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Harwich’s savings from turbines far less than expected  

Credit:  By Jamie Balliett, Harwich Oracle, www.wickedlocal.com 26 March 2010 ~~

HARWICH – A change in borrowing terms, decommissioning requirements and maintenance costs could dramatically cut the town’s estimated savings from two proposed wind turbines in North Harwich.

Under revised financial assessments produced by the Cape and Vineyard Electric Cooperative (CVEC) – the organization expected to build, own and maintain the 400-foot-tall turbines – the town’s direct savings drops from $7.2 million to under $4 million over the 20-year life of the cooperative’s loan.

The bulk of the reduced savings come from a change in the loan term from 15 to 20 years and from additional costly repair and eventual removal requirements regarding the project.

Mark Zielinski, treasurer of the CVEC, gave a presentation to selectmen on Monday night, stating that the group has not made a final decision yet on financing.

“We’re looking really right now at two financing options,” he said. CVEC is planning on borrowing around $9 million for the project.

It is considering either federal Clean Renewable Energy Bonds for a 15-year term or financing through the federal Rural Utility Service for a 20-year term.

“All this boils down to a power-purchase price,” he said of the complex financial formula.

Zielinski said that the town’s annual NStar bill is $915,732. Once the turbines are built, the town would still have to pay the utility about $180,344 each year – a $3.6 million cost over 15 years.

But the town would earn other revenue, $100,000 per year, from the cooperative’s land lease payment to the town.

Selectman Angelo La Mantia said he was surprised that the previous estimated savings of $7.2 million had shrunk so much.

“What’s the driver?” he asked.

Zielinski replied, “I really think it’s the most conservative estimate right now.”

He explained that two items had cut significantly into the savings: A decommissioning fund (to pay for the turbines’ eventual removal) and a turbine-refurbishing fund (to pay for needed repairs once the equipment reaches a certain age).

“That really ate up a lot of the excess cash,” said Zielinski.

Harwich is expected to use up to 79 percent of the power generated by the two turbines – the remaining 21 percent is divided into two groups, with 10 percent going to the Cape Light Compact and 11 percent to the other CVEC member towns (which include 16 communities).

But Town Administrator James Merriam noted that Harwich is permitted to use up to 90 percent of the power generated and with a new water filter plant planned for construction, electricity that the town could use is expected to climb above 79 percent.

“These numbers will improve if we can get that treatment plant into that,” said Merriam.

Selectman Larry Cole asked Zielinski whether the town could see significant savings for as long as the equipment lasts – after the loan is paid.

Zielinski said that at that point, the only costs are operation, maintenance and insurance and there would be significant savings.

Noreen Donahue from West Tupelo Drive – an opponent of the turbines – tried to pick some holes in the financial side of the project. She asked Zielinski what would happen if CVEC couldn’t make its loan payments.

“The financing entities of the utility would hold final liability,” he replied. “Our goal is to develop these pro-formas and financial estimates as financially conservative as possible so we don’t put ourselves in that situation.”

Donahue also asked about who would pay for the removal of the turbines if CVEC can’t.

“The salvage value is assumed to fund the decommissioning of the turbines,” Zielinski replied.

Another project opponent, Rick Toma, asked Zielinski, “If it moved to a 20-year loan, are we going to see the data of what we are voting on?”

“Certainly, once you get prepared to close for any document, we’ll be able to finalize all these numbers and be able to share them with you,” he replied.

Source:  By Jamie Balliett, Harwich Oracle, www.wickedlocal.com 26 March 2010

This article is the work of the source indicated. Any opinions expressed in it are not necessarily those of National Wind Watch.

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