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Cape Wind Project: Started in 2001, the Cape Wind project is an offshore wind farm that will consists of 131 turbines situated within a 24 square mile area on the south coast of Cape Cod. The peak nameplate generating capacity is 454 megawatts (MW) and will deliver 170 MW on average due to the intermittent nature of wind. The developer, Cape Wind Associates, claims that 170 MW is nearly 75 percent of the 230 MW used by Cape Cod, and the islands of Martha’s Vineyard and Nantucket. Project cost is expected to be $2.5B.

The Cape Wind project has several issues. These include long development time, high capital cost, high cost of electricity, need for subsidies, and small percentage contribution to overall electricity generation in Massachusetts. Please see the posting of April 18 for reference to other postings regarding these issues.

Issue-High cost of electricity: Average retail price for electricity in MA during November 2010 was 13.87 cents/kWh for all sectors. Average of all sectors U.S. in November 2010 is 9.62 cents/kWh. The initial price of electricity for Cape Wind is 18.7 cents/kWh in 2013 and will then increase annually by 3.5 percent over 15 years.  At the end of 15 years the Cape Wind electricity price will be 31.3 cents/kWh.

During the past ten years the cost of electricity in Massachusetts has varied from 9.57 cents/kWh in 2000, to a low of 4.06 cents/kWh in 2002 and to a high of 15.45 kWh in 2009. In case of Cape Wind, the cost of electricity will always increase with no downward movement due to economic changes. Thus, the consumer will always experience increasing prices.

Cape Wind Project: Started in 2001, the Cape Wind project is an offshore wind farm that will consists of 131 turbines situated within a 24 square mile area on the south coast of Cape Cod. The peak nameplate generating capacity is 454 megawatts (MW) and will deliver 170 MW on average due to the intermittent nature of wind. The developer, Cape Wind Associates, claims that 170 MW is nearly 75 percent of the 230 MW used by Cape Cod and the islands of Martha’s Vineyard and Nantucket. Project cost is expected to be $2.5 billion.

The Cape Wind project has several issues. These include long development time, high capital cost, high cost of electricity, need for subsidies, and small percentage contribution to overall electricity generation in Massachusetts. These are discussed in the postings of April 20, 26, and 28.

Issue 1. Long development time

The Cape Wind project began in 2001 and has experienced a torturous path of red tape involving approvals, permits, licenses, certifications, lawsuits, and numerous local hearings related to not-in-my-backyard (i.e., NIMBY) issues. As of this writing (February 2011), the developer still has to acquire financing for the project and find customers (National Grid agreed to take 50 percent of the electricity generated by Cape Wind. The remainder has yet to be sold.)

Issue 2. High capital cost

The capital cost of offshore wind turbines is nearly $6,000 per kilowatt (kW), while onshore capital coast is $2,400. In comparison, the capital cost of standard fossil fuel systems ranges from approximately $700 to $1,000 per kW for advanced combustion turbines and conventional natural gas combined cycle systems, respectively.

The levelized cost of electricity generating technologies ranges from approximately $100/MWh for most technologies (i.e., coal, gas, advanced nuclear, onshore wind, biomass, hydro,) to nearly $250/MWh for offshore wind. Levelized cost is the present value of the total cost of building and operating a generating plant over its economic life.

Massachusetts’s Goal

In January 2009, Gov. Deval Patrick set a goal of developing 2,000 megawatts (MW) of wind power capacity, enough to power 800,000 Massachusetts homes, by 2020. This post addresses unrealistic expectations of that goal in terms of onshore wind turbines. Please see the post of April 5 for other onshore wind energy issues. (The offshore case is treated in separate posts.)

Business Development Issues

At best, electricity generation from onshore wind will be a small fraction of the total electricity generated in Massachusetts and will power only 17 percent of the consumers claimed (see “Wind Energy, Onshore Case—Wind Turbine Growth and Homes Powered by Homes in Massachusetts“). The anticipated rate at which wind turbines will be installed between 2010 and 2020 is probably not realistic. Unless the capital cost of onshore wind turbines decreases significantly, Massachusetts may feel compelled to support this industry beyond current expectations. If the economy does not improve, this economic assistance may be problematic.

Further, the life expectancy of wind turbines is 20 to 25 years. They will have to be either decommissioned, replaced with new wind turbines, or refurbished with subsystems (such as, overly stressed gearboxes from wind gusts), and thus incur costs that may have been ignored by policy analysts.

In the future, the cost of wind energy may seem less expensive compared to, say, coal when the heretofore unpaid costs of coal are factored into its price. These costs include climate change, air pollution, water shortage, wastewater, soil pollution, and land degradation.

In January 2009, Gov. Deval Patrick set a goal of developing 2,000 megawatts (MW) of wind power capacity, enough to power 800,000 Massachusetts homes, by 2020. This post addresses the unrealistic expectations of that goal in terms of onshore wind turbines. Please see the post of April 5 for other onshore wind energy issues. (The offshore case will be treated in future posts.)

Issue 3: High Capital Cost of Wind Turbines

The total capital cost of installing 1,028 MW of onshore wind in Massachusetts is approximately $2.5 billion based on $2,438 per MW. The following table, from the Institute for Energy Research, compares the capital costs of competing electricity generating technologies.

Overnight capital cost, new generating technologies ($2,010 per kilowatt)

• Conventional natural gas combined cycle—$978
• Conventional combustion turbine—$974
• Advanced combustion turbine—$665
• Onshore wind—$2,438
• Offshore wind —$5,975

Issue 4: Tax Breaks Needed to Sustain Wind

Onshore wind—and even more so for offshore wind—has capital costs much greater than the capital costs of conventional fossil fuel systems as indicated in the previous table. This cost compels state and federal governments to provide financial incentives that promote the deployment of renewable energy systems to help offset these large capital costs. According to the Database for State Incentives for Renewables & Efficiency, incentives in Massachusetts include

• excise tax deduction for solar or wind-powered systems
• excise tax exemption for solar or wind-powered systems
• commonwealth wind incentive program—commercial wind initiative grant
• commonwealth wind incentive program—commercial wind initiative loan

Massachusetts’s Goal

In January 2009, Gov. Deval Patrick set a goal of developing 2,000 megawatts (MW) of wind power capacity, enough to power 800,000 Massachusetts homes, by 2020. This post addresses unrealistic expectations of that goal in terms of onshore wind turbines. Please see the post of April 5 for other onshore wind energy issues. (The offshore case will be treated in separate posts.)

Issue 1: Unrealistic Growth of Wind Turbines

For Massachusetts there are 205 square kilometers of potential wind that will generate 1028 megawatts (MW) of electricity. By Sept. 30, 2010 Massachusetts had 17 MW of installed wind turbine power, which is 1.7 percent of the maximum potential power (1,028 MW), according to the U.S. Department of Energy. Starting with 17 MW now, achieving 1,020 MW in 10 years implies a compound annual growth rate (CAGR) of 51 percent. That rate is phenomenally high. Compare it with the expected Chinese wind industry growth from 2007 to 2012 at 54 percent CAGR.

As another comparison, the United States wind installation grew from 8,706 MW to 33,542 MW during 2005 to 2009. The CAGR for this case is 30 percent. Thus, Gov. Patrick expects wind installation growth rates in Massachusetts to exceed national wind growth rates. Is this assumption reasonable?

Issue 2: Incorrect Number of Homes Expected to be Powered by Wind

How many homes in Massachusetts could be powered by the maximum available onshore wind energy? To figure this data, you need to know that that maximum wind energy in Massachusetts  based on that National Renewable Energy Laboratory analysis (see “Wind Energy, Onshore Case—Acceptable Locations for Wind Turbines“) is 3,323 GWh per year and the average residential monthly electricity consumption in Massachusetts is 618 kWh/month. Using this data, approximately 450,000 consumers could be powered with the maximum amount of onshore wind energy—not 800,000 consumers as Gov. Patrick claims. As there are 2,647,529 consumers in Massachusetts, powering 450,000 of them with onshore wind-generated electricity represents a 17 percent reduction in other forms of energy.