A few years ago First Wind had a brilliant scheme: form a joint venture with Nova Scotia utility giant Emera, then blitz Maine with an astonishingly aggressive wind power buildout.
This was actually Plan B, after an embarrassing failed attempt to go public in 2010.
In 2012 they got hitched with Emera even though Maine’s Supreme Judicial Court was still deciding whether the JV was legal. The Maine Public Utilities Commission (PUC) had to impose 50 conditions to the law so that the JV could proceed. Clearly motivating that special PUC treatment was a public desire to see First Wind succeed in its apparently benign pursuit of a cleaner planet.
Now, almost two years later First Wind has a problem.
The Court decided. It voided the deal because Maine law clearly says that utilities cannot own, control, or have interest in generation assets. Whether that law makes sense is a subject for another column, but its present effect is to send Maine’s biggest turbine installer into a tailspin. Anyone concerned about the economy and the environment should be paying close attention.
How First Wind Dug its Hole
We at Friends of Maine’s Mountains are predictably pleased with the Court, but there is reason to be cautious. The Court not only vacated the JV, nullifying its ability to conduct business, it also asked the PUC to consider a do-over. Over the next several weeks First Wind (assuming Emera still wants in) will feverishly attempt to redesign the scheme in a way that the PUC can approve. They will also be lobbying the public with their PR.
Back in August, Moody’s had rated the JV “Ba3″ and added that the “rating outlook is stable.” Moody’s curiously made no acknowledgement of the Supreme Court case that was underway. Immediately after the Court decision in March, Standard and Poor’s “placed its B+ corporate credit rating on…CreditWatch with negative implications.” Moody’s has since downgraded also.
With no more money from the Emera spigot, now First Wind is scampering in the Street like a drunkard desperately seeking a drink. The Boston developer, brainchild of former ENRON alumni Steve Vavrik, Paul Gaynor, and Michael Alvarez, this week announced that they have gotten consent from existing creditors to raise $75 million in junk bond financing from institutional high rollers (who might want to show a loss for the tax year). If they can raise it, that money is a fraction of what they need to stay afloat, but it restores a pulse for a few weeks or months.
First Wind has spent about half a billion dollars building Maine wind projects, with plans to spend more than twice that amount moving forward. While that sort of “investment” in Maine sounds like a good thing, remember it is ultimately our money. They exist to recover every penny of it (and more) from our ratepayer or our taxpayer pocket, as we don’t have a choice whether to buy the product they sell.
In its crisis First Wind’s robust PR machine will no doubt be reminding us of all the good they bring us: clean air, investment, jobs… Because they rely on us to believe their windmills are necessary and useful.
Most people don’t know, but we already got off oil. 99% of Maine’s electricity generation in 2012 came from clean sources other than oil and coal. Maine’s electricity fleet was the 3rd cleanest for CO2 emissions in America, contributing only 1.4% of total New England CO2 emissions and .0004% of US CO2. Our Renewable Portfolio Standard is the highest in the nation. In contrast to Maine, some states like Iowa get as much as 75% of their electricity from coal (and we get their emissions). Maine has 4,400 megawatts of electricity generation, yet we rarely need even 1,500 megawatts to run everything.
Only 14% of Maine’s CO2 emissions are from the electricity sector. But it seems everyone wants to squeeze CO2 reductions from electricity generators. In contrast, 46% of Maine CO2 emissions come from the transportation sector. What has the legislature done about that disparity? Last year they approved raising the I-95 speed limit to 75 MPH.
Despite our clean electricity fleet, the legislature continues promoting mountain wind power. They wrote a goal in statute that would leave Maine hosting more than 1,000 wind turbines, taller than most of the skyscrapers in Boston. The cost of these turbines would exceed $3 billion. The poles & wires needed to move that low quality electricity to Massachusetts could add up to $20 billion to our New England light bills.
Yet we need none of it.
If you wonder whether this cost of “doing our part” in stopping climate change is worth it, consider this: If Maine hosts billions of dollars worth of wind infrastructure, we will (using the wind lobby’s exceedingly generous projections) reduce New England CO2 emissions by a tiny fraction of one percent. In short, if we’re concerned about CO2, we won’t even budge the needle in a perceptible way by covering Maine’s iconic mountains with thousands of massive turbines. Still, like the fabled citizens in the “Emperor’s New Clothes,” most of us believe that wind turbines are wonderful.
To the extent our 34,000 megawatt grid needs new generation it will be to replace older base load and peak load plants, like Maine’s largest generator, the oil-fired Wyman Station in Yarmouth, like the Vermont Yankee nuclear plant, and a handful of old coal plants in southern New England. Unfortunately, wind power cannot replace or even displace base load and peak load plants because of its dual flaws: intermittency and unpredictability. Base load and peak load plants need to be dispatchable. Wind turbines are basically huge costly spectators on the playing field known as the New England grid.
Regardless of whether First Wind survives this crisis, let’s say Maine reaches the statutory wind goal. Over a thousand turbines will stand atop 300 miles of ridge, costing us billions and making no dent in climate change. And the 34,000 megawatt grid will only receive an influx of 600 to 700 part-time megawatts from this “investment.” So we see no reason for the PUC to now bail out First Wind.
A Gross Misallocation of Resources
The billion dollars that has been spent on useless Maine wind turbines has been a grossly negligent misallocation of resources, causing increased prices, increased fossil fuel burning, and increased air emissions.
Wait. Wind power increases pollution? Yes. It has been doing exactly that for the last two years.
We sit in the dooryard of the world’s most abundant shale gas field, Marcellus. Yet inadequate gas pipeline infrastructure from New York into New England creates shortages, even as gas proliferates in homes, businesses, and electricity generation. Over the last few years 50% of New England electricity came from gas, while coal and oil generation shrunk to only 4%. However, in 2013 and 2014, we have increasingly been getting back onto coal and oil. It is common some days for the dirty duo to contribute 20 to 30% of New England generation while gas production drops into the 30 to 35% range and prices increase five or tenfold. Those same days, feckless wind is usually lucky to provide 1% of the grid’s power.
Rather than throwing billions of dollars at remote and superfluous wind projects, we should have been fixing the critical gas pipeline infrastructure that is bleeding billions of dollars from our pockets, even forcing manufacturing plant closures in Maine. Instead of paying great Maine companies like Cianbro and Reed & Reed to build useless windmills we should be hiring them to build critical infrastructure.
It is impossible to quantify how many millions of dollars are being drained from the Maine economy because of this hare-brained “system.” But consider it this way: with median income at $27,000, every $100 million that is needlessly extracted from Maine’s disposable income will cost us the equivalent of 3700 jobs. How many times have we seen politicians pose for a ribbon cutting where three jobs are created?
Watching the Clock
First Wind’s relentless assault on Maine is driven by a loudly ticking clock. The hundreds of millions in tax giveaways they have received are growing unsustainable. Renewable Energy Credit values, and the popularity of state mandates that enable them, are both falling. The deficient gas infrastructure will be fixed. And big hydro is going to punch over the border from Newfoundland and Quebec, fulfilling state renewable mandates with high-quality electricity that can even perform base load and peak load functions. When all that happens, wind power goes the way of the pet rock. So they need to erect and contract now, but they can’t do it without money.
If the JV with Emera is killed – or even substantially stalled – First Wind’s days could be numbered. While we don’t like seeing any business fail, we will all be better off. As First Wind lobbies for continued sympathy and special treatment, let us remember that they deserve neither. The Emperor has no clothes. We hope our PUC sees it that way this time around.
Chris O’Neil is an independent government relations consultant who acts as Public Affairs Director for Friends of Maine’s Mountains.
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