Prior to a December 18 Town Council meeting devoted to the Deepwater Wind wind farm project (see related story), members of the Electric Utility Task Group met with New Shoreham Town Council members to address their questions around projected future costs for maintenance and decommissioning of the farm, perceived island benefits once the system is in place, and environmental considerations.
The town may submit comments on the project during the public comment periods now open before the U.S. Army Corps of Engineers and the Rhode Island Coastal Resources Management Commission (CRMC).
Council members at the EUTG meeting questioned the group about whether certain findings, highlighted by the agencies, were true and what could be done to bring resolution. The Coastal Resources Management Council report, for instance, pointed to a need for clarification of ongoing maintenance schedules for the Deepwater Project. And council members asked about clarification of maintenance to a necessary back-up, on-island system, should power fail from the proposed cable. Also questioned were the future costs of the Block Island Power Company, as well as decommissioning costs for the wind farm and what structure or body should take on the role of oversight of decommissioning funds.
And there were also more fundamental questions about whether building the wind farm and running the cable is the best and most viable alternative for Block Island.
“A Deepwater Wind cable is a good economic deal for the island,” said Everett Shorey, a business consultant who serves on the EUTG. “The committee’s charge is to look at the costs for the island. If there is no cable, then there are a series of other deals but none of them are close to the Deepwater Wind cable – none of them are close to the cost savings. That’s our position.”
Shorey was responding to questions from council members regarding other energy models that have been presented for the island. Most prominent of those ideas is the laying of a cable unattached to the wind farm. The unknown in all cases is the volatility of fuel costs. The EUTG has explored the issues in papers published on their website, accessible via the Town of New Shoreham’s website.
Army Corps public comment
Members of the task group issued a summary statement to the Town Council regarding a request for public comment from the Army Corps of Engineers. It was in response to this report that council members raised questions for the EUTG.
New council member Chris Warfel stated that the Task Group summary report provided no “historical content,” particularly regarding the town’s effort to meet Public Utility Commission (PUC) requirements and environmental oversight. Warfel has been concerned that the town, in the past, has been weak in addressing the manner in which the PUC regulates BIPCo. He also believes that rate and conservation structures in place on the mainland should also exist on Block Island. The mainland has a variety of energy conservation programs and net metering rates, Shorey said, that could also be used on the island. Shorey, speaking for the task group, said that the EUTG understood it was to focus on economic and environmental impacts, but if the council wanted to expand its charge, the group would do so.
Warfel and fellow new councilor Sean McGarry also questioned whether the cable was the best solution when compared to alternative systems, and asked for more information regarding them. Systems such as solar, cogeneration (where waste heat from one system is taken and used to supply energy for another), or demand side management are all options Warfel wants considered. For the latter, energy efficient equipment, energy efficient lighting and smart energy management could make a difference in overall costs. Besides looking at these alternatives, McGarry asked why there was no information in the summary about fuel costs trends.
“There are no projections for fuel costs,” McGarry said. “I don’t understand why that wasn’t included. Fuel is the driving economic factor.”
In answer to the question, the task group pointed to a study sponsored by BIPCo, the Town of New Shoreham and the Division of the Utilities and Carriers that was done in May 2007. According to that study, fuel costs on the mainland play off of the cost of natural gas, while on the island they play off of the cost of diesel fuel. That will change if a cable is laid and the island’s power comes from the mainland.
“In looking at all of the alternatives, we have tended to look first at the changes made at the fuel cost portion of the charges, because those are the things that are directly affected,” Shorey said. “The way this is structured now, [what] changes is the amount of fuel that runs the diesel. So the direct effect is to the fuel costs.”
The EUTG therefore sees fuel cost savings as potentially saving Block Island consumers the most, since they would no longer be held hostage to diesel fuel price fluctuations.
In the report, the task group estimated a savings of 40 percent (from 54 cents per kilowatt hour to 31 cents per kilowatt hour) for power on Block Island if the cable is put in place. The report also noted that the town must budget ahead for its fuel needs. Having a more constant fuel source would eliminate some of the guesswork involved in that process.
Council members asked if the document could contain some sort of long-term fuel planning projections. Warfel said it was misleading to say that all of the energy would come from the wind farm. “So put in what the wind farm says,” he suggested: “It will run 90 percent of the time,” according to a report issued by Deepwater.
Maintenance and system failure
Councilors Ken Lacoste and Norris Pike questioned the maintenance and storage of fuel on the island for a back-up system. Since the current BIPCo system would become a back-up system once the cable was operational, there were questions about ongoing maintenance and its ability to meet capacity should the cable fail.
How BIPCo will restructure is still in question. No one present seemed to know how much back-up is prudent and reasonable and what needs to be done.
Distribution of power is a separate issue. The current BIPCo power grid is “2.4 kilovolts now and BIPCo recommends it go up to 4.8 kilovolts,” Shorey said, the latter being the national standard. “If we don’t upgrade the system, we will run into maintenance issues.”
Shorey added that this is sort of like “repairing a roof; it just has to be done.” Shorey said that upgrading would include putting infrastructure in place that could handle the additional power.
And then there are the environmental concerns that revolve around the storage of fuel for the back-up facility. Council members asked that these concerns be addressed in the EUTG report.
Town Manager Nancy Dodge asked about insurance coverage, which is not addressed in the Army Corps of Engineers summary report but is relevant to the CRMC approval process. Council members asked for clarification and ideas for setting aside monies for system failure in the cable, or decommissioning the wind farm.
Though the towers are expected to last at least 20 years, there are no guaranties. These issues fall under CRMC’s purview and should be addressed as the process moves forward.
One idea related to the decommissioning is the establishment of a trust fund. Task group member Barbara MacMullan recommended a trust fund as a way of mitigating risk, and also agreed with Dodge that additional insurance coverage should be explored.
“If we are three years into it [the wind farm] and it doesn’t work, who is going to pay for it?” MacMullan asked.
“Twenty years from now there has to be enough money sitting in a pot to pay for this,” Shorey said. He went on to explain that there are three risks involved in preparing for the eventual decommissioning. The first is there is not enough money to pay for the process because the costs are higher than thought. The second is an investment risk; the money is invested, but not enough is earned to cover costs. These first two risks, he added, are covered in standard models by requiring Deepwater to update the fund every couple of years. Finally, Shorey said, there is a timing risk. There is an assumption that the towers will not have to be decommissioned sooner than 20 years, “But what if it is sooner and there is not enough money in the pot?” he asked. “What Deepwater has said is that the company has insurance and warranties, but for a variety of reasons we [the EUTG] don’t think insurances and warranties are sufficient options.”
The EUTG, according to Shorey, would recommend that the New Shoreham Town Council ask CRMC make sure there is adequate coverage for this kind of risk. He added that it is difficult to know what costs will be when projecting 15 years into the future, but one method is to let Deepwater know that it owns the risk.
The placement of the cable is an issue CRMC will address. Currently, it is recommended that the cable come ashore in Narragansett.
“The Deepwater cable is going around a section of Narragansett Bay to avoid the hard bottom,” Shorey said. “So why did twenty million dollars go to forty? Part of it is that the cable is going up the Bay and it’s a lot longer run.”
Initially, studies brought the cable ashore near Charlestown Beach. But environmental concerns for a landing in that area led to a change in venue.
Also at issue is how the cable will be laid on the sea floor; it must avoid hard bottom areas. This need, along with required environmental permitting, has added another layer of costs that was not in an original BIPCo estimate for a cable.
The task group ended by setting up meeting dates for 2013. The first is set for January 14.
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