Skip to main content

Cape Wind costs murky

CAPE COD, Mass. – It’s clear that a proposal to construct the first offshore industrial wind energy factory in Nantucket Sound would cost the Wampanoag nations their view of the rising sun in ceremony and destroy the ocean bed that was once dry land where their ancestors lived and died.

What’s not clear is how much it’s going to increase consumers’ electricity bills.

Conflicting information about the cost to consumers for Cape Wind electricity has muddied the waters surrounding the controversial proposal, which is touted by Obama administration officials as the first of many offshore wind energy projects on the East Coast.

Supporters of the project say it will provide clean, cheap wind-generated electricity to consumers in the Massachusetts service area, create jobs and other economic benefits.

Cape Wind calls the project a “wind park” and says its 130 turbines towering 440 feet above ocean level spread across 25 square miles of Nantucket Sound will offer a “majestic” and “inspiring” view that will draw more tourists to the area.

Opponents say the project will wreck the environment, destroy the local fishing industry, degrade dozens of historic places, violate the Endangered Species Act and other federal laws, endanger public safety, obliterate the Wampanoags’ sacred site, and create an astronomical spike in electricity costs.

Interview with Cape Wind spokesman Mark Rogers Cape Wind spokesman Mark Rogers was interviewed at one of several Massachusetts Department of Public Utilities hearings held in June to gather public comment on the Cape Wind project and its contract to sell energy to National Grid. The DPU notice said the price of Cape Wind energy would be 20.7 cents per kilowatt hour, based on the assumption that the project will receive $600 million in tax credits from federal stimulus funds. Consumers currently pay around nine cents per kilowatt hour.

Indian Country Today: What happens if Cape Wind doesn’t get the $600 million in federal stimulus funds?

MR: It means the rate is somewhat higher and it also means Cape Wind gets less. The way the contract was structured between National Grid and Cape Wind we essentially split the value of those (federal stimulus) incentives so half would be the higher rate and the other half would be less revenue. ICT: What about people’s concerns about the increased cost of electricity?

MR: Well, it’s a 2.2 percent increase so that’s the actual bill impact. ICT: But the DPU says it’s a 3.5 percent increase each year.

MR: Yes, but the bill increase impact for 2013 is 2.2 percent and the reason for that is Cape Wind will represent a fairly small slice of the generation pie that National Grid is using so it gets spread around. So it’s 2.2 percent in 2013, and then that small slice will increase 3.5 percent a year, which is actually a smaller annual increase traditionally than we see in fossil fuels. ICT: Are you saying the increase will be 2.2 percent in the first year and then 3.5 percent of the 2.2 percent each year thereafter?

MR: On the small slice. I think it’s a single digit number. ICT: The DPU notice said 3.5 percent. Was it wrong?

MR: That’s not a reference to the consumer; that’s a reference to the price National Grid pays Cape Wind for its power. ICT: So you’re saying the annual increase is definitely not going to be 3.5 percent for consumers?

MR: That’s right. ICT: What’s it going to be?

MR: Less than one-tenth of that because we’re going to represent something like eight percent of National Grid’s generation pool so you divide it by that fraction. ICT: So it’s 3.5 percent of the eight percent?

MR: Yes, that’s right. ICT: No wonder people are confused.

MR: It is confusing. It’s a communications challenge.

“All of us in this, the Cape Cod and Islands region, will lose,” said Cheryl Andrews-Maltais, the chairwoman of the Aquinnah Wampanoag. “We’re looking at a future similar to what’s going on in the Gulf Coast now. Our entire regional economy will be devastated, our precious waters fouled and our entire way of life changed. But even worse for my people, our rights to our spiritual, traditional and cultural practices will have been trampled, and the archeological evidence of our ancient ancestors will be destroyed forever.”

In the debate over how much the project will actually cost consumers and taxpayers, one thing is certain: If the project is finally approved and completed by the end of 2012, which some opponents say is an impossible schedule, consumers’ electric bills will more than double from the current nine cents per kilowatt hour in 2013.

The Massachusetts Department of Public Utilities is investigating the projected cost of Cape Wind electricity to consumers.

Cape Wind reached an agreement in the spring with National Grid to sell half of the power it would generate for 20.7 cents per kilowatt hour (kWh). A buyer for the other half has not yet been found.

On July 30, Massachusetts Attorney General Martha Coakley announced she had reached an “agreement in principle” with Cape Wind and National Grid to lower the cost to 18.7 cents per kilowatt hour with a 3.5 percent increase each year.

Coakley said the reduction would save consumers and businesses up to $450 million over the 15-year life of the contracts.

“This agreement accomplishes two important goals – working to develop renewable energy, specifically off-shore wind in Massachusetts, and ensuring customers get the benefits of this project under a much fairer price than what was originally proposed,” Coakley said.

But on the same day, Dr. Jonathan A. Lesser, an energy economist and president of Continental Economics, filed independent testimony in the DPU cost investigation charging that Cape Wind power would impose a minimum $3.2 billion tax on Massachusetts ratepayers because National Grid ignored its own procedures and did not consider cheaper alternatives to Cape Wind.

“First, by its own admission, National Grid did not compare the cost-effectiveness of the PPAs (Power Purchase Agreements) with any other renewable generating resources located outside Massachusetts. Second, there is no evidence in this case that National Grid properly evaluated any in-state renewable resource alternatives, despite the clear availability of such resources in the time frame, and at a lower price, than Cape Wind,” Lesser said.

Earlier in July, a report by W. Robert Patterson & Associates, an independent management consultant specializing in the energy supply, utility, and alternative fuels industries, issued a report called “The True Cost of Cape Cod” that projected Cape Wind costs would add $1.5 million a year to the expense budgets of cities and towns across Massachusetts – the equivalent of 25 jobs in each community or 3,400 jobs across the state.

The report projects the costs of the proposed power purchase agreement between National Grid and Cape Wind, the estimated construction cost of Cape Wind – which has not been disclosed – and potential impacts to communities.

“In the National Grid filing at DPU, they have sealed not only Cape Wind’s costs but also the market analysis that the consultants to National Grid used to help prepare the contract between National Grid and Cape Wind. They don’t want anybody to know how bad this deal is,” Patterson said.

Meanwhile, lawsuits against the project are piling up.

The Alliance to Save Nantucket Sound and the Town of Barnstable sued the Federal Aviation Administration to reverse its approval of the Cape Wind project based on aviation safety concerns.

The alliance and a coalition of conservation sued the federal agencies that approved the project, asserting violations of the Endangered Species Act and other federal environmental laws.

Because of Cape Wind, Trans Canada, an energy supplier that owns a Maine wind energy plant that could provide cheaper power to Massachusetts residents, sued the state asserting that its law requiring utilities to buy power from Massachusetts is unconstitutional.

The DPU has also allowed 16 interveners to participate in hearings scheduled for Aug. 30 through Sept. 17. Project opponents include Wal-Mart, which opposes the increased energy costs for its stores, and the Associated Industries of Massachusetts – a 6,000-member trade group.