December 7, 2014
New Jersey, Opinions

Economic benefits for wind energy plan fall short

Bottom lines: Economic benefits for wind energy plan fall short | Kevin Post, Business Editor | The Press of Atlantic City | December 6, 2014 | www.pressofatlanticcity.com

The state Board of Public Utilities has turned out to be the protector of electricity customers, more than politicians, more even than the state division of rate counsel representing those electric customers.

The BPU recently reaffirmed its rejection of Fishermen’s Energy plan for a demonstration wind farm of five turbines off the coast of Atlantic City.

The board said the energy the windmills would generate would still be too costly and too risky for homeowners and businesses.

A state appellate court had sent the plan back to the BPU after an appeal by Cape May-based Fishermen’s Energy, telling the board to use a somewhat reduced estimate of how much the energy would cost. I figured then that even at the reduced estimate, the windmill power would cost double what Atlantic City Electric customers are currently paying.

Utilities, or consumers for that matter, will only buy electricity from this or just about any wind farm if they’re required to or if the cost is subsidized, preferably by someone else.

In the Fishermen’s Energy case, homeowners and businesses would be the ones subsidizing the wind farm, through state agreements to buy the power at rates substantially above the cost of electricity in the open market.

Wind turbines are a mature technology deployed all over the world, including much at sea, so the “demonstration” aspect of the project is not to show they work but to show sufficient subsidies and political gain can be lined up to do a lot more windmill development off the East Coast.

A 2012 report by the Institute for Energy Research said wind-power generators got $56.29 in government subsidies for each megawatt hour of electricity produced, compared to $3.14 for nuclear plants and 64 cents for natural gas-fueled generating stations.

One of the major subsidies for wind power, the federal production tax credit, is expiring and this week the U.S. House voted to extend it for one year, not the usual two years. The Senate will presumably address the subsidy before it adjourns for the holidays around mid-month.

The production tax credit gives wind producers $23 for each megawatt produced, so it’s a big part of overall subsidies. The BPU may have been mindful of the uncertain future of the credit when it made its decision.

The case for continued massive subsidies for wind power at the expense of taxpayers, consumers and businesses is weak. But if the federal government renews the production tax credit, it would give Fishermen’s Energy another, lesser argument for its project.

The credit has paid wind firms $7.3 billion the past seven years and is expected to pay another $2.4 billion this year.

As matters now stand, the recipients of this political largesse are mainly outside of New Jersey, but we residents of the Garden State still have to pay them.

In 2012 New Jersey taxpayers paid out $126 million more in taxes covering the product credit than was received by producers in the state. Presumably this year that number will be higher.

Fishermen’s Energy could argue that as long as the U.S. is funding energy for political reasons, we might as well have our own subsidized producers to at least get more of our taxes back.

That plus the dire employment situation in the region might be the two best arguments for the project in the absence of a reasonable economic rationale.