Many costs, few benefits of wind power

Massachusetts has an ambitious goal for renewable-energy development but no realistic plan or guidelines to reach it. The result is a free-for-all with the state lavishing money on wind-power development in the Berkshires, investors and other states benefiting from the largess, and Berkshire towns and residents left in the dark as to the real consequences for our community, our economy, and our beautiful mountains.

Our state has set a quota for renewable energy that depends upon building hundreds of massive wind turbines in the next four years.[1] Unfortunately, there are only a few places with enough wind: offshore, along the coast, in the Berkshires, and in other states. There is a proposal to build 130 turbines off the coast of Nantucket, but that is likely to fail because of powerful opponents.[2] A few coastal communities are considering one or two turbines for municipal use,[3] but land there is otherwise too costly and populated for bigger facilities. Residents of neighboring states are furiously opposed to hosting wind projects that benefit Massachusetts, and have their own renewable energy quotas to meet.[4] That leaves the Berkshires. We have windy ridgelines,[5] without the population and political clout to hamper development.

Based on information from state agencies, it’s clear that if no turbines are built offshore more than 450 will be needed on our mountains to satisfy the quota.[6] It’s just as clear that state officials know that number will never be attained.[7] Rather than analyze the problem thoroughly and produce a realistic plan, the state has, instead, defaulted to a bumbling strategy of spending extraordinary amounts of public funds to entice developers into the Berkshires,[8] and hoping that something happens. There’s no plan,[9] no guidelines for where turbines should be erected to minimize impacts, and no hope of meeting the quota.

There are, however, many unintended and costly consequences. The state’s lack of careful planning forces electricity retailers like National Grid to compete against private investors, companies seeking to appear “green,” and other states for the certificates needed to meet the renewable-energy quota. This increases costs for all of us.[10]

Here’s how it works: State law permits renewable-energy producers like wind-power companies to sell electricity and its “green” attributes as separate products. For every unit of electricity, a corresponding renewable-energy certificate (REC) is created.[11] This is an extremely lucrative subsidy for those producers. Electricity retailers must buy and hold a certain number of RECs each year to meet the state’s quota.[12]

If there aren’t enough RECs on the market, then the retailers must make costly alternative compliance payments (ACPs) to the state government[13] RECs and ACPs are reflected in our electricity rates, already among the highest nationwide.[14]

In effect, the electricity retailers are a captive market because by law they must have RECs or pay the ACP penalty. However, RECs are in short supply because there aren’t enough renewable-energy producers, and there is increasing demand in the voluntary market. Hedge funds, private equity firms, and other investors see an opportunity for profit and are speculating on RECs to resell at premium prices.[15] Companies like Staples[16] and Whole Foods[17] are buying RECs as part of their marketing strategies to impress customers. Households that sign up for programs like GreenStart, which charge extra to support renewable energy, are also fueling competition for scarce RECs, forcing up prices, and intensifying pressure to build wind turbines on our mountains.[18]

In addition, other states are competing for our RECs and the underlying renewable electricity to meet their own quotas. Connecticut just announced that it will buy half of the output of the Hoosac wind-power plant proposed in the Berkshire towns of Florida and Monroe.[19] Consequently, none of the associated RECs will qualify for our state’s quota.[20] Rhode Island is funding the purchase of thousands of RECs from the Brodie wind-power plant proposed in the Berkshire town of Hancock.[21]

Thus, not only will we be paying more for the few remaining RECs, but we will be subsidizing REC purchases by those companies and states. Hoosac’s 20 turbines will produce less than 14/100ths of one percent of the commonwealth’s annual energy consumption.[22] Yet, over 20 years, its foreign owners[23] will pocket an estimated $80 million in federal, state, and local subsidies, including $56 million from REC sales.[24] If our state’s entire electricity consumption were subsidized at that rate, about $60 billion would be spent on subsidies during the same time period.[25]

Those subsidies won’t bring lots of new jobs or revenues to our communities. Each wind-power plant will create one or two full-time jobs.[26] Building the miles of new access roads will require temporary construction workers, but the turbines will be erected by out-of-state contractors.

The towns of Florida and Monroe have been promised approximately $320,000 in annual tax revenues for Hoosac,[27] but are unlikely to ever see that much. In Pennsylvania, 20 turbines produce about $13,000 in annual payments to the town of Meyersdale.[28] In West Virginia, 44 turbines generate about $100,000 in property taxes for two counties.[29] In Massachusetts, it appears that wind turbines are exempt from local property taxes and excise taxes.[30]

A few landowners will make money leasing to the developers,[31] but neighbors will pay the price in reduced property values[32] and diminished quality of life.[33] Our tourism economy, too, could suffer. People come here for the scenic beauty,[34] not for ridgelines industrialized with 34-story turbines. In fact, if all wind projects are built as proposed near Mount Greylock, visitors to the War Memorial there may be forgiven for thinking they’ve arrived at America’s premier industrial resort.[35]

[1] Under the Massachusetts Electric Utility Restructuring Act of 1997, by the end of 2009, 4% of electricity sold by retailers (excluding municipal utilities) in Massachusetts must come from renewable energy produced from new construction of renewable-energy sources. After 2009, the required amount will increase by 1% annually. At a public meeting in North Adams, MA, on 9/19/03, Rob Pratt, director at the time of the Massachusetts Renewable Energy Trust Fund (part of the Massachusetts Technology Collaborative) said 80% of that renewable energy was expected to come from wind. See footnote 6 for details. [https://www.mass.gov/legis/laws/seslaw97/sl970164.htm; 225 CMR 14.00, Renewable Energy Portfolio Standard, p. 10, https://www.mass.gov/doer/rps/225cmr.pdf; https://www.mtpc.org/RenewableEnergy/green_power/rps_scenarios.pdf]

[2] The Cape Wind project proposed in Nantucket Sound is opposed by Governor Mitt Romney, Lieutenant Governor Kerry Healey, Attorney General Tom Reilly, U.S. Senator Ted Kennedy, and numerous local politicians.

[3] The coastal town of Hull has one turbine and is building a second turbine. Many towns have been in discussions with MTC about wind turbines, but it appears that only a few are seriously pursuing development.

[4] Connecticut and Rhode Island have renewable portfolio standards (RPS), but don’t have enough wind for large wind power facilities. Maine has a renewable portfolio standard. Vermont has an RPS goal that may become mandatory (https://www.dsireusa.org/library/includes/incentive2.cfm?Incentive_Code=VT04R&state=VT&CurrentPageID=1&RE=1&EE=0). New Hampshire doesn’t have one. A google search will produce many references to controversies swirling around the many projects in various stages of proposal in Vermont and Maine, in particular. The Links section of the Green Berkshires website contains numerous URLs for groups opposing wind development in New England states (and elsewhere.) People with whom I’ve spoken there are particularly incensed that the state of Massachusetts is spurring development by funding some projects.

[5] A 2004 study by the Appalachian Mountain Club found that of 65 inland sites with enough wind in Massachusetts, covering 96 miles of ridgeline, 62 are in the Berkshires, along 93 miles of ridgeline. [Presentation by David Publicover, Appalachian Mountain Club, at Broad Meadow Brook Conservation Center and Wildlife Sanctuary, Massachusetts Audubon Society, 9/20/04; David Publicover, A Methodology for Assessing Conflicts Between Windpower Development and Other Land Uses, AMC Technical Report 04-2, Research Department, Appalachian Mountain Club, May 2004, pp. i, 3.]

[6] On 9/10/02, Nils Bolgen of the Massachusetts Technology Collaborative produced a worksheet titled “Massachusetts RPS Scenarios” (https://www.mtpc.org/RenewableEnergy/green_power/rps_scenarios.pdf). It shows that in 2009, 2,386,000 MWh of RPS attributes (RECs) will be needed to meet the RPS quota. At a public meeting in North Adams on 9/19/03, the director of MTC’s Renewable Energy Trust, Rob Pratt, said his agency expects 80% of the quota to be met by wind power. 80% of 2,386,000 is 1,908,800 MWh. Using Mr. Bolgen’s assumption of a 30% capacity factor (which is high, since the national average is 28%), that means 726 MW of capacity will be needed. The math for that is as follows: X × 8760 hours/year × 0.30 CF = 1,908,800 MWh; X = 726.33 MW. Divided by the current standard turbine size of 1.5 MW, that means 484 onshore turbines will be needed to satisfy the RPS quota by the end of 2009.

[7] Massachusetts Division of Energy Resources, Massachusetts Annual Compliance Report for 2004, 1/9/06, pp, 2, 11, https://www.mass.gov/doer/rps/rps-2004annual-rpt.pdf

[8] Hoosac, $17,075,142 (2004), https://www.masstech.org/Project_lst_rslt.asp?ID=57;
Berkshire Wind (a.k.a. Brodie), $8,703,000 (2004), https://www.masstech.org/Project_lst_rslt.asp?ID=55;
Berkshire Wind, $150,000 (2001), https://www.masstech.org/Project_lst_rslt.asp?ID=567;
Jiminy Peak, $582,875 (2005), https://masstech.org/Project_lst_rslt.asp?ID=652
Center for Ecological Technology, $50,000 (2003), https://www.masstech.org/Project_lst_rslt.asp?ID=381
Center for Ecological Technology, $50,000 (2004), https://masstech.org/Project_lst_rslt.asp?ID=615
Center for Ecological Technology, $50,000 (2005), https://www.masstech.org/Project_lst_rslt.asp?ID=669
Catamount Ski Area, $39,900 (2005), https://masstech.org/Project_lst_rslt.asp?ID=644
Union of Concerned Scientists, $45,000 (2005), https://masstech.org/Project_lst_rslt.asp?ID=629

[9] State agencies such as the Massachusetts Division of Energy Resources and the Massachusetts Technology Collaborative have funded consultants to study various aspects of the Renewable Portfolio Standard. I have seen numerous documents about the benefits of renewable energy and an RPS but I have not found one document that lays out a roadmap for reaching the goals set forth in the RPS regulations or Chapter 164 of the Acts of 1997. For example, if MTC believes as indicated in one document that landfill gas potential may be only 50 – 100 MW in all of New England (https://www.mtpc.org/RenewableEnergy/green_power/rps_scenarios.pdf ), how much of that is likely to be available to Massachusetts, and how many biomass, solar, and wind plants will have to be constructed as alternatives (and how big will they have to be) to meet the state’s quota? How many off-shore wind-power plants will have to be constructed? I have asked numerous individuals in state government if s/he knows of such a plan, and no one does. My guess is there is no plan because no one wants to deal with the political consequences of publicizing the details.

[10] Kevin Keenan, “Supply trails renewable energy demand,” Worcester Telegram & Gazette, 2/24/06, https://www.telegram.com/apps/pbcs.dll/article?AID=/20060224/BUSINESSREVIEW/602240737/1002/BUSINESS

[11] Massachusetts Division of Energy Resources, Massachusetts Annual Compliance Report for 2004, 1/9/06, p, 3, https://www.mass.gov/doer/rps/rps-2004annual-rpt.pdf

[12] 225 CMR 14.00 - Renewable Energy Portfolio Standard, p. 10, https://www.mass.gov/doer/rps/225cmr.pdf

[13] https://www.mass.gov/doer/rps/acp.htm; Massachusetts Division of Energy Resources, Massachusetts Annual Compliance Report for 2003, p. 14, https://www.mass.gov/doer/rps/rps-2003annual-rpt.pdf

[14] https://www.eia.doe.gov/neic/rankings/stateelectricityprice.htm

[15] Kevin Keenan, “Supply trails renewable energy demand,” Worcester Telegram & Gazette, 2/24/06, www.telegram.com

[16] https://www.epa.gov/grnpower/partners/partners/staples.htm

[17] https://www.wholefoodsmarket.com/company/pr_01-10-06.html

[18] https://www.cetonline.org/Greenstart/WhyChooseGreen.html

[19] https://www.smartpower.org/dec_2005.htm#5;
https://www.renewableenergyaccess.com/rea/market/business/viewstory?id=40662

[20] Massachusetts Division of Energy Resources, Massachusetts Annual Compliance Report for 2003, p. 15, https://www.mass.gov/doer/rps/rps-2003annual-rpt.pdf

[21] https://eetd.lbl.gov/ea/ems/cases/Large_Renewables_Database.xls

[22] Enxco Inc. (the first owner of Hoosac) projects that the 20 Hoosac turbines will produce 84,000 MWh annually. That represents a 31.96% capacity factor, which is optimistic given that the national average is 28%. Nonetheless, we’ll use it here. Massachusetts Division of Energy Resources forecasts 62,360,000 MWh usage during 2007 (the first year of expected operation for Hoosac), so the ratio would be 0.001347. Each year thereafter, energy consumption is expected to increase, so the ratio would get worse over time. Of course, this number assumes that all output from Hoosac would be used in MA: since at least half is to be sold out of state, the ratio would be half (or less) of 0.001347, or 0.006735. [MA DOER, Annual RPS Compliance Report for 2004, 1/9/06, p. 9.]

[23] Until recently, the Hoosac project was owned by Enxco, Inc., a company controlled by EdF, which, in turn, is controlled by the French government. EdF is the largest utility in the world, and the largest marketer of nuclear, coal, and gas in Europe. On 2/17/06, it was announced that Enxco had sold Hoosac to PPM Energy, owned by Scottish Power. [Shaw Israel Izikson, “Hoosac Wind project sold,” North Adams Transcript, 2/17/06; Christopher Marcisz, “Hoosac Wind Sold,” Berkshire Eagle, 2/19/06.]

[24] See attached spreadsheets: Hoosac_Projected_Cash_Flow_A.xls, Hoosac_Projected_Cash_Flow_B.xls
Enxco, Inc., the initial developer of Hoosac, has not provided the project's financials for public review. In the absence of firm numbers, Green Berkshires, Inc. hired Energy Ventures Analysis, Inc. (https://www.evainc.com) to prepare two spreadsheets based on wind industry practices. The first spreadsheet (A) shows projected cash flow including annual payments, either through property taxes or Payments In Lieu Of Taxes (PILOTs), of $320,000. The second spreadsheet (B), substitutes $160,000 for the $320,000 of annual payments. Even the lower figure is undoubtedly too high given the experience of communities elsewhere, but at least it gives a means of comparison. The spreadsheets cover the 20-year period of 2007 through 2026.

In the box at the lower left of the spreadsheets is the set of assumptions underlying the cash flow analysis. Most of these come from documents filed by Enxco, Inc. with state agencies. Other assumptions derive from EVA's experience. Federal, state, and local tax rates are also factored in to the assumptions. Note that since we aren't certain if the payments to the towns will be in the form of local property taxes or PILOTs, both terms are used.

In the lower central section is a summary of the subsidies. Note, in particular, the amount of subsidy from the towns, in either the A or B scenario. Also note that the subsidy totals are conservative because they don't include the full value of the accelerated depreciation schedule established by the I.R.S.

In the top half of the spreadsheets, note that the production output (MWh) is static throughout all 20 years. That's unlikely to be the case, but we're using one number for the sake of simplicity. In the REC column, note that the years 6-15 reflect the price that we believe has been contracted between Massachusetts Technology Collaborative and Enxco Inc. If REC prices are higher during that time, Hoosac's owner will not be obligated to sell RECs to MTC at that low rate. This means that the REC subsidy paid by electricity consumers and green power buyers could be much higher. So the 20-year total of $56 million may be significantly underestimated.
Further to the right on the top half of the spreadsheet, there are two green columns showing the net cash flow to investors. Below that is a red box showing the rate of return to investors. Note that the rate of return ranges from 56% to 58% over the 20-year life of the project.

[25] If 0.001347 represents $80 million of subsidies, then 1.0 (i.e. 100% of all electricity use) represents $59,391,239,792.10 ($80,000,000 ÷ 0.001347). This number is conservative because the $80 million figure assumes that the two host towns will receive tax payments and that those, added together, will be somewhere between $160,000 and $320,000 annually. The $80 million figure also doesn’t take into account the full value of the accelerated depreciation schedule established by the I.R.S.

[26] In its Special Permit Application, Enxco Inc. stated that two full-time jobs would be created. However, in its application for funding from MTC, it estimated that 50-60 hours would be spent on maintenance per turbine each year. For a 20-turbine project, that would mean 25 to 30 weeks of work, or less than one full-time job.

[27] Special Permit Application for Enxco Incorporated: Hoosac Wind Project: Florida/Monroe, Mass., 10/6/03, p. 23.

[28] Larry Lipman, “Bat deaths cast pall over promise of wind power,” Palm Beach Post, 11/14/05, https://www.palmbeachpost.com

[29] Chris Stadelman, County Turbines Generate Attention, Parsons Advocate, 4/13/05, https://www.saveblackwater.org/advocate-4-13-windmills.htm

[30] https://www.dsireusa.org/library/includes/map2.cfm?CurrentPageID=1&State=MA&RE=1&EE=0

[31] In the case of Hoosac, two families have leased property to the wind developer. The Bakkes do not live in the town of Florida but own a large property there. The Gregorys do live on Tilda Hill Road in Florida. In addition, the towns of Florida and Monroe have leased land to the developer.

[32] Mike Johnston, “Wind farm opponents speak out,” Kittitas Record, 1/12/06, https://www.kvnews.com/articles/2006/01/12/news/news02.txt
“Windmills would affect property values,” Kittitas Record, 7/3/04, https://www.kvnews.com/articles/2004/07/03/news/news08.txt
“Wind turbines made our house unsellable,” Daily Echo, 1/22/04, https://www.dartdorset.org/DE%20220104%20WINDFARMS%20MADE%20OUR%20HOUSE%20UNSELLABLE.pdf
“An Ill Wind Blowing?” Daily Telegraph, 2/14/04, https://www.telegraph.co.uk/property/main.jhtml;sessionid=24W342ROMB2Z1QFIQMGSM54AVCBQWJVC?
xml=/property/2004/02/14/pfarm14.xml&secureRefresh=true&_requestid=28228

[33]Pam Foringer, “Our Wind Farm Story,” https://xray.rutgers.edu/~matilsky/windmills/Windfarm_story.htm; Catherine Milner, “Wind farms 'make people sick who live up to a mile away',” Daily Telegraph, 1/25/04, https://www.telegraph.co.uk/news/main.jhtml;jsessionid=ZMJSR21CD3FSZQFIQMGCFGGAVCBQUIV0?xml=/news/2004/01/25/nwind25.xml

[34] Scott Stafford, “Berkshires makes lasting impression,” Berkshire Eagle, 3/1/06, www.BerkshireEagle.com

[35] See the Green Berkshires map titled All Projects Overview, https://www.greenberkshires.org/maps/maps_mainpage.html