead, an environmental lawyer and former top Environmental Protection Agency official. “Right now it’s somewhere between a half and 1 percent, and I think people predict that it can grow a fair bit, but it’s unlikely to ever be a major source of base load.”

Tuffy was more optimistic, predicting steady growth in onshore wind, followed by surges in offshore production first across the Great Lakes, then the Atlantic Coast.

Solar technologies should follow, Tuffy predicted, as scientific advances drive down the cost of large-scale solar generation sites. World solar capacity has risen from 300 megawatts in 2000, just 10 percent of Delaware’s total production, to 1,500 megawatts in 2005. By 1010, levels are expected to surge to 23,000 megawatts expected over the next two years, a 75-fold increase in just a decade.

Across the wind industry, Bluewater would vault Delaware to 16th in the nation for wind production if they went online today with a 200-megawatt capacity, and first in the nation with an outer continental shelf supply.

Pennsylvania would rank 15th, with 293 megawatts, while Texas would be ranked first with more than 5,300 megawatts and 2,000 more under construction.

“It’s not going to save the world. It’s not going to cause too many problems, either,” said Jay Apt, a distinguished service professor at Carnegie Mellon University’s School of Engineering and Public Policy. “It’s a good step toward additional generation, which is needed in that part of the country,”

Robert Kaufmann, who directs the Center for Energy and Environmental Studies at Boston University, said policymakers need to adopt an “every little bit helps” philosophy in light of rising evidence that fossil fuel use is driving up pollution that causes climate change.

“Anybody who tells you they have the answer to the oil crisis or climate change is basically not telling the truth,” Kaufmann said. “There is no single answer. Instead, what it takes is going to be a variety of actions, and clearly this is one that helps.”

Debate far from over

Public support for the idea has grown across the state, after a groundswell developed in Sussex County among residents eager for alternatives to conventional power plants such as the coal-burning Indian River complex near Millsboro.

“I think offshore wind is worth the extra money as long as it’s environmentally sound,” said Rutledge resident Darrel E. Mahoney, a flight attendant who has seen both offshore and onshore wind farms in his travels. “It’s not all that much to pay, and wind farms are all over Europe. We need to start doing something. The environmental problems are becoming more serious each and every year.”

Manor Park resident Starlet Quill said she was unhappy about Delmarva’s initial resistance to Bluewater’s project.

“We need to start reducing pollution before we don’t have anything left, and we need to find alternative sources of energy,” Quill said. “It’s worth the extra money. We have to start somewhere.”

But some object to the way the Bluewater deal has been financed. Lawmakers ordered Delmarva to seek new in-state electricity supplies despite the company’s claim that it can manage with what it has. The company threatened a lawsuit against a forced-purchase plan, then agreed to a contract after Bluewater reduced the cost and size of the deal.

In another concession to Delmarva, legislators voted last week to spread all the extra costs of the wind project among all of the company’s ratepayers. Actual wind-generated electricity will remain earmarked for residential and small-business customers, however.

Buena Vista Park resident and postal carrier Steven Blanchies said lawmakers should have stayed out of the wind farm decision after deregulating the state’s utilities in the late 1990s.

“I don’t think business decisions should be legislated like that. The wind farm is a good, positive thing, but they’ve rammed it down somebody’s throat and they’re making people pay for it,” Blanchies said.

“When the state is trying to promote something, they should provide grants and do other things to promote it, not take money away from the ratepayers.”

Other states close to deals

Delaware nailed down the nation’s first offshore wind contract in spite of a near-vacuum in state energy planning.

Maryland, Pennsylvania and New Jersey all have released comprehensive energy blueprints recently. New Jersey’s plan calls for developing up to 1,200 megawatts of wind power by 2020, while also reducing peak demand by 20 percent and considering a new nuclear power plant.

Plans in both Maryland and Pennsylvania singled out wind power as an important renewable power source that needs to be cultivated directly through state support for investment. Although neither set targets as specific as New Jersey’s, both call for creation of new financing programs to help develop new in-state resources and conserve energy.

Delaware, by comparison, is only now preparing to rewrite its own energy plan. The state’s last report, in 2003, seldom mentioned wind as an option, and approached most issues with broad recommendations.

When Bluewater’s offshore wind initiative emerged as a private venture, most Delaware officials lined up behind it before completing its long-range planning.

“It’s fair to say that we’ve been behind the curve compared with Maryland and New Jersey. We’ve made a lot of progress in the last five or six years, but it hasn’t been coherent,” said Seth Ross, a Delaware Nature Society member who served on a committee that developed the current plan.

“The energy picture has been changing and it’s gotten more serious and I think more people are aware of that, and I think that’s one reason that Bluewater got approved,” Ross said.

Apt said Bluewater likely benefited most from an accelerating nationwide trend toward state-established, minimum requirements for renewable electricity purchases.

Delaware set its renewable requirements at 20 percent in 2007, creating a financial incentive for Delmarva and other utilities to at least consider wind. Sen. Harris B. McDowell III, D-Wilmington North, said last week he is considering a new push to raise Delaware’s renewable requirements even higher.

The state also created a Sustainable Energy Utility, an organization focused on ways to reduce consumption of electricity, mainly through programs that support conversion to energy-efficient appliances and systems.

Supporters say there is a potential to save customers $1,000 yearly in energy costs and reduce state carbon dioxide emissions by 30 percent by 2020 through subsidies for energy-efficient appliances and non-polluting, small-scale projects such as rooftop solar panels.

A combination of reduced consumption and new power sources not based on fossil fuels is thought to hold the key to reducing the region’s contribution to global warming.

“There is no silver bullet, but wind is certainly a cost-effective, low-carbon resource,” Apt said.

Delmarva’s role

Even with a wind contract, Delmarva has no direct control over the state’s two largest coal- and oil-burning utilities, NRG Energy near Millsboro and Conectiv in East Wilmington. The two rank as the state’s top sources of air pollution.

Both plants, however, are “merchant” operations that sell wholesale electricity across the PJM grid, either under contract to large users or on “dispatch” when demand requires more cheap, steady-running coal power or quick infusions of electricity from gas-fired plants to meet sudden peaks.

Variable offshore wind speeds will affect Bluewater’s operation, making it harder to manage than Delmarva’s other supplies. When output falls, Delmarva would most likely have to buy electricity from gas turbines at premium prices, company officials have cautioned, because current PJM rules keep lower-cost coal plants in heavy use.

“PJM is neutral as to the source of fuel for generation,” Dotty said. “You may feel that a megawatt of wind is a much better thing than a megawatt of coal, but it’s not up to us to make that judgment.”

In addition, because of variability in wind speeds and equipment limitations, Bluewater’s 200-megawatt wind farm actually would generate as little as 23 to 24 megawatts during some hours of June, July and August – roughly the amount produced by a single modern, truck-mounted industrial turbine on wheels.

The company’s own forecasts, not yet supported by actual wind studies off Delaware, show that output can swing by as much as 100 percent on some days, particularly during the spring.

“You’re going to need to compensate for the variability when it gets large enough to make a difference,” Apt said. “Texas had about 4 percent of their net generation from wind on the 26th of February at 3:30 p.m. Three hours later, an unforecasted lull in the wind dropped it tremendously, and they declared an emergency.”

With no experience in offshore wind generation, PJM allows member utilities to claim only 13 percent of the maximum production of offshore generation as the amount available for service. The figures could be revised to reflect actual results only after three years of operation.

Bluewater built its forecasts around a far higher 35 percent ratio – or 35 megawatts of reliable generation for every 100 megawatts installed.

Even at that rate, Bluewater would need to expand from the roughly 70 turbines now planned to 2,000 turbines to reliably match a 700 megawatt coal plant roughly the size of Indian River.

Department of Natural Resources and Environmental Control Secretary John A. Hughes said a decision remains over the need for extra conventional generating capacity to back up Bluewater’s turbines.

The backup power option, Hughes said, could include attempts to reduce emissions from NRG’s coal-burning plant near Millsboro in exchange for rights to replace one of its units with a far-cleaner natural gas turbine.

“What I hope is that the backup will be debated and decided primarily on environmental merit,” Hughes said. “I think it’s a wonderful opportunity to solve some of Delaware’s environmental problems that have to do with power plants.”

Hughes said the latest energy price spiral had left state residents “shocked and disturbed,” and had reinforced his own interest in “homegrown” energy supplies.

“I think price is a phantasm, after watching what’s happened with the costs of crude oil and fuel,” Hughes said. “I have no confidence in the stability of price. I have a heck of a lot of confidence in advanced environmental technologies.”

By Jeff Montgomery

The News Journal

29 June 2008