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Delaware energy: Offshore wind faces political blowback

At least six more summers are likely to pass before a Bluewater wind turbine produces any power, and the same is true for more than a dozen sites from North Carolina to New Jersey to Maine. Offshore wind's once impressive momentum has been stalled by a powerful shift in economic, social and political currents, all casting a harsh light on the industry's weakest link -- the high cost.

The clean, renewable energy of the future meets new obstacles

Just two short years ago, the vision of giant windmills 13 miles out to sea churning out clean electricity to help power Delaware into the future was a bandwagon with barely enough room for all its supporters, no matter their political allegiance.

The wind farm Bluewater Wind pledged to build by 2012 would help insulate the state from soaring prices for electricity generated with imported oil, or by pollution-spewing coal plants viewed as major contributors to global warming.

When the upstart firm signed a contract to sell enough electricity to Delmarva Power to light 50,000 homes, executives, lawmakers and environmental activists cheered, and imitators proposed similar projects for sites all along the Eastern Seaboard.

But nary a windmill marred the horizon on a recent day at Delaware Seashore State Park as Terri Ritchey scanned the water. She was struck only by the lack of progress toward what seemed a simple proposition.

"We should have done this years ago," said Ritchey, a teacher fom Fairfax County, Va.

At least six more summers are likely to pass before a Bluewater wind turbine produces any power, and the same is true... more [truncated due to possible copyright]  

The clean, renewable energy of the future meets new obstacles

Just two short years ago, the vision of giant windmills 13 miles out to sea churning out clean electricity to help power Delaware into the future was a bandwagon with barely enough room for all its supporters, no matter their political allegiance.

The wind farm Bluewater Wind pledged to build by 2012 would help insulate the state from soaring prices for electricity generated with imported oil, or by pollution-spewing coal plants viewed as major contributors to global warming.

When the upstart firm signed a contract to sell enough electricity to Delmarva Power to light 50,000 homes, executives, lawmakers and environmental activists cheered, and imitators proposed similar projects for sites all along the Eastern Seaboard.

But nary a windmill marred the horizon on a recent day at Delaware Seashore State Park as Terri Ritchey scanned the water. She was struck only by the lack of progress toward what seemed a simple proposition.

"We should have done this years ago," said Ritchey, a teacher fom Fairfax County, Va.

At least six more summers are likely to pass before a Bluewater wind turbine produces any power, and the same is true for more than a dozen sites from North Carolina to New Jersey to Maine.

That's because offshore wind's once impressive momentum has been stalled by a powerful shift in economic, social and political currents, all casting a suddenly harsh light on the industry's weakest link -- the high cost of the electricity from those ocean turbines.

Once vibrant public sentiment for moving away from fossil fuels -- particularly imported oil -- has been eroded by the long recession, low oil prices and a political climate that now frowns on government mandates and market subsidies.

Ratepayers in several states have balked at paying a premium for offshore wind, which can cost twice as much as power produced by fossil fuels and more than land-based wind.

"Having people out of work, worrying about how they're going to pay their bill, you never want to be the guy responsible for having any upward impact on customer rates, no matter how small," said Bill Moore, chief executive officer of Deepwater Wind, which plans projects in New Jersey and Rhode Island. But "if we want to move off of fossil fuels, we're all going to have to pay more for electricity."

Offshore wind's prospects worsened after the Gulf oil disaster, as renewed scrutiny of government oversight of any offshore drilling threw an already problematic permitting process into disarray. Industry officials now expect it will take 7 to 9 years to get full permission to build an offshore wind farm.

Many analysts say it all adds up to political reluctance to commit to an energy future rooted in renewables like wind and solar power -- unless those power sources can survive in competition with fossil fuels.

"That's what we're seeing -- a lot of uncertainty, a lot of time involved -- that just discourages the upfront investment. Not having that clarity going forward is not helping the industry," said Matt DaPrato, a wind analyst with IHS Emerging Energy Research.

Still a piecemeal approach

Despite the current climate, the offshore wind industry is far from dispirited.
States still are lining up to encourage new projects, and developers have won key victories in the last year moving projects closer to construction, negotiating long-term power purchase deals with utilities despite higher prices.

Few doubt the long-term potential for offshore wind as an important part of future power generation along the East Coast, where demand still is expected to grow enough to require additional generating capacity. Put together, wind projects in Delaware, Massachusetts, New Jersey and Rhode Island would generate 2,200 megawatts, enough to completely power about 660,000 homes.

Just this week, the environmental group Oceana estimated offshore wind power could supply nearly half the current electricity used in all the East Coast states. In 2008, the Department of Energy estimated the nation could generate 3 percent of its electricity with offshore wind by 2030.

If the will is there.

"We need a series of green lights. This is a complicated endeavor," said Michael Peck of Gamesa North America, which manufactures land-based wind turbines in Pennsylvania. "There has to be a whole industrial, societal, economic equation put in place to make it work. We're doing it in bits and pieces, but we still need to fill in a lot of the blanks."

Eastern states have given the industry a major boost by requiring that utilities buy a portion of their annual power -- 25 percent in Delaware by 2025. That has helped motivate power companies to agree to long-term purchase contracts with wind development firms despite higher per-watt prices.

When Bluewater won its contract with Delmarva Power in 2008, before the economic meltdown, it had to endure a battle with cost at center stage after a 2005 rate-hike shock following electric deregulation in 2000. Bluewater's price is regarded by analysts as a bargain for offshore wind power: 12.4 cents per kilowatt-hour, barely higher than the 11.98 cents most residential Delmarva customers in Delaware pay today.

Two other East Coast wind developers have been able to secure agreements with utilities in New England, but only after protracted battles over the price tag.

Deepwater won a purchase agreement this summer that will require Rhode Island ratepayers to pay 24.4 cents per kwh, starting in 2013. Cape Wind still faces a regulatory battle over the 18.7 cents per kwh a Massachusetts utility agreed to this spring.

That came when Cape Wind won a federal construction permit after a long battle with neighbors who contend the 130-turbine project would ruin views of Nantucket Sound. Cape Wind won its permit under rules in place before current federal requirements took effect.

The situation in New Jersey is less certain. Republican Gov. Chris Christie last month signed a bill requiring all utilities to buy an unspecified portion of their load from offshore wind power. That may help three proposals there, including Bluewater's, but no power-purchase contract has been worked out. Business owners are nervous, wondering what they'll have to pay under the new law.

"This was a difficult effort in a tough environment," said Peter Mandelstam, Bluewater's president.

Other decisions are going against offshore wind, as states and developers crunch the numbers.

The Southern Company, a utility with 4.4 million customers, had been considering offshore wind in Georgia but recently said the price is currently too high to proceed.

Duke Energy this summer pulled out of a three-turbine demonstration project off the North Carolina coast, also citing prohibitive costs.

"The cost of the project simply exceeds the benefits our customers would receive if we were to continue," said Paul Newton, senior vice president of strategy for Duke Energy's franchised businesses.

True costs of fossil fuels

To address the cost issue, the offshore wind industry, which meets this week in Atlantic City for its annual convention, is looking to Washington for help.
They're asking Congress to extend tax credits currently available and make them apply long-term. Recent year-to-year extensions provide little assurance to investors who can't depend on the tax credits being around five or 10 years out.

Wind industry officials also want Congress to enact legislation internalizing the full costs of fossil fuel-generated electricity by accounting for carbon emissions that contribute to global warming. So far, the leading proposal -- for a system capping carbon emissions and establishing a market for trading carbon emission credits -- has failed to overcome opposition contending it would raise electricity costs and contribute to unemployment in coal-producing areas.

And Congress also has failed to adopt a national requirement that utilities buy a set percentage of power from renewable energy sources. A 20 percent requirement effective in 2020 was included in a climate bill that passed the U.S. House of Representatives, but is stalled in the Senate.

Delaware Gov. Jack Markell has been pressing for more action by states and the federal government to speed permitting and create the necessary incentives to make offshore wind more competitive. In a keynote address to the wind industry's 2009 conference, Markell urged states to create financial incentives to help build the offshore wind industry, saying the supporting manufacturing businesses won't show up until there's a critical mass.

"It's going to take much more than a quarter-gigawatt contract in Delaware and a few potential projects of a few hundred megawatts. We need to ensure a steady stream of projects, year after year, and we need to drive down prices through creative financial and policy mechanisms," Markell said.

Markell and Maryland Gov. Martin O'Malley this summer wrote to President Barack Obama asking that he direct the Department of Defense, the General Services Administration and other federal agencies to commit to buying a gigawatt of offshore wind energy from the mid-Atlantic region.

The electricity would help power federal offices and military installations, especially those around metropolitan Washington, while bolstering a project that would help the nation become less dependent on imported oil, they wrote.

Easier to get permit to drill

They also asked Obama to increase coordination between federal agencies on permitting offshore wind farms.

Jim Lanard, president of OffshoreWindDC, the industry's lobbying group, said the measures the industry seeks are an attempt to account for factors like energy independence, climate change and sea-level rise in the price of fossil fuels, which would make offshore wind more competitive -- and attractive as a stable, domestic source.

"The explosive growth that's projected will be dependent on a rationalized energy policy in the United States that reflects the true cost for each power source," Lanard said.

The industry also is pressing lawmakers and the Obama administration to do something about a long, involved and still uncertain permitting process. That problem worsened after the main reviewing agency was split into three pieces after the disastrous BP oil gusher in the Gulf of Mexico revealed serious oversight problems.

All drilling projects three miles or more out in the Atlantic will be subject to lengthy reviews by the Bureau of Ocean Energy Management, Regulation, and Enforcement. Developers estimate it could take 7 to 9 years to get a permit -- two years longer than the average now for an oil-drilling platform. Approval for wind farm construction requires 10 federal permits, seven state ones and numerous local approvals.

"We face a total permitting and leasing timeframe that exceeds nuclear plants," said Moore, the Deepwater Wind executive. "It really doesn't make a lot of sense."

New jobs in new industry

The recession delivered a double blow to the industry. It accentuated the costs issue on two fronts -- electricity consumers are now less able to cope with higher bills, and lawmakers now must confront a stimulus-inflated deficit.

The recession also put more than 15 million people out of work, providing added traction to arguments against measures that might drive up the price of coal -- and potentially endanger mining-related jobs.

Of course, the industry counters with a jobs argument of its own, noting the potential for an offshore wind manufacturing industry along the coast, with tens of thousands of jobs in factories building the 8,000 parts needed for a hulking offshore wind turbine. Oceana estimates an emerging offshore wind industry would create between 133,000 and 212,000 jobs in the U.S.

One such plant -- geared now for production of turbines for land-based wind farms -- has settled into space in a shuttered U.S. Steel factory in Bucks County, Pa. Gamesa, a Spanish company, cranked up the plant in 2008, employing 600 people.

Delaware officials hope they will be able to land production and construction staging operations should Bluewater win go-aheads for wind farms off of Delaware's coast, and perhaps off New Jersey.

But Lanard and Gamesa's Peck said it will take a national commitment to Atlantic Ocean wind before any turbine manufacturer commits to production facilities.

It takes five to seven years of work before a turbine supplier can feel comfortable investing in an offshore wind-turbine factory, Peck said.

Delaware has made a strong case for Gamesa to build a factory in this state, but Pennsylvania, Ohio, South Carolina and Virginia are also contenders, he said.

Peck said his company is high on Delaware, if the industry can only get out of the starting gate.

"There's no limits on what Delaware can make happen as far as offshore wind," Peck said.


Source: http://www.delawareonline.c...

OCT 3 2010
http://www.windaction.org/posts/28288-delaware-energy-offshore-wind-faces-political-blowback
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