Important stories we're following...

Windaction is closely tracking several important stories involving wind energy development that we will be reporting on in more depth in the coming weeks. Highlights of two of these stories are detailed below.

Cape Wind: Spreading the pain

This week, the Massachusetts Department of Public Utilities (DPU) approved the power purchase agreement (PPA) negotiated between Cape Wind and utility giant National Grid. The agreement has Grid purchasing half the energy generated by the project for 18.7 cents a kilowatt hour -- a price that's three times the cost of natural gas in the region and at/or nearly double the cost of other renewable options. But the numbers are far worse than the press is reporting. The approved 18.7 cent cost does not include the 4% paid National Grid for agreeing to buy renewable energy per the Massachusetts Green Communities Act. Added in, the price comes to 19.4 cents per kilowatt hour. The agreement also includes a 3.5% yearly escalator. After the first year of operation, the cost will rise to 20.1 cents per kilowatt; each year thereafter the cost increases 3.5% until it reaches 31.4 cents per kilowatt in 2027, the last year of the 15-year contract. If any anticipated federal subsidies expire or decrease, the price goes even higher.

The DPU acknowledged that the project will cost ratepayers with a National Grid meter between $420 million and $695 million above market prices over 15 years -- a figure that we believe to be grossly understated.

But the story doesn't end there.

The power purchase agreement approved by the DPU allocates the entire cost of the project to the delivery side of the electricity bill, and NOT the energy side where it belongs.

Since Massachusetts is a deregulated state, most large industrial and commercial users purchase their energy from competitive suppliers while still paying their utility any delivery charges to cover use of the transmission lines. By applying the project's energy cost as a delivery charge, all consumers in Grid's service territory will be hit with the bill regardless of their energy supplier. This cost allocation flies in the face of electricity deregulation which was adopted to encourage competition. It's no wonder Walmart and the Associated Industries of Massachusetts (AIM) objected to the contract, and why this approval will be appealed.

National Grid took this unusual action for one reason: to spread the cost to as many ratepayers as possible. According to National Grid general counsel Ron Gerwatowski, if the cost only applied to ratepayers who purchase their energy from Grid, "everybody would leave the standard offer and we'd have nobody to recover the costs." In other words, the price shock would be enough for residents and businesses to either leave Grid's service area or find an energy supplier that didn't include costly wind in its energy portfolio.

Walmart will likely not leave Massachusetts, but it may have no choice but to reduce its staff and/or raise prices to cover Cape Wind's price tag. The same goes for members of AIM. Nothing in the DPU's public comments suggests the State considered the impact this agreement would have on the State's economy and jobs outlook.

AWEA's employment claims questioned

Data supporting the American Wind Energy Association's employment claims are spongy at best.

In 2007, AWEA touted that the industry represented 50,000 employees in the U.S., a figure that jumped to 85,000 in 2008. Twenty thousand of these jobs were in manufacturing but according to AWEA CEO, Denise Bode, this dropped by 1500-2000 jobs in 2009 due to recession-related plant closings and layoffs. However, the total 85,000 figure did not change owing to a corresponding increase in construction and maintenance activity.

But the 20,000 person number appears suspect. According to the 2010 US Trade Commission report on turbine manufacturing trends (table, page 8) there are 17 existing manufacturing facilities for blades, nacelles, and other turbine components in the United States. Assuming 500 employees on average for each of these 17 plants, there are 8,500 people employed in the manufacturing of turbine components. [1]

Even if we allow AWEA 18,500 jobs in manufacturing (assumes 1500 jobs lost in 2009) and using Duke Energy's number of 0.1 jobs per megawatt to operate a wind energy facility, total U.S. jobs dedicated to the manufacturing and operation come to only 22,100 (18,500 manufacturing jobs plus 3,600 operation jobs on 36,000 megawatts of installed wind). This means that over 60,000 of the jobs cited by AWEA are involved in construction and transport.

Since construction jobs are not permanent the industry would need to meet peak levels of development year after year just to maintain the 85,000 jobs it now touts. This is clearly not sustainable. We will be looking closely at the jobs numbers for 2010 and reconciling this figure with the amount in stimulus monies lavished on projects. Given recent forecasts that show a significant drop in megawatts installed this year, we expect to see a drop in the jobs count.

[1] Average employment figure per plant may be much lower based on table 5, page 17 of this report which cites 2797 employed for 8 plants or 350 employees on average per plant.

NOV 24 2010
back to top