How did Cape Wind become a dog?

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    How did Cape Wind become a dog?

    When first described in 2001, Cape Wind looked as though, financially speaking, it might be reasonable: 420 peak MW of power at an installed cost around $500 million. Last year, ten years later, the project was pegged at 468 peak MW of power, a little more than before, and $2.62 billion, an enormous cost increase. After starting as what might have been a reasonable project, how did Cape Wind become a dog?

    [ Jeffrey Krasner, Offshore wind farm blows into Cape view, Boston Globe, July 28, 2001, page A1 ]
    [ Steve LeBlanc, Associated Press, Feds approve Cape Wind power project off Massachusetts coast, USA Today, April 19, 2011, at http://www.usatoday.com/money/industries/energy/2011-04-19-cape-wind-power-electric.htm ]

    Neither general inflation nor a bigger project explains the difference. Together, they would bring the 2001 cost up to about $710 million today. If that held, instead of a wholesale electricity price over 18 cents per kWh, as contracted with National Grid, it could be around 7 cents: a bit high but not scandalous.

    An academic study found wind power costs rising faster than inflation because of big increases in copper and steel prices. However, those add only about 55 percent, making the 2001 cost estimate, adjusted for that factor, now amount to about $1.1 billion--still far short of the latest $2.62 billion.

    [ Bob van der Zwaan, et al., Evolving economics of offshore wind power, Stanford University, 2011, at http://emf.stanford.edu/files/docs/273/IEW-2011-vanderzwaan-etal.pdf ]

    The technology for Cape Wind was coming from Europe, where offshore wind farms started in 1990, and that is still the plan. In 2001, Denmark, where offshore wind was most active, said its total installed cost of wind farms was averaging about €920, then $790, per peak kW. At that price, Cape Wind, as planned in 2001, would have cost about $330 million, so estimating $500 million might even have looked conservative.

    [ European Wind Energy Association, Wind energy costs and prices, 2001, at http://www.ewea.org/fileadmin/ewea_documents/documents/publications/WETF/Facts_Volume_2.pdf ]

    Since then, the European Commission has reviewed actual costs of wind power in Europe, and it has told a story much different from what Denmark and the European Wind Energy Association told in 2001. The Commission claimed typical costs of wind farms are now about €1,250 per peak kW onshore and €3,500 offshore.

    [ Key performance indicators for the European wind industrial inititaitve, November, 2011, at http://setis.ec.europa.eu/activities/eii-key-performance-indicators/KPIs_Wind ]

    Considering general inflation, a larger project, metal prices and the difference between offshore and onshore wind farm costs, Cape Wind's 2001 estimate, adjusted for all those factors, now becomes about $2.9 billion--close to the latest cost estimate publicized here.

    In 2001, Cape Wind's developers failed to tell the public about the big difference in cost between offshore and onshore wind farms. They let bad news leak out a bit at a time. That is how Cape Wind became a dog.

     
  2. You have chosen to ignore posts from topaz978. Show topaz978's posts

    Re: How did Cape Wind become a dog?

    Not really a dog. Dissapointing yes. But give spikey nat gas and petroleum costs we could see 18c per kw for nonpolluting energy as a good thing (might take ten years).
     A few summers ago during peak nat gas prices, the gas fired generators were getting 14c kw for peak demand. This is not far from possible soon if more base power gas generators are added to the grid. Current cheap gas prices are driving long term futures contracts for base demand generators.
     
  3. You have chosen to ignore posts from AppDev. Show AppDev's posts

    Looks like dog, sounds like a dog...it's a dog

    Yes, financially speaking, Cape Wind is a dog. When it finally got a commitment to buy half its power output for 20 years, investors weren't interested. The business is financially so fragile that a gust of wind, so to speak, could blow it away. However, it's only an extreme case in the wind power business.

    Recently Vestas announced a third layoff--a tenth of its employees--although few in the U.S. this time. More layoffs are widely expected in the U.S. within a few months, since Congress dropped the wind energy tax credit, set to expire at the end of this year. West Texas and North Dakota wind projects are "on hold." Orders are being reported as cancelled. Taxes, costs and prices are among the key problems.

    While a "peaking" price for wholesale electricity has gone as high as 21.1 cents/kWh, the average New England price over the past five years has been 6.4 cents. [ ISO New England, 2007-2012, Wholesale Market Data, U.S. Energy Information Association, 2012, at http://www.eia.gov/electricity/wholesale/index.cfm ]

    Wind farms are not peaking power. They enjoy a legally enforced privilege of delivering baseload power. The New England grid would be forced to make room for Cape Wind whenever it had power to deliver. That means electricity customers would pay for Cape Wind most of the time, at 18.7 cents/kWh and up.

    According to news reports, Cape Wind would provide about two percent of the bulk power for the recently announced merger of NStar into Northeast Utilities. As a result, the new utility's average wholesale cost would go up about four percent, and retail electricity prices would probably go up around two percent.

    [ Erin Ailworth, NStar agrees to buy Cape Wind power to win state blessing on merger, Boston Globe, February 15, 2012, at http://www.boston.com/Boston/businessupdates/2012/02/nstar-agrees-buy-cape-wind-power-win-state-okay-merger/38TIb9N1uq7B8P3WHxfOOK/index.html ]

     

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