State: Cost of wind power overstated 

The average residential Delmarva Power customer could end up paying just 70 cents a month more over the next 25 years for Bluewater Wind’s power than they would have paid for fossil-fuel generated electricity, a team of state consultants said Thursday.

The projection is significantly lower than the $6.46 a month “wind power premium” the consultants projected in a December analysis of the previous proposed contract between Bluewater and Delmarva, which would have had Delmarva buy twice as much wind power. Delmarva fought that contract as too expensive for its customers.

On June 23, after more than a year of haggling, Delmarva and Bluewater agreed to a 25-year contract under which Delmarva will buy no more than 200 megawatts of offshore wind power in any given hour.

Four state agencies, including the Public Service Commission, are expected to decide whether to approve the compromise later this month.

The consultants’ report said some of the cost gap disappeared because of the recent rapid escalation in the price of oil, natural gas and coal, all of which are used heavily to generate electricity.

In addition, the December calculations actually were higher than they should have been because of an inadvertent error.

The extra costs of the wind power were spread only over the base of residential and small business customers who actually buy electricity from Delmarva. If spread over the larger base of users who buy power from Delmarva or have it delivered over Delmarva’s wires from another producer, the “wind power premium” in the December contract would have been closer to $2.53 a month, according to the consultant, Barry Sheingold of New Energy Opportunities, Inc.

“Did that make a difference?” Sheingold said, referring to Delmarva’s long opposition to a contract with Bluewater Wind. “Probably not, but you know, we just mentioned that there was a mistake there. I think the focus ought to be on what the deal is now, and the right numbers.”

Bluewater spokesman Jim Lanard said the reported error was “immaterial to the outcome. Bluewater is not troubled by it at all.” He said the report was positive and “shows that hard work does pay off.”

The report, whose lead author was Sheingold, was generally favorable toward the compromise brokered by Senate Majority Leader Anthony DeLuca, D-Newark.

It was critical of a provision of the contract that gave Delmarva additional credit toward meeting its state renewable energy requirements, but noted that the provision was probably necessary to get the deal done.

Wind power, a cleaner form of energy than burning coal, oil or natural gas, is generally seen as a more expensive resource.

But the report noted that under the new contract, the projected monthly premium over market costs was much lower because of the rising cost of natural gas and higher government taxes projected for use of fossil fuels to generate power.

Delmarva attorneys said the miscalculation was due to a miscommunication between Sheingold and their consultant. The political debate at the time centered around residential and small business customers only, they said.

Under the new, smaller contract, Sheingold estimates the average monthly additional cost on a residential customer, averaged over 25 years, will be 70 cents.

In the early years, those additional costs will be an estimated $1.79 a month over market, and over time, will turn into a savings as fossil fuels get more expensive.

By Aaron Nathans

The News Journal

4 July 2008