Think Wind-Generated Power Is Saving People Money? Check Out America’s First Offshore Wind Farm

Printed from:

America’s experiment in off-shore wind-based energy is raising rates on residents and creating another burden for businesses in a state that is already consistently ranked one of the worst places for businesses in the country. 

In December last year, the first off-shore wind farm started operating off the coast of Rhode Island. Although hailed as an innovative step forward in renewable energy, some customers are balking at the higher costs. 

“My whole objection to the process back in 2010 was the excessive cost involved in the demonstration project and that’s a concern that persists to this day and I think is actually being borne out by real numbers,” said Larry Ehrhardt, a former Republican state representative from North Kingstown.

Ehrhardt was among a small group of conservatives who opposed the wind farm, Deepwater Wind, which entered into a power purchase agreement with National Grid, the main state utility, in 2010, amid a state debate about the merits of the project. Ehrhardt since joined in a federal lawsuit against it. A ruling in the case is pending in U.S. Court of Appeals for the First Circuit in Boston.

From the beginning, a major sticking point has been the higher projected cost to ratepayers, which originally was supposed to be 24 cents per kilowatt hour. That’s more than double the national average, which in 2012 was 11.88 cents per kilowatt hour for homes, according to data.

Rhode Island already has some of the highest energy costs in the country, ranking fifth, according to federal data. And even before the impact of Deepwater Wind, residential rates have been rising, increasing from 13.9970 to 15.6060 cents per kilowatt hour between July 2013 and July 2017, according to data provided by the state Public Utilities Commission. 

“The idea that we subsidize any business on the backs of ratepayers is poor policy and to have regular Rhode Islanders pay 24 cents per kilowatt hour in a state that already has higher costs than normal is an unfortunate way to use the little people to subsidize a corporate welfare program,” said Giovanni Cicione, a local lawyer, conservative activist, and former chairman of the state GOP. 

But it’s not just individual ratepayers who could face a bump in costs. For businesses, especially manufacturers, the increase could be serious. “It adds to the cost of doing business in Rhode Island,” said Ehrhardt, who has partnered with the Rhode Island Manufacturers Association in his lawsuit. 

During the state debate over Deepwater Wind, the poster child for affected business was Toray Plastics, which Ehrhardt said was the state’s largest user of electricity. The wind farm threatened to slap Toray with $7.3 million in added costs, imperiling a business which has 600 employees and has invested $750 million in the local economy, according to one report.

The state has responded by giving Toray a grant to help build its own power generator, sparing it the higher rates. Ehrhardt said Toray had received $15 million in total. A spokesman for Toray declined to comment.

For a conservative like Ehrhardt, the state’s intervention to help Toray only compounds the problem. “In a way it’s sort of like driving with one foot on the accelerator and the other on the brake,” Ehrhardt said. “You’re putting it to them in the form of high rates for this inefficient renewable energy program but then providing relief by basically taking them out of that market. That’s terribly inefficient.” 

Deepwater Wind itself is benefiting from federal tax credits, though the company apparently has not disclosed the full amount. Deepwater Wind did not respond to several requests for comment.

Even with such subsidies, the power will be expensive. National Grid will pay $19.9 million above the normal market cost to buy power from Deepwater Wind this year. Over the next two decades, that will only increase, hitting $35.8 million in 2036, according to a January 5, 2017 letter National Grid filed with the state Public Utilities Commission. 

A National Grid spokeswoman said the higher costs were anticipated and justified, noting that the power purchase agreement was in line with guidelines set by state law. “It was anticipated at the time the legislation was passed that costs associated with offshore wind-generated power would be higher than traditional sources, but the state found it was in the public interest to promote a commitment to renewable energy,” said the spokeswoman, Deborah Drew. 

Drew was asked what National Grid is doing to protect ordinary customers from spikes in prices. 

“National Grid is sensitive to customers’ energy costs. There is a growing need to diversify the energy portfolio [sources] in the United States. National Grid supports and continually looks for new ways to advance its energy infrastructure and secure clean, renewable energy sources to support current and future customer needs,” she said. “National Grid is committed to a clean energy transition for our future energy needs, and it is through the mix of these resources, integration of renewables, and energy efficiency that we can help to stabilize costs for our customers over the long-term.”

In effect, National Grid is arguing that the need for a diversity of energy sources is worth the higher price in the short term. And in theory it appears the company expects those costs to eventually stabilize.

There is, of course, an environmental argument in favor of Deepwater Wind. The company says that the wind farm, which consists of just five turbines generating 30 megawatts of power, will cut carbon emissions by 40,000 tons annually. “That’s 800,000 tons over its 20 year life — the equivalent of taking over 150,000 cars off the road!” the company states on its Web site

But Ehrhardt claims that National Grid could diversify its energy supply in other ways. “Our opposition is not an argument about renewable energy or global warming or any of those things,” he said. “Our argument very simply is that if you want renewable energy you can get it in other places in abundance for considerably less money.” (His example is hydropower from Canada.)

Cicione said electric utilities should leave it up to individual customers to pay more for renewable energy if they want to. (National Grid does have such a program, called Green Up.)

“I’m an environmentalist, I’m just not a socialist,” Cicione said. 

The farm, which is located off Block Island, is small by design —  it generates enough power for about 17,000 homes — because it was meant merely to demonstrate the feasibility of off shore wind in the United States, according to The Week

That honor could have gone to the proposed Cape Wind Farm off Cape Cod, but that project has been dogged by lawsuits and was dealt a major blow when major utilities including National Grid withdrew from the deal. Although conservative activists opposed it, Deepwater Wind still did not face stiff opposition from local residents, especially on Block Island, where the farm is located, The Week reported

Despite concerns about higher rates, Deepwater Wind has argued in the past that the project would be good for the Rhode Island economy. In particular, it said the project would yield 300 new jobs in the state. But the company has also said that 300 jobs would be entailed in the construction of the project. It is not clear how many are permanent positions.  

Ehrhardt remains skeptical that there was any major economic benefit to the state. The copper cables used to connect the farm to land were manufactured in South Korea. The container ship that installed the turbines is owned by a European company. The turbines were made by a French manufacturer and the platforms were fabricated in the Gulf Coast

“So the much-vaulted economic growth benefits to Rhode Island thus far have proven to be completely illusory,” Ehrhardt said.