Pace Global Energy Services, LLC (“Pace”) was commissioned by Delmarva Power and Light (“Delmarva”) to independently assess the economic impacts of the proposed Bluewater Wind off-shore wind farm (the “BWW Project”) on Delmarva’s Standard Offer Service (“SOS”) customers. The review undertaken by Pace was based solely on publicly-available information and data sources. The report can be downloaded by clicking on the below link.

CONCLUSIONS

In reviewing publicly-available data on the BWW Project, Pace evaluated the market conditions and conducted its economic analysis regarding the energy and capacity prices. We undertook an analysis of the risk factors associated with the Bluewater Wind farm, including the price escalation adjustment mechanism, the impact of project delays, and other factors. Pace looked at the impact upon the SOS customer, including rate stability, and the overall project economics and variability in these factors.

Pace's analysis priced the Bluewater off-shore facility well above market comparable to similar findings for other, recently-proposed off-shore facilities, most notably by LIPA. Pace's analysis revealed a substantial Green Premium for each option before consideration of the Energy Rate escalation terms (see Exhibit 15) on both a nominal, levelized dollar per MWh basis, and on a cost per month per Delmarva SOS customer for all of the options considered.

• The BWW Project as a stand-alone operation requires a levelized cost, or Green Premium, of $60.95 per MWh ($79 million per year), leading to a $22/month increase in the average cost to each SOS customer.

• When combined with the NRG Back-Up resource, the levelized Green Premium per MWh is lower, at $44.32 per MWh. However, the overall Green Premium cost to consumers is higher, at $122 million per year, or $34/month per customer.

• The BWW Project combined with the Conectiv Back-Up resource results in a Green Premium of $75 million, or $21/month per customer.

• By way of contrast, purchasing an equivalent amount of wind energy from PJM-West comes at an annual levelized cost of $38 million higher compared to the PJM-Market, or $11/month per customer, i.e., the BWW Project costs $11/month per customer more than an on-shore wind alternative.

• These Green Premiums will likely be much higher upon application of price escalation terms embedded in the contract.

• The Green Premium for the BWW Project without escalation is substantial relative to the value of carbon exposure avoided and no foreseeable estimates of carbon prices would fully
offset this cost differential.

Web link: http://www.delmarva.com/_res/documents/PaceReport%...

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