Of all the topics generating hot air in Annapolis, none can match the gale-force bluster swirling around offshore wind power.
For the second year, Gov. Martin O’Malley is loudly touting the enormous potential of offshore turbines. If only the legislature will approve a bill to help underwrite the enormous costs, Maryland will be the national leader in this greenest of green initiatives.
Last week, O’Malley stood next to U.S. Interior Secretary Ken Salazar as Interior gave the OK for wind turbines off the coasts of Maryland, Delaware, Virginia and New Jersey.
This move cuts two years from the federal environmental review process, which O’Malley termed a breakthrough.
A review of the facts, though, shows that’s not the case. Offshore wind power could be decades away from actual operation.
The biggest problem, which Maryland’s governor conveniently skirts, is the lack of federal support for these hugely expensive undertakings.
In fact, tax credits for wind farms – offshore and land-based – are on track to expire at year’s end. Fat subsidies for offshore wind aren’t going anywhere in Congress as long as Republicans hold power.
Just look at the bleak situation in other Atlantic Coast states that had exciting plans for offshore turbines.
In Virginia, Dominion Power had wanted to generate 2,000 megawatts of Atlantic power. But the high cost of that energy made it economically dubious – 28 cents per kilowatt hour, or close to triple today’s low electric rates.
Without tax credits from Washington, that project is on hold.
The proposed Bluewater wind farm off the coast of Delaware suffered a near-fatal blow in December when New Jersey-based NRG Energy withdrew from a power purchase agreement because the risk was too great without major federal support.
“This is a reflection of inconsistent federal tax policy,” the company’s president said. Private investors won’t put up significant sums unless there is strong federal backing.
NRG Energy put its project on hold. Without loan guarantees and tax credits, the project became “unfinanceable and financially untenable.”
The best hope remains the Cape Wind project off Massachusetts, first proposed in 2001.
The $2.6 billion project is still seeking buyers for an unsold half of its power output from 130 offshore turbines. Last year, Cape Wind lost its bid for a federal loan guarantee due to its lack of “readiness to proceed.”
In January, New England’s power grid manager raised the prospect of more delays beyond Cape Wind’s scheduled start-up in 2015.
The main concern: Cape Wind’s energy would be at least double the price of today’s electric rates.
That gaping disparity is likely to worsen thanks to record-low natural gas prices. With the discovery of huge amounts of natural gas in shale deposits, utilities are planning new gas-fired energy plants to keep costs down. That would further depress prospects for high-cost, offshore wind.
In Maryland, O’Malley wants legislators to disregard all these negatives and focus on the positives.
He succeeded in strong-arming Exelon Corp. into a deal – part of its proposed merger with Constellation Energy – to give the state $30 million for an offshore wind “Construction and Operations Plan,” including meteorological towers to gauge wind speed, sea state, ecological impact and other preliminary studies necessary before work begins 10 miles off the coast of Ocean City.
The governor also got Exelon to ante up $2 million so the state can hire offshore energy experts at its public universities to supply advice and guidance. Hopefully, the Maryland Higher Education Commission will not make a mockery of this process by trying to slice off small pieces of this donation to competing institutions.
O’Malley also is trumpeting his initiative as a huge jobs generator. But most of those jobs will flow out of state. Manufacturing and assembly of the turbines won’t happen in Maryland. Construction workers with offshore experience don’t reside in Maryland but in Gulf Coast states.
Thus, any jobs estimate coming from the governor’s office is highly suspect.
The biggest sticking point remains the cost to Marylanders for subsidizing this project. Once again, O’Malley wants to cap utility surcharges for utility customers at $2 a month.
That figure bears not relationship to actual costs and expenses of offshore wind energy. It’s an artificial cap set at $2 for political purposes.
The truth is that O’Malley has no idea what the extra charges will be when offshore wind makes it onto Maryland’s power grid. Similarly, his plan to force utilities to purchase high-cost offshore wind energy eventually could mean more customer charges decades from now.
It’s possible the governor will work out a slimmed-down compromise plan with lawmakers to give Maryland the patina of approval for offshore wind power. It’s something O’Malley then could brag about in his speeches across the country.
Yet, the sad truth remains that without heavy federal subsidies and tax credits, O’Malley’s dream of Maryland leading the way in green, Atlantic Coast wind power may simply drift out to sea.
Barry Rascovar is a State House columnist, communications consultant and radio commentator on WYPR-FM, 88.1.
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