Re: “New landmark rises over Crisfield,” Sept. 19, and “Good jobs, clean energy for the Shore,” Sept. 11
A recent article and commentary both praised the proposed off-shore wind project and other renewable energy proposals for the Eastern Shore.
Unfortunately, wind and solar photovoltaic technologies are not compatible with contemporary lifestyles. In addition, manufacturing and construction jobs created by off-shore wind and photovoltaic projects occur as a result of massive government subsidization at the federal and state levels, not because these technologies are lower in cost than other electricity sources.
Existing federal and Maryland energy policies are wealth redistribution efforts, moving income from the poor and middle class to the wealthy.
How does this happen?
First, some background.
Wind and solar electricity outputs are volatile. The level of electricity can change from zero to full capacity and back to zero in a short time period (five minutes or less).
Proponents of wind and solar like to minimize this challenge in a variety of ways. One is through demand-side management. This is a program where users have their electricity curtailed at times of high demand.
This is accomplished using several different mechanisms, one of which is remotely shutting off hot water heaters and HVAC systems. Supporters believe grid enhancements will enable the grid operator to control electricity demand to meet the supply without impacting reliability.
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It is not clear this can be accomplished without decreasing grid reliability. In addition, the utility customers will pay for these systems.
The most common approach to compensating for this output volatility is to increase the amount of spinning reserves – traditional generating units that are operating, but the electricity is not used. It is true grid operators maintain spinning reserves for the reliable operations of the electrical grid – but adding unreliable generating sources like wind and solar on the Shore will increase its level.
This will increase the overall cost of the electricity and will be paid by all ratepayers.
The Shore’s transmission system is approaching its capacity. Any additional sources of generation will impact it. Currently, The Maryland Public Service Commission is considering upgrading a transmission line from southern Wicomico County to Virginia’s Eastern Shore.
If approved by the PSC, Delmarva Power customers will pay for it. This upgrade is in response to the addition of Great Bay Solar and cancellation of the Mid Atlantic Power Pathway project. Hence, Great Bay Solar should pay for this upgrade.
The off-shore wind project will put additional stress on the local transmission system. The system will not be able to transmit the electricity off the peninsula without substantial upgrades, which are part of the cost of the project and would not occur without the project.
When transmission upgrades are considered, large wind and solar projects become uneconomical – even with substantial government subsidies.
Small solar projects impose costs on the distribution system. First, the owners of these systems are overcompensated for the electricity sold back into the grid. Owners receive full rate for this electricity, when more appropriate is an avoided cost rate. Avoided cost would be in the order of 4 cents to 6 cents per kilowatt-hour instead of the full residential rate, which is 8 cents to 10 cents per kwh.
As wealthier customers install these systems, customers who do not have or cannot afford them pay these subsidies.
The distribution system is designed to move electricity to the customer, not away. If distribution systems need modifications to handle the increased two-way power flows, everyone – not just the owners of small solar projects who forced the upgrade – will pay for it, representing another wealth transfer from poorer to wealthier individuals.
Some have claimed huge employment numbers to install and maintain wind or solar systems. In fact, they claim nationally, more people are employed in the renewable power sector than in traditional generation companies.
This claim may be true; however, the numbers are notoriously difficult to analyze, for a variety of reasons.
In addition, we should consider productivity. The number of kilowatt-hours are much lower for employees in renewable industries compared to traditional generation industries. In June, hydroelectric and renewable represented 5.5 percent (174 gigawatts per hour) of the electricity generated in Maryland.
Traditional sources (natural gas, coal, and nuclear) produced 94.5 percent (2,993 gwh) of that electricity.
If we assume 1,000 people work in the renewable industry, they produced 0.174 gwh per person while employees (assuming 1,000 employees) in traditional sources produced 2.99 gwh per employee.
Thus, employees in traditional companies produce more than 17 times the amount of electricity per employee – and at lower costs. This is a simplistic analysis of a complex issue; however, it illustrates how heavy reliance on off-shore wind or solar before they are cost-effective will affect energy costs and the bills customers pay.
What should we do?
First, Maryland should repeal its Renewable Portfolio Standards. The RPS favors wind and solar over other, more reliable forms of generation.
Second, change the production and investment tax credit (aka subsidies) for wind and solar projects.
Third, include the full cost of these assets when calculating property taxes. Current programs reduce the property taxes paid by owners of these systems.
Lastly, change net metering values to reflect the true value of the electricity from solar arrays. A more appropriate rate would be the avoided costs rate, something that is common for other sources.
Dan Ervin is a professor of finance at the Perdue School of Business at Salisbury University.