July 7, 2011
Like newlyweds arguing over wall paper, Obama administration bigwigs appear at odds over varying shades of green. After being jubilantly green-lighted a year ago by the Interior Department, Cape Wind was recently rebuffed by the Department of Energy in its quest for a critical loan guarantee. The future of our country’s first offshore wind farm, a 125 square mile 130 turbine colossus that has had Cape Codders in fits for the past ten years, is again in doubt.
How can this be? Mr. Obama recently described wind power as “the future of American energy.” Last November, his administration announced a “major new initiative to accelerate the development of clean, offshore wind power along the Atlantic Coast,” according to the Natural Resources Defense Council. And yet, the DOE refuses to provide necessary financial backing for the industry’s signature venture. We could ascribe this seeming contradiction to a long-standing government tradition of inconsistent (actually, just plain stupid) energy policies, or we can hope that someone at the DOE actually made an informed decision on the economics of Cape Wind. You decide.
Today we import over 65 percent of the oil we use, up from 24% in 1970. Consider: nearly forty years after Arab producers imposed an embargo of oil shipments to the United States we have done absolutely nothing to reduce our vulnerability to such measures. The recent loss of Libyan production and subsequent oil price hike spotlighted once again the fragility of our supply network.
A realistic energy policy would require a constancy of a sort that rarely surfaces among the transients on Capitol Hill or in the White House. Given the very long lead times required to develop indigenous energy supplies, government decisions cannot cartwheel from side to side kowtowing to the fancy of the moment. Public opinion may argue for sudden shifts on nuclear power or offshore drilling; our continuing dependence on imported oil does not.
Advocating renewables in particular demands a long-term viewpoint. U.S. leaders have long hoped for a technology breakthrough that could make alternative energy sources truly competitive. President Obama takes a slightly different tack, embracing renewables even if they are not competitive. He sees the future, and it is green.
Which is why the back and forth on Cape Wind, the poster project for alternative energy, is so confusing. Admittedly, the Nantucket Sound mega-project was initially opposed by none other than the late Senator Ted Kennedy, that great champion of environmental causes. Mr. Kennedy’s objection? The 440-foot turbines marred the sea views from his Hyannis porch. This literal NIMBY-ism encouraged other local Democrats to block the undertaking, in deference to the senior senator. The first permit applications were filed in 2001; a decade later Cape Wind remains in Limbo.
Permits and regulatory hurdles have also retarded progress. Concerns for roseate terns, benthic organisms, plankton, noise levels, sediment transport patterns, sea weed and other environmental issues subjected Cape Wind to greater scrutiny than any energy project since the Alyeska Pipeline. The authorities that have had to pass on the development include: the Minerals Management Service, the Army Corps of Engineers, the EPA, the National Marine Fisheries Service, the US Coast Guard, the Federal Aviation Authority, and at least four state and local groups.
In April 2010, the Interior Department finally gave the pivotal green light for Cape Wind to proceed. It was a surprise then, that in May of this year, the Department of Energy put its expected $2 billion loan guarantee for the project “on hold.”
Critics say that the project is foundering on its terrible economics. While National Grid, a U.K.-based electricity and gas company, has committed to take half the power expected to be generated by Cape Wind, the developer has failed to find a buyer for the other half. Given the high cost, that’s not surprising. National Grid has agreed to pay 19 cents per kilowatt-hour for the electricity, an amount that will rise 3.5% annually over the contract’s 15-year term. This compares to recent wholesale electricity costs, as reported by ICE, of around 5 cents. It is also higher than prevailing retail prices in Massachusetts, presenting something of a problem for a profit-seeking venture.
The Massachusetts Department of Public Utilities (DPU), in explaining its approval of the National Grid contract, said “The power from this contract is expensive in light of today’s energy prices. It may also be expensive in light of forecasted energy prices…”
Opponents from The Alliance to Protect Nantucket Sound, have calculated that consumers will pay a premium of some $4 billion over the life of the contract, despite a taxpayer subsidy of $600 million. (The DPU’s estimates are lower.) Naturally, consumers are not thrilled by such projections. Repeated polls have shown Massachusetts residents opposed to the project.
In approving the National Grid contract, the Massachusetts DPU cited the project’s “unique benefits.” Their rundown makes it clear that the most unique benefit is that it satisfies a government dictate that some portion of electricity must stem from renewable sources. Not very satisfying for hard-pressed consumers.
Wind power is up and running in many countries, and it is taking hold onshore in the U.S. Encouraging renewable sources of energy with promising economics make sense as part of a diversified energy portfolio. It does not make sense to underwrite enormous projects that are not even competitive with other green sources – much less abundant domestic natural gas. David Graves, spokesperson for National Grid, admits that “long term, there is a large supply of natural gas available, but we still have a commitment to renewable energy.” That’s swell, but having Massachusetts residents, and U.S. taxpayers, underwrite that commitment seems unnecessarily generous.
Related stories on clean energy from The Fiscal Times:
Investing in Clean Energy: A Sputnik Moment for America
Obama's Clean Energy Trip Raises Questions
Investment Idea # 3: Rewiring the Sun