TommyWonk Back on WDEL to Talk Wind Power

The Public Service Commission staff report gives us plenty to discuss. I'll be back on WDEL (1150 AM) this evening at 5:24 to talk it through with Allan Loudell.
As the News Journal reports, some don't want to discuss it any further:

The report came as a relief to opponents of the project, including Sen. Harris McDowell III, D-Wilmington.
"This is pretty much a nail in the coffin," he said.

Others think there's still plenty to talk about:

[Bluewater Wind spokesman Jim] Lanard said that statement shows the PSC staff still believes there can be a place at the table for Bluewater and its project.
"We're disappointed with this report, but we appreciate the PSC staff's offer to continue the dialogue," he said.
Jeremy Firestone, assistant professor of marine policy at the University of Delaware, said the PSC staff should not have been surprised the price of the wind farm went up when it asked Bluewater to cut its size.
Firestone suggested the state agencies have known the estimated costs of offshore wind power for months, and previously found them acceptable. A cap on commodity and currency escalators could help share the risk between ratepayers and Bluewater, he said.

Negotiations of this complexity involve prices and risk allocation. The commodity risks cited in the report can be managed and hedged. The long term rise in energy costs over the next 30 years cannot be hedged except by building energy sources that aren't subject to increases in fuel costs.
At least some in the state aren't closing the door on wind power:

Phillip Cherry, a policy manager at the Department of Natural Resources and Control, said he could not comment yet on the report, but added that the debate was just beginning.
"I'm anxious to hear what the public has to say about the report. I do think that the public's opinion will be important in this case."

Can the numbers be made to work? I don't know. That's what negotiations are for. It's in the public interest that negotiations continue.

PSC Staff Report Recommends Against Current Wind Farm Proposal

I've only had a few minutes to peruse the Public Service Commission (PSC) staff report on the term sheets. The PSC report is not gentle:

As set forth in detail in the attached Independent Consultant (the “IC”) Report, the proposal outlined in the Bluewater Wind, LLC (“Bluewater”) Term Sheet is not the same project that Bluewater proposed in its initial bid received and previously reviewed by the IC. In fact, viewed solely from an economic prospective, the new Bluewater proposal has little relationship to its prior bid. First and foremost, the negotiations with Bluewater have not reduced the price of the project, as was the expectation of Staff when it recommended negotiations with Bluewater in its report issued six months ago, but rather increased those prices dramatically. Instead of “sharpening its pencil,” Bluewater has used the negotiations to dramatically escalate the potential cost of the project to Delmarva Power (“Delmarva”) and its Standard Offer Service (“SOS”) ratepayers.

The key objection is a proposed energy price adjustment based on commodity costs during the construction of the wind farm. Bluewater Wind wants an index to protect it from increases in commodity prices between now and the installation of the turbines.

The Bluewater Term Sheet raises prices for its services to Delmarva. Bluewater’s original bid employed a fixed payment rate for energy, capacity, and Renewable Energy Credits (RECs). Moreover, the Bluewater Term Sheet includes an energy price adjustment provision to track changes in the commodity indices and currency exchange rates. This price adjustment shifts the energy payment rate in one direction – upward and towards the SOS ratepayers who will now bear 100% of the risk associated with these new price escalators. Second, the Bluewater Term Sheet delays the project in-service date by one year, which further increases the ratepayers’ risk associated with the Bluewater project.

So what happens next?

Staff recommends that the State Agencies continue the review of energy supply alternatives, including on and offshore wind projects, in PSC Docket No. 07-20.

Docket No. 07-20 sets a procedure for Integrated Resource Planning for Delmarva Power, different from the RFP process governing the current negotiations. In other words, negotiations to bring wind power to Delaware could shift to a different regulatory process. I imagine that the current negotiations could continue; after all Delmarva Power hadn't actually agreed to the term sheets now on the table.
You can download the staff report and the independent consultant's report here.

Wind Power Comment Rescue

Wind power is a hot topic of conversation these days, so much so that it's hard to keep up with all that's being said. So today I offer some miscellaneous comments, from online and on the air.
Wind Turbine Gearbox
As I noted yesterday, the News Journal, in what must be a first for local journalism, ran a front page story about a gearbox. State Rep. John Kowalko e-mailed me these observations:

For 25 years I worked at the Delaware City Refinery as the General Foreman of the Machine Shop. Throughout that time there were constant adjustments and upgrades made to thousands of pieces of equipment that functioned under the most severe conditions. Gearbox modifications and upgrades are made responsibly. Proactive development and redesign of parts that undergo stressful operational conditions is part of a successful formula to achieve longevity and lower maintenance costs. The fact that VESTAS has a substantial time frame to address this particular matter before installation dates speaks well for the most optimal outcome and success for its product. I worry that the forces arrayed against Wind Power are taking advantage of a bias in the media or the messengers lack of understanding of technology. Moving backward from a clean, alternative energy production that guarantees price stability is certainly not the answer.

Dana Garrett on WHYY's Delaware Tonight
Dana, who writes Delaware Watch, was invited on to the news in review panel with freelance journalist Rita Farrell and Delaware Today editor Mark Nardone. Appearing without his pundit's pipe, Dana demonstrated he had done his homework on wind power. Dana, who said he had spoken with UD professor Jeremy Firestone, argued that Delaware should double the size of the oringinal wind farm (400 instead of 200 turbines or the 150 turbines now being negotiated) and export the electricity to other states. As of this morning, WHYY has not yet posted the segment.
First State Politics and Wind Power
Over at FirstState Politics, Dave Anderson published this strong post on wind power:

The Bluewater wind-farm has wide support among the population of Delaware. Some people support it because they think wind energy will save the planet or some nonsense. Others support it because they understand that we need energy diversification based upon local sources. Still others understand that nonpolluting sources have an economic value by eliminating costs shifting on to other people. Stop making people sick. Why not figure that into true energy costs?

Why not indeed? Jeremy Firestone and Willett Kempton of the University of Delaware have estimated the health benefits of wind power to be as much as $1 billion.
Dave A. may agree with the White House that global warming is good for you, but I welcome his voice on the wind power issue. I'm not looking for converts; I'm looking for allies.
The SEU and RECs
At the end of his interview with Allan Loudell two weeks ago, Harris McDowell tried to dismiss concerns that Delmarva Power is using undue influence in the General Assembly:

Loudell: Does the fact that Delmarva Power has given political contributions to a lot of lawmakers, how much does that weigh in all of this?
McDowell: Oh I don't know. I consider them -- I'm very unhappy with Delmarva Power. They gave away the people's rights when they gave the RECs away to this development.

RECs are Renewable Energy Credits. McDowell's SEU (Sustainable Energy Utility) will need RECs to provide a funding stream to finance distributed energy sources like solar panels and more efficient appliances. His comment suggests that he's worried that Bluewater Wind will make it harder for the SEU to use this tool once the wind farm come on line in 2012. (By the way his complaint about Delmarva Power seems a little odd when the company hasn't actually agreed to a deal with Bluewater Wind.)
There is no limit to the number of RECs that can be issued in Delaware in any given year, but the entry of a large seller of credits could affect the price. Would it be enough to sink the SEU? It's hard to predict how a nascent market will perform, but I don't think that the SEU would fail because of a price drop in RECs. Even so, McDowell's concern about RECs could be a factor in his opposition to the wind farm.

Will Turbine Problems Affect the Wind Farm?

The News Journal splashed news of a manufacturing problem with the maker of the turbines Bluewater Wind plans to deploy off the coast of Rehoboth, including worried sounds from Delmarva's designated concern troll, Bill Yingling:

Delmarva Power spokesman Bill Yingling said his company is disappointed Bluewater Wind didn't alert Delmarva to the mechanical problem during negotiations for a power purchase agreement.
...
Delmarva is a reluctant player in negotiations, having been forced by the state to seek a 25-year contract to buy wind power to stabilize electricity prices.

Here's why I'm not concerned about the suspension of production of the wind turbines Bluewater Wind plans to deploy off the coast of Rehoboth. First the company, Vestas isn't going out of business; it's just retooling a part in the turbine. Second, the proposed contract includes penalties of up to $68 million if Bluewater doesn't get the the wind farm up and running on time. And once online, if the turbines don't spin, Bluewater doesn't get paid. Bluewater Wind bears the risk, as it should. The company's ability to shoulder the risk was enhanced when Babcock & Brown, with its $50 billion in assets, took a majority stake in Bluewater.
Bluewater executive Jim Lanard shot back at Delmarva:

"We stand by the commitments we've made, and we're surprised that Delmarva would throw out this red herring without speaking to us directly," Lanard said.

Given that Delmarva doesn't want to do this deal, it seems to me the company's concerns are just a bit overplayed. I imagine power plants of all sorts face and overcome technical problems. For instance, the Salem nuclear power plant has a history of going offline due to engineering breakdowns, but I haven't heard Delmarva balk at buying electricity from Public Service Enterprise Group, which runs the plant. I don't know that Delmarva Power has ever played up a potential mechanical problem with a supplier as it's doing here.

The White House Thinks Global Warming Is Good for You

Dr. Julie L. Gerberding, the director of the federal Centers for Disease Control and Prevention, sat down in front of the Senate Environment and Public Works Committee on Tuesday. But before she did, the White House cut more than half of her written testimony, as the New York Times reported:

The White House made deep cuts in written testimony given to a Senate committee this week by the director of the Centers for Disease Control and Prevention on health risks posed by global warming, but the director agreed yesterday with administration officials who said the cuts were part of a normal review process and not aimed at minimizing the issue.

Not that the story's all that new. Last year I wrote about a 24 year old political operative who insisted on editing the public words of senior NASA scientist James Hansen.
And for those who think these might just be isolated incidents of political meddling in our scientific discourse, two non-profit organizations found 453 similar incidents in a survey of scientists released earlier this year:

WASHINGTON—An investigative report by the Union of Concerned Scientists (UCS) and the Government Accountability Project (GAP) has uncovered new evidence of widespread political interference in federal climate science.
...
UCS distributed surveys to 1,600 climate scientists, asking for information about the state of federal climate research. The scientists who responded reported experiencing at least 435 occurrences of political interference in their work over the past five years. Nearly half of all respondents (46 percent) perceived or personally experienced pressure to eliminate the words "climate change," "global warming," or other similar terms from a variety of communications.

Yesterday, White House Press Secretary Dana Perino tried to show that is too up on the latest on global warming:

Q: And one more. You mentioned that there are health benefits to climate change. Could you describe some of those?
Ms. PERINO: Sure. In some cases, there are — look, this is an issue where I'm sure lots of people would love to ridicule me whan I say this...

Then perhaps Ms. Perino, you shouldn't. But she did.

...I’m sure lots of people would love to ridicule me when I say this, but it is true that many people die from cold-related deaths every winter. And there are studies that say that climate change in certain areas of the world would help those individuals.

Why pick on Dana Perino? For one, she's speaking for the most powerful person on the planet about one of the planet's most urgent issues. Shouldn't we expect people in such positions of power to know what they're talking about, or at least take the subject seriously? Or am I just feeling cranky tonight?

Wind Power: Looking Ahead

For those feeling snowed under, or just plain snowed, by the factoids (like the price of electricity in the Netherlands) flying around on wind power, take heart. Between now and the end of November, we will have much more information to consider.
The Public Service Commission (PSC), Controller General, DNREC and Office of Management & Budget will soon have a new staff report, comments and draft agreements to consider:

October 29: The staff delivers its report on the term sheets to the PSC and other agencies.
November 12: Comments on the term sheets and the staff report are due from participants.
November 20: The PSC and the other agencies meet to discuss the staff report and comments.
November 30: Draft Power Purchase Agreements are due from Delmarva Power, Bluewater Wind, Conectiv and NRG.

After the PPAs are presented, the PSC and other agencies will have something on the table on which to act. Here's where it gets hairy.
Prominent legislators have asked Controller General Russ Larson to refrain from ratifying an agreement without consulting them first. Without consensus among the leadership in the General Assembly, Larson may be compelled to abstain from acting until legislators reconvene in January.
There is also the pending threat of litigation, already filed, from Delmarva Power to nullify the entire process.
So how do we as citizens evaluate the proposed wind farm? While there is plenty more analysis yet to come, I am increasingly convinced it will come down to this: If the price of coal and natural gas remain flat for the next thirty years, we will pay a premium for wind power of about five dollars a month. This is highly unlikely.
The price of natural gas has tripled in the last decade. The expense of imposing carbon controls on coal powered plants will drive costs up at least 20 percent according to an MIT study. Finally, the peak oil phenomenon will sharply increase demand for other power sources.
With more relevant data coming, we still have more homework to do to understand how these factors will shape our energy future.

Drinking Liberally in Wilmington this Thursday

In what may be an offhand tribute to shuttle diplomacy, the northern Delaware chapter of Drinking Liberally travels back and forth beween Wilmington and Newark from month to month.
This month's edition of Drinking Liberally gathers in Wilmington on Thursday, October 25th at 8 p.m. at Dead Presidents (yes that's the name) at 618 N. Union Street.
And if you're feeling especially loose with your money (and what self respecting liberal isn't) you can go online to purchase these many fine Drinking Liberally products including t-shirts, hats and glassware.
I'll see you there.

TommyWonk Talking Wind on WDEL this Evening

Allan Loudell has invited me back on WDEL (1150 AM) for an update on wind power in Delaware. We'll be talking at 5:24 this evening. Once again, we'll try to cut through the noise to focus on the most important factors to consider in evaluating the proposal.
If you miss the segment, WDEL posts podcasts of recent interviews here.

Comparing Wind Power Proposals for Long Island and Delaware

What lessons can we learn from the collapse of the wind power project in Long Island? Quite a few. The News Journal today chronicles the missteps of the Long Island Power Authority and FPL Wind in their efforts to build an offshore wind farm.

Long Islanders say Delaware, now considering an offshore wind farm of its own, can learn from the considerable mistakes made by the power authority and wind farm developer.

The differences between the Long Island plan and the one being contemplated for Delaware are considerable. The proposal by Bluewater Wind has been tested by competing with coal and natural gas. It is being refined by ongoing negotiations with a power company that has yet to agree to terms. The Long Island proposal started with a lowball number. Its costs have escalated four-fold since it was first presented. The cost of the Bluewater Wind proposal nudged up slightly as the size of the wind farm was reduced from 200 to 150 turbines. The Long Island plan is only one fourth the size, which means it would be less cost effective.
The News Journal had the municipal energy director for the town of Babylon New York look at the numbers. The worst he could say was that he didn't understand the difference between the FPL and Bluewater Wind proposals.
The Bluewater Wind proposal is being closely examined from front to back and top to bottom. If there were any significant traps in the proposal, someone would have noticed by now.
There are other encouraging differences to be noted. While Long Island residents have complained about the views, hardly anyone in Delaware has raised the issue.

TommyWonk on WGMD Saturday at 1:00 PM

Maria Evans of WGMD, 92.7 FM, has asked me to come on the air Saturday at 1:00 (note the schedule change) to talk about energy and environmental issues, including wind power and NRG's coal burning plant.
Maria has done some pretty good reporting on this stuff herself. For instance she had the proposed wind power terms sheets up on the WGMD blog before anyone else.
Maria is generously devoting an entire hour to our discussion. Tune in if you can, via the airwaves or online. If you feel so moved, call in at 1-800-518-9292.

Jack Markell's Energy Policy

Jack Markell released his energy policy earlier this week. I've been hearing from people who like what he has to say. There are two ways to read his plan.
The first would be to check off the policy points like items in a menu: Increasing renewable energy standards--check. Using the buying power of state government to support renewable energy--check. Attracting more research dollars--check. Developing new energy technologies as an avenue for economic development--check. Making a personal investment in clean energy--check.
The second way to understand such a policy paper is to look for clues as to how a candidate considers policy issues. Looking beyond the policy checklist, Jack Markell gives us a glimpse of how he thinks:

Some people think that renewable technologies are years away from being “practical” or “cost competitive” with traditional power sources. Wind is an exception to that rule and I believe we should act now to deploy wind power facilities in Delaware. Wind power is the fastest growing source of power in the US and the main reason is simple – its cost is fixed and attractive.
For example, in November 2005, the 35,000 customers of Excel Energy in Colorado who had signed up to purchase “green power” fueled by wind farms began paying less than Excel’s other customers. Natural gas shortages had forced Excel to impose a 27% price increase on traditional power customers, while the 35,000 wind power customers paid an average of $10 less per month. Wind is no longer an environmentalist’s pipe dream and with more US and European wind power companies building manufacturing plants in the US, I believe it is time for Delaware to get on board.

This is what caught my eye. He seems to understand that environmental benefits and economic costs and benefits are coming into alignment. The view that the two are antithetical is outdated, as I noted in comments I made to the Public Service Commission in March:

The conventional wisdom is that the public’s environmental interest is in conflict with the public’s economic interest. But my review of the record leads me to conclude that the conventional wisdom has been turned on its head...

No one could pretend to understand all of the the environmental and economic challenges that will confront us over the next decade. I could hardly expect that this one policy pronouncement can or will contain all there is to say about energy. One thing I look for in our next governor is an ability to look ahead, and not simply rely on the conventional wisdom of recent years. (By the way, I'm looking for similar evidence of forward thinking from John Carney, who can draw on his own public policy chops, having earned a masters degree in public administration.)
It's not enough to simply present a list of policy points without offering some framework on which those policies are arrayed. I'm not just looking for someone to hit the right notes; I'm looking for someone who understands the melody and harmony, and not just the individual notes.

Why Would NRG's CEO Favor Carbon Controls?

Maria Evans of WGMD posted a comment on this on Sunday: David Crane, CEO of NRG published an op-ed in the Washington Post titled (I am not making this up): "We're Carboholics. Make Us Stop."
In it he writes:

I am a carboholic. As Americans, we are all carboholics, but I am more so than most. The company I run, NRG Energy, emits more than 64 million tons of carbon dioxide (CO2) into the atmosphere each year -- more than the total man-made greenhouse gas emissions of Norway. And we are only the 10th-largest American power generation company. Imagine the CO2 emissions of Nos. 1 through 9.
Why do we do it? Why does America's power industry emit such a stunning amount of greenhouse gases into the atmosphere in this age of climate change?
We do so because CO2 emissions are free. And in a world where CO2 has no price, removing CO2 before or after the combustion process is vastly more expensive and problematic than just venting it into the atmosphere.
Congress needs to act now to change our ways. Lawmakers should regulate CO2 and other greenhouse gas emissions by introducing a federal cap-and-trade system, which would put a cap and a market price on CO2 emissions.

Has the chief executive responsible for Delaware's dirtiest power plant suddenly gotten religion? Has he recognized the error of his ways? I suspect not. Instead I can think of three reasons why an executive in his position would publicly endorse carbon controls.
First, power plants require enormous capital expenditures. Those putting their money down on big ticket capital items don't like uncertainty. A recent MIT study put the cost of carbon controls at 20 percent or higher. What investor would want to take on that kind of risk for average returns? GE CEO Jeffrey Immelt made a similar point when he came to Wilmington last year.
Second, operators of coal plants would like to be able to pass on the cost of carbon controls to their customers, which is what NRG did when it submitted its proposal for "clean coal" as part of the RFP process that led to the decision to build an offshore wind farm in Delaware. NRG's proposal would have placed the cost of future carbon controls with the ratepayers.
Third, NRG already knows it will have to clean up the Indian River power plant. It's in the company's interest to see to it that every coal power plant be required to do so or pay for expensive carbon offsets. In August, NRG agreed to reduce its emissions in response to a new regulation promulgated by DNREC. It's in the company's strategic interest that all of its competitors that operate coal fired plants be held to similar requirements.
So when David Crane writes, "Please make us stop," I'm guessing he really means "Make all the other dirty coal power plants clean up their act as well."

Professors Kempton and Firestone Evaluate the Term Sheets

Willett Kempton and Jeremy Firestone of the University of Delaware have circulated their first take on the terms sheets now under review. In their comments filed with the Public Service Commission, which were published in the News Journal on Sunday, Kempton and Firestone question the usefulness of the proposed backup generators and urge that the proposed wind farm be expanded to its original scale of 600 megawatts. Their comments bring some useful clarity to a complicated subject.

Willett Kempton and Jeremy Firestone's
Preliminary Comments on All Three Term Sheets

Last spring, after an open bidding competition, four Delaware state agencies jointly chose an offshore wind farm as the next major source for new power for Delaware, with the possibility of a smaller natural gas generator as well. The winning bidder, Bluewater Wind, was sent to closed door negotiations with Delmarva Power, which would buy the resulting power.
Conectiv and NRG did not win the bid, but were allowed to negotiate terms for "backup" power.
The negotiated terms are now public. The offshore wind farm is smaller than originally proposed, 450 megawatts rather than 600 (that is, 13 percent rather than 17 percent of the entire state's electric supply). The cost will be about 11 cents per kilowatt-hour, compared with the earlier bid of about 10 cents at the original size and terms.
A formula also allows Bluewater to pass on higher materials costs should they arise, but onlyuntil financing is fully in place. Other than a 2.5 percent inflation factor, there will be no increase in electric prices from this wind farm for 25 years.
Overall, the offshore wind bid is straightforward, is based on proven technology, and is consistent with what the law called for. It will have substantial benefit for consumer pricestability, decrease Delaware's contribution to global warming, reduce air pollution and contribute to Delaware's economic development. Because all of the fundamentals supporting the offshore wind farm bid remain firmly in place -- and the bid is if anything stronger now with the additionof a large investor, Babcock and Brown -- we expect the state agencies to reaffirm their decision for the wind farm.
However, the state agencies will have to resolve some questions remaining from the contract negotiations. We hope they also consider the original, larger project that was less expensive perkilowatt-hour. To do this would require finding a means to assure Delmarva that it would not get stuck with more electricity than it needs during the few hours of the year when load is lowest and the wind is strong.
We also think the state agencies should consider placing a cap on the amount by which an increase in commodity costs would increase the wind cost to consumers; and add that if commodity costs decrease, the benefits should be passed to consumers as well.
In case anyone is still wondering if Delaware's offshore wind farm is a good idea, look at our neighbor.
Last week New Jersey issued a request for proposals for a 350-megawatt power plant, allowing bids only for offshore wind: No coal, gas or land-based wind may apply. New Jersey understands what Delaware's bids revealed: that offshore wind has an electric price close to other generators, while providing stable prices, zero pollution and health benefits. It is carbon-free homegrown energy, creating a new local industry with construction and high-technology jobs.
Whereas Delaware is requiring Bluewater to pay the full project cost with no subsidy or state tax break, New Jersey is offering options for tax-free bonds to finance its project, plus offering $19 million cash to encourage bidders. New Jersey's 350-megawatt wind plant is considered a pilotproject to see if that state wants to develop an additional 2,150 megawatts of wind off its coast.
In contrast to its wind contract, Delaware's proposed backup contract is more controversial. Delaware can pick either natural gas bid -- or neither.
The Conectiv bid is for two 100-megawatt units in Bridgeville, fed by existing gas lines. The NRG bid is for 300 megawatts at Indian River, and will require a new natural gas pipeline to be run under the Chesapeake Bay. Both gas bids are for 25 years.
When measured against Conectiv's 2006 gas bid, both new gas bids are less favorable to Delmarva customers. They offer no price stability benefits, and despite their backup function, both are even larger than the proposed stand-alone Conectiv plant. In both new gas proposals, all increases in natural gas prices, and all carbon dioxide fees, would be passed through as higher, uncontrolled electricity prices.
In their order this past May, the four state agencies required that any change from the original bids result in greater price stability, lower price or other benefits for consumers. The changes proposed by NRG and Conectiv do just the opposite.
We see little justification for building a new backup power plant in the first place. Delmarva has stated on the record compiled in the bidding proceeding that no backup power is needed. We agree.
We also note that the comparable-sized New Jersey offshore wind plant request does not call for any new backup power plant.
In southern Delaware, the existing gas plants are often idle as it is. This past July and August, more than 350 megawatts of natural gas generators in Kent and Sussex counties sat idle. They ran an average of only 7 percent of the time [1]. They weren't fired up because for most hours, natural gas is already too expensive. It makes no sense to build 200 or 300 new megawatts for backup on top of so much idle capacity. If new gas generation was to displace existing coal, that would have a beneficial effect in cleaning up the air a bit. A new gas plant also would be more efficient than old ones. But consumers should rightfully ask if building a redundant gas plant and getting locked into a 25-year contract makes sense at this point.
Natural gas plants can be built quickly. There's no need to lock into a gas contract now, justified as backup for a wind farm that won't be operating until 2014.
Moreover, building transmission seems to make more sense for Delaware than building additional natural gas capacity. After the state agencies acted in May, the Mid-Atlantic Power Pathway received interim approvals from the federal government, the regional transmission operator and Gov. Minner. If and when it is finally approved, MAPP would run a high-voltage line connecting from multiple power plants and power users in Virginia, into Delaware all the way to Indian River. This would provide any backup power needed. And if Delaware builds more offshore wind farms, that also would make it easier for us to sell excess wind power toother states.
If one had to choose between the backup proposals, how do they compare? Regarding the danger of locking users into high gas payments, Conectiv's bid imposes a smaller penalty if the plant sits idle. The NRG plant is more efficient (less gas needed and thus less carbon dioxide emitted per kilowatt-hour generated), but would cost more to build and require constructing a big new natural gas pipeline.
If state decision-makers nonetheless desire backup, they should consider having Conectiv build only one of the two 100-megawatt units proposed and returning to Conectiv's original proposal for a 10-year commitment and price increases tied to a less volatile coal index, rather than passing through all natural gas price increases.
If backup is deemed necessary now, these modifications would add to existing backup with much less risk.
[1] This is a rough estimate that can be refined if needed.

Citizens for Clean Power Clear the Air

The correspondence has been flying fast and furious. John Austin and Pat Gearity sent me a copy of their letter to state legislators refuting the assertions in the McDowell/Hudson letter.

October 8, 2007

To: Senator Harris McDowell
Representative Deborah Hudson
Members of the Delaware General Assembly

Citizens for Clean Power responds to the six claims in Sen. McDowell’s 10/2/07 letter to the General Assembly (co-signed by Rep. Hudson). Citizens for Clean Power is a nonprofit group based in Lewes, Delaware.
[1] “On average, the Dutch electricity consumer pays about 30 cents per kWh (Kilowatt hour) – twice as much as Delaware consumers – in order to justify expensive options like off-shore wind.”
In Europe, price to the consumer is a function of the cost of electricity generation, local market conditions, environmental taxes, and value-added taxes (VAT). The Dutch pay extra for environmental taxes and VAT. Americans do not. On the other hand, the base cost of electricity for the offshore wind-loving Danes and for the Dutch is very similar to Delaware’s average cost for power.
Denmark
Base Price of Energy, 14.14 cents/kWh
Consumer Cost, 33.93 cents/kWh
Netherlands
Base Price of Energy, 16.97 cents/kWh
Consumer Cost, 29.69 cents/kWh
Delaware (w/o offshore wind)
Base Price of Energy, 11.3 cents/kWh*
Consumer Cost, 13.73 cents/kWh
*SOS Residential
[Link] and [Link]
[2] ”The Dutch have built many onshore wind farms. They have started only one offshore wind power plant and it is experimental. They reported their onshore wind farms are much less expensive than the experimental offshore power plant.”
Offshore wind plants are far from experimental. Denmark has been operating offshore wind farms since 1990. The HornsRev wind farm is located in the North Sea - hardly a placid environment: [Link]
Offshore wind has been so successful in Denmark that their public officials want to install more, not less. Check it out at [Link].
Delaware lacks adequate resources on land for large-scale utility generation. This fact was established six months ago.
Bluewater Wind’s project is fully insured. Does Sen. McDowell think that the company (and its new backer, Babcock & Brown) would put turbines in the ocean without assuring their reliability?
In our opinion, people should not speculate about the cost of Delaware’s offshore wind project until the PSC staff completes its analysis (on or about October 29, 2007). Citizens for Clean Power respects the expertise of the PSC staff and the Independent Consultant. We think public officials should do the same.
[3] “Before deciding to build the experimental offshore power plant, the Dutch completed a detailed off-shore wind study with actual data on wind speeds for every hour of the year.”
Scientists at the University of Delaware have already done extensive studies of wind speeds over the Atlantic Ocean. The Department of Energy and the University of Delaware published details about the significant wind energy potential off coastal Delaware. The U.Del. study was done over a year ago. It was posted at: [Link] and [Link]
More wind studies will be undertaken as part of the permitting process. According to the term sheets, if Bluewater Wind fails to obtain necessary permits and approvals by the deadlines specified in the contract, they have to pay Delmarva Power about $6,000,000 in liquidated damages! Would it be rational for Bluewater’s investors to risk losing millions of their own dollars on a mere “experiment?”
[4] “When the decision was made to build the experimental project, the Dutch chose a size that is one-third the size of the power plant proposed for construction in federal waters off the Delaware coast.”
There are economies of scale in wind farm construction. The larger the wind farm, the lower the cost to the ratepayer. The Dutch have a tiny wind farm. We will not; unless, that is, Sen. McDowell and DP&L manage to cut back the size of the wind farm even further than the 150-turbines now proposed by Bluewater Wind. During negotiations, DP&L insisted on cutting back the size of the wind farm from 200 turbines to 150.
That maneuver cost DP&L customers an additional cent per kilowatt-hour on their bill. Is Sen. McDowell interested in even fewer turbines, which would raise the rates more? Delmarva Power is not interested in renewable energy; every kilowatt from renewable energy is one less kilowatt produced by their sister company Conectiv.
[5] ”The [Dutch] government agreed to provide large subsidies so that the electricity price would increase but not too fast.”
There is not one fact relevant to Delaware’s offshore wind farm in this statement. If the Dutch are unable to build a large wind farm and reap the benefits of 25-year level pricing, that is their misfortune.
We have tried to be respectful of all members of the Legislature. Frankly, however, we are disgusted that Delmarva Power supporters promote the myth that Delaware taxpayers, or DP&L ratepayers, will pay upfront to subsidize construction of the offshore wind farm. The Delaware offshore wind project will be financed upfront by investors and outside loans, not by government or the public. This important point was disclosed in Bluewater’s bid. Sen. McDowell, do you think it is ethical to imply otherwise? Do your colleagues think it is ethical?
Senator, since you have placed yourself in the position of spokesperson for Delmarva Power’s position, we charge you with the responsibility to speak from the truth. You have failed this important civic charge. The taxpayers and ratepayers will not pay a penny for the wind farm until and unless it churns power for DP&L customers. This commitment was in Bluewater Wind’s bid. It has been in the public record over six months.
[6] “A representative from Vestas Wind Systems (a leading producer of wind turbines) recommends that offshore wind turbines should not be in service for more than 20 years.”
Vestas sells turbines. Twenty years is the estimated design life. With proper maintenance and upgrades, useful life of Vestas turbines can be extended another five years, or more. Bluewater Wind includes maintenance and equipment upgrades in its plan throughout the service life of the turbines. This information was also contained in the original bid. Bluewater Wind has the expertise and the financial resources to meet their contractual obligations. It is not necessary for the Legislature to micromanage the contract.
To the Honorable Members of the General Assembly:
We don’t need more studies to repeat what has already been learned about renewable energy sources for Delaware. Hundreds of thousands of taxpayer dollars have been paid to the Independent Consultant and other PSC consultants to investigate the bids, and make recommendations. The studies were carefully considered before the Bluewater Wind project was named the primary power source under HB6.
Delaying or terminating the approval process could be disastrous for the state, legally and economically. We are shocked any legislator would suggest re-opening a major bid
process at this late date. So far, the RFP process has cost bidders and taxpayers in excess of $3 million. There are many intelligent, well-informed citizens in Delaware. The people have spoken. We demand in-state, price-stable, non-polluting energy. The offshore wind project will create new jobs and major business opportunities in Delaware. The public has said they are willing to pay extra for it.
Contrary to the public statement of another legislator, the purpose of HB6 was never to get “cheap” power. Delmarva Power’s decades-old mantra, “cheap power at any price,” is what got us into the mess we are in now - unpredictable price hikes from continued dependence on out-of-state fossil fuels and short-term contracts. The results: price instability, big rate hikes, horrendous pollution, and alarming rates of lung cancer, heart disease and asthma.
We believe it is in the best interest of the people of Delaware for members of the General Assembly to carefully examine the motives of public officials working to dismantle or circumvent laws they have enacted. We urge you to ignore misleading, inappropriate messages coming from Delmarva Power supporters. In a few weeks, we’ll hear from the real experts.

Respectfully yours,
John Austin & Patricia Gearity
Citizens for Clean Power

For readers who find their eyes glazing over with all these letters, I apologize and ask your forbearance. I will get back to trying to make sense of it all in the coming days, but for now I simply want to get it all out in the public eye.

The "Gore Derangement Syndrome"

The sheer tonnage of invective hurled at Gore and the Nobel Committee in the last few days leads one to wonder, what is it that drives the right batty when it comes to Al Gore?
Holding forth on Fox News, Weekly Standard editor William Kristol disparaged the honor, calling it "a prize given by bloviators to a bloviator for nothing." Locally, Hube joins the fun by declaring that "the Nobel Peace Prize is now a sad joke." New York Times columnist Paul Krugman calls it the "Gore Derangement Syndrome."

On the day after Al Gore shared the Nobel Peace Prize, The Wall Street Journal’s editors couldn’t even bring themselves to mention Mr. Gore’s name. Instead, they devoted their editorial to a long list of people they thought deserved the prize more.
And at National Review Online, Iain Murray suggested that the prize should have been shared with “that well-known peace campaigner Osama bin Laden, who implicitly endorsed Gore’s stance.” You see, bin Laden once said something about climate change — therefore, anyone who talks about climate change is a friend of the terrorists.

Of course, speaking of Al Gore in disparaging terms became an occupation hazard among the sophisticated media stars who treated us to endless coverage of his earth tones and his sighing during the 2000 campaign. George Bush, you see, was so much more authentic, as Bob Herbert pointed out in the NYT:

Mr. Bush came to mind because, for all of the obvious vulnerabilities he exhibited in 2000, it was not him but Mr. Gore who was mocked unmercifully by the national media. And the mockery had nothing to do with the former vice president’s positions on important policy issues. He was mocked because of his personality.
In the race for the highest office in the land, we showed the collective maturity of 3-year-olds.
Mr. Gore was taken to task for his taste in clothing and for such grievous offenses as sighing or, allegedly, rolling his eyes. It was a given that at a barbecue everyone would rush to be with his opponent.
We’ve paid a heavy price. The president who got such high marks as a barbecue companion doesn’t seem to know up from down. He’s hurled the nation into a ruinous war that has cost countless lives and spawned a whole new generation of terrorists. He continues to sit idly by as a historic American city, New Orleans, remains wounded and on its knees. He’s blithely steered the nation into a bottomless pit of debt.

In 2000, the presidential campaign was reduced to an election for senior class president, with the egghead pitted against the genial frat boy. The invective heaped on Gore cannot erase the uncomfortable truth that throughout his career, he has been right more than his critics, including the senior and junior Bush, as Krugman points out.

The worst thing about Mr. Gore, from the conservative point of view, is that he keeps being right. In 1992, George H. W. Bush mocked him as the “ozone man,” but three years later the scientists who discovered the threat to the ozone layer won the Nobel Prize in Chemistry. In 2002 he warned that if we invaded Iraq, “the resulting chaos could easily pose a far greater danger to the United States than we presently face from Saddam.” And so it has proved.

But for some, a know nothing is preferable to a know it all.

State Rep. John Kowalko Writes Regarding Wind Power

Earlier this month State Sen. Harris McDowell and State Rep. Deborah Hudson wrote a letter in which they urged that offshore wind power be considered "experimental" and that wind power should be built only as the result of "a competitive bidding process including all cost-effective alternatives." (Didn't we just do that?)
State Rep. John Kowalko has responded to the McDowell/Hudson letter:

Dear Colleagues,
Last week we received a letter from Senator McDowell and Representative Hudson about their recent trip to examine offshore wind park facilities in Amsterdam as part of an effort to better understand Bluewater Wind’s proposal to build a similar project off our coast. While I applaud their diligence, I believe they have conveyed some wrong impressions from their trip, perhaps because some of the facts they cite regarding the Dutch experience do not apply here.
The first and arguably most important issue raised in their letter is the price. While the Dutch may pay 30 cents per kWh, we here in Delaware will not. Bluewater Wind has committed to a price of 10.59 cents per kWh and guaranteed their price for 25 years, subject only to the rate of inflation. If they do not supply energy at the price agreed upon they are subject to heavy penalties.
Furthermore, the price of Bluewater Wind’s energy is directly tied to the size of the project and to the fact that it will not receive a government subsidy as the Dutch project does. In essence, the relative size of the project in comparison to the Dutch project Senator McDowell and Representative Hudson visited is what helps keep cost per kWh lower.
The second issue they raise is whether wind power is a proven or “experimental” technology. There are established wind parks across the globe and some countries are already building second and third projects because the technology works.
A third issue raised in their letter is whether there is data to support the fact that Bluewater Wind’s project can produce the energy it is pledged to provide. There has been significant research done, but if you need further assurances consider this: Bluewater Wind was recently purchased by Babcock and Brown, the world’s fourth largest wind farm developer and investor. I can assure you the new owners did not do so because they only “thought” or “hoped” the project would work.
As elected officials, we should act no differently. We should ask questions about the project, how it will work, its benefits and costs. It is our responsibility as elected public servants. But as we consider all the facts of the Bluewater Wind proposal, please consider one simple fact. Is Delaware going to take a lead role in developing clean, reliable and stable-priced energy as it prepares for its future?
If energy producers continue to use “dirty” fossil fuel based technologies, they will continue to produce pollution and contribute to the sea level that already threatens Delaware’s shores. If Delmarva Power purchases energy from another state rather than a Delaware based company, jobs are produced there not here. The Bluewater Wind project will create 500 jobs for the three year construction period and up to 80 permanent, union operations and maintenance jobs.
If we miss this opportunity we may not get another.
Representative John Kowalko

McDowell was interviewed by Allan Loudell on WDEL last Friday. (Hopefully, the podcast will be posted Monday.) When Loudell asked if he would instruct the controller general, who represents the General Assembly, to veto a deal, McDowell replied that he didn't want the controller general to "cherry pick" the data in favor of approving a deal. I have never heard any legislator complain that the controller general's office was in any way unfair or biased in its analysis.

TommyWonk, Dace and Gazizza Together Again On WILM

I’ll be joining Dace Blaskovitz tomorrow for the monthly view from the blogosphere segment on his Money and Politics show on WILM, 1450 on your AM dial. The show runs from every Saturday from 10:00 to 11:00. I’ll be on at about 10:30 with Paul Smith, Jr. from Gazizza.net, who will be sitting in for Hube.
We’ll be discussing Al Gore, health care, the Delaware Military Academy and more. Listen in and then get outdoors to enjoy the rest of this beautiful October weekend.
UPDATE: We did not get to any of the promised topics, but we did discuss wind ower, the election in RD 14 and Joe Biden. As usual, it was good fun. Thanks Dace and Paul.

The Nobel Peace Prize Awarded to Al Gore and the IPCC

The Noble Peace Prize has been awarded to Al Gore and the Intergovernmental Panel on Climate Change (IPCC) for their work on climate change. The Nobel Committee noted that the IPCC (a United Nations agency) has played a central role in the science of global warming:

Through the scientific reports it has issued over the past two decades, the IPCC has created an ever-broader informed consensus about the connection between human activities and global warming.

This should reinforce the solidity of the scientific consensus on climate change. The IPCC's most recent report features these compelling charts (click to enlarge) depicting the increase in CO2, methane and nitrous oxide concentrations in our atmosphere.
The Nobel Committee cited Gore's unique role in putting the issue before the public:

He is probably the single individual who has done most to create greater worldwide understanding of the measures that need to be adopted.

Reuters reports that Gore voiced his gratitude at sharing the award with an international committee of scientists:

"This award is even more meaningful because I have the honor of sharing it with the Intergovernmental Panel on Climate Change -- the world's preeminent scientific body devoted to improving our understanding of the climate crisis -- a group whose members have worked tirelessly and selflessly for many years."

There are many in the U.S. who remain convinced that global warming is a hoax perpetrated by internationalists determined to destroy capitalism. An award from some Scandinavians isn't likely to sway them. Also stay tuned for the Gore haters, who will probably point out his hypocrisy when he flies to Stockholm to receive his award instead of traveling by kayak.

"The experimental days of offshore wind development are over."

So writes Bluewater Wind president Peter Mandelstam in response to two legislators who think the state is moving too fast to complete an agreement to bring wind power to Delaware.
Last week Harris McDowell and Deborah Hudson wrote their colleagues a letter offering reasons to not complete a deal to bring wind power to Delaware. Their letter asserts that offshore wind power is "experimental" and pointed out that the price of electricity in the Netherlands is 30 cents per kWh.
Yesterday, Mandelstam wrote a letter refuting the key points McDowell and Hudson made:

October 9, 2007

Dear Members of the General Assembly,

I just spent a few days with Senator McDowell and Representative Hudson in Amsterdam, touring offshore wind park facilities, and I must say, after having read their October 2nd letter to you, I was disappointed. In an effort to provide proper context to this critical issue, I offer this letter in response.
First, as a general matter and as we carefully document below, relying upon the Netherlands’ electricity price of 30 cents per kWh as an argument that offshore wind is too expensive is misleading, especially when one considers that Bluewater’s proposal to Delmarva Power set the price at 10.59 cents per kWh. Similarly, offshore wind power generation is a proven technology that has moved well past the experimental stage. To suggest otherwise is not accurate.
Importantly, Bluewater’s Atlantic North Offshore Wind Park will provide clean, renewable, and stable-priced power to more than 100,000 Delaware households. We will protect the environment, support the fight against global warming and sea level rise, and ensure that birds and marine life are fully protected. At a distance of at least 11.5 miles from the coast, our turbines will be barely visible on clear winter days; in the summer time the haze will render the turbines virtually impossible to see.
In response to the letter from Senator McDowell and Representative Hudson (“the Letter”), I offer the following point by point observations and comments:
1. The price of electricity. The Letter points to Dutch electric rates costing 30 cents per kWh. The Bluewater Wind bid already submitted to Delmarva Power is 10.59 cents per kWh, nearly one-third of the Dutch price. Indeed, our price was submitted to Delmarva Power in our September 14, 2007 term sheet and is available on line at the Public Service Commission’s website:
http://depsc.delaware.gov/electric/irp/termsheets091407.pdf
In regard to the cost of electricity in the Netherlands, it is also important to note that according to Statistics Netherlands, Voorburg/Heerlen 2007, “The Netherlands is among the countries where the highest tax rates are imposed. Energy tax and VAT (Valued Added Tax) account for more than 40 percent of the electricity price.” Of course, Delaware does not impose an Energy Tax or a VAT in residential electric bills; in fact, there is no line item tax on residential electric bills. Accordingly, the reference in the Letter to an electricity cost of 30 cents per kWh does not provide the reader with an accurate “cost to compare”. To begin to get to that number, the 30 cents per kWh would have to be reduced by 40% which comprise the Energy Tax and VAT. In addition, other costs related to Dutch social policy decisions may be reflected in this cost to compare so it may be that the actual cost to compare is even lower. Simply put, this is not a relevant comparison.
Dutch offshore wind parks. The Letter states that the Dutch have “started only one off-shore wind power plant and it is experimental….” In fact, the Dutch have started two offshore wind parks. One, the Egmond aan Zee, is completed and operating; the other, Q7, is under construction and Senator McDowell and Representative Hudson saw the staging area for this project. (They would have taken a boat or helicopter to the actual wind park site, but it was too windy.) In addition, seven other European countries have built 27 operating projects with dozens more in various stages of development. These countries continue to build these facilities because they are great sources of affordable, stable-priced energy and because they help fight against climate change and sea level rise. Governor Minner, Senator McDowell, Representative Hudson and the rest of the Delaware delegation received briefings on the robust state of European offshore wind.
The Letter also argues that offshore wind is still in its experimental stage. Nothing could be further from reality. In 2006, there were 877 MW of energy being generated by offshore wind parks. By the end of 2007, that number will rise to 1,077 MW. The next four years will see equally impressive increases in the amount of energy generated by offshore wind parks:
Cumulative Totals of Energy Generated by Offshore Wind Parks
2009 1,250 MW
2010 2,605 MW
2011 4,970 MW
2012 7,600 MW
The experimental days of offshore wind development are over. Indeed, offshore wind technology is well established and fully commercial.
The offshore wind team at Shell’s Renewable Energy group (the Dutch partner cited in the Letter) has moved well past the experimental stage too. In fact, Shell is a 33% owner of the 1,000 MW London Array project, a development that, once completed, will be one of the world’s largest wind parks – offshore or on land. The London Array will be nearly three times larger than the wind park Bluewater has proposed for 11.5 miles off of the Delaware coastline. Shell states that major expansions in wind power require the development of offshore wind projects where the “winds are stronger, larger turbines can be used and the chance of visual disturbance is smaller.”
It should be noted that the structure of the sales arrangement, which is a PPA with predefined escalation, leaves the technical risk with the owners. Further, consider that Babcock & Brown is a highly experienced wind investor (fourth largest owner in the world) and would not have been interested in purchasing Bluewater if offshore wind were an experimental technology. Babcock & Brown did extensive due diligence on the project and the state of the technology and is comfortable that the project will be a technical success.
For more information see Shell’s web site:
http://www.shell.com/home/content/rw-br/about_shell/wind/wind_1017.html
2. Wind resource assessment. The Letter also states that “the Dutch completed a detailed off-shore wind study with actual data ….” Bluewater Wind already has extensive offshore wind speed data for our Atlantic North Wind Park and we will have even more data by the time construction begins. To date, Bluewater has expended over five million dollars ($5,000,000) on our bid to provide Delaware’s residents with stable-priced energy. Before making this investment, we reviewed eight (8) years of publicly available wind data that is maintained by the National Oceanographic and Atmospheric Administration (NOAA). This is the same data that the University of Delaware has relied upon in its 2005 – 2007 thorough and detailed research papers that it has published on the potential for offshore wind in the state.
Our investors would never allow us to bid, let alone build, the wind park without knowing what the wind resources are at our site. That data is the key piece of information that informs us whether there is adequate wind to provide the amount of electricity that we will guarantee to Delmarva Power – a guarantee that provides for penalties if we fail to meet it.
In fact, we have already provided Delmarva Power with our own hour-by-hour, year-round wind resource assessment.
Some of the penalties that we could be subject to include $68,000,000 in delay damages and termination fees if we do not fulfill our contractual obligations. Thus, we can say with a great deal of confidence that we have extensively studied all details of our proposed wind park. We are confident that the wind resources will allow us to meet the terms we have proposed in the Term Sheet.
3. Project size. The Letter notes that the Dutch wind park is “one-third the size” of what Bluewater has proposed. Whether you choose to develop an offshore wind park with 36 turbines (Egmond aan Zee), with 60 turbines (Q7), or with 150 turbines, the technology is the same. Turbines are modular and wind parks can have any number to match required output. Turbines connect to an offshore transformer by armored submerged cabling, which then connects via larger, armored submerged cable to an on land substation.
The Dutch teamed up with Shell Renewable Energy to build Egmond aan Zee, the first offshore wind park in the Netherlands. By the time the Bluewater Wind Park is built off the Delaware coast, offshore wind parks will have been operating for more than twenty years – and each year generating more than enough electricity for over 871,000 households. That’s a lot of data and experience upon which our development team can rely.
Let me also point out that members of our development team have been directly involved in 868 Megawatts, or 95%, of the 918 Megawatts of offshore wind energy capacity that had been installed when our proposal was submitted last year. This represents 21 of the 27 offshore wind parks that were operational at that time. In the short time since the proposal was submitted, even more projects have been advancing through the design and construction process, and members of our team have been participants in those projects as well.
4. Subsidies. The Letter reports that the Dutch “government agreed to provide large subsidies” for the project. While that may be true, Bluewater Wind will receive no state subsidies. Our price is set.
5. Turbine service period. In the Letter, reference is made to a comment made by Vestas, a turbine manufacturer, which is also Bluewater’s expected turbine manufacturer. The Vestas comment, as reported in the letter to you, was that “turbines should not be in service for more than 20 years.” Bluewater has negotiated a 25-year term with Delmarva Power and our financial model includes all costs for operation and maintenance of the facility and insurance for the entire 25-year period. All costs to maintain or replace turbines will be borne by Bluewater at no risk to Delmarva’s ratepayers.
I would now like to respond to the steps recommended by Senator McDowell and Representative Hudson:
* Wind parks utilize well-established technology. The Bluewater Wind project will be a fully commercial, privately financed offshore wind power plant. There are now 877 MW of electricity generation through offshore wind parks; by 2011, more than 4,500 MW of generation capacity are planned to be installed. Offshore wind technology is indeed mainstream technology.
* Bluewater Wind has completed a wind resource assessment of actual data. In addition to the existing wind resource assessments that we have, we are awaiting approval from the U.S. Department of Interior’s Minerals Management Service to install a hub-height meteorological tower (met mast) to take additional wind speed measurements for at least one full year. We will also begin conducting avian studies as well as marine research issues by using the met mast base as a research platform; our goal is for this in-depth research to begin in the spring of 2008.
* Green energy options for Delaware. HB 6 mandated that Delmarva Power consider a long-term contract through a competitive bid for in-state generated power.
Bluewater Wind was selected unanimously by four state agencies – the Controller General, the Office of Management and Budget, the Department of Natural Resources and Environmental Control and the Public Service Commission – to be the primary source of that power. The competition was not for green power, per se, as the competitors for the long-term contract included a coal facility and a gas facility.
Bluewater Wind fully supports efforts to expand development of green energy for Delaware’s citizens. To that end, we are participating fully in the Integrated Resource Planning process, as established by the General Assembly, and as recommended to you in the Letter. We also continue to support Senator McDowell’s Sustainable Energy Utility (SEU) and view the conservation benefits of the SEU as being fully compatible with our offshore wind park.
* Competitive bidding for green energy. Bluewater Wind participated in a competitive bid for the long-term contract with Delmarva Power. All green energy bidders, including any other offshore or on land wind energy developers, were welcome to compete. In fact, this process, which began in August of 2006, may have been the most open and competitive procurement process in the state’s history -- with millions of dollars spent by the competing companies and thousands of hours of public testimony and written comments provided by Delaware citizens.
In the end, we are pleased that Representative Hudson and Senator McDowell stated that “wind power is certainly an exciting and intriguing form of alternative energy….” and that “… an affordable form of wind power should be factored into Delaware’s Renewable Portfolio Standard.” This is exactly what Bluewater Wind has proposed to Delmarva Power and we look forward to providing that clean, renewable and stable-priced power to over 100,000 Delaware households.
In addition, Bluewater has committed to providing approximately 500 union jobs in each of the three years of staging and construction of the offshore wind park and an additional 80 – 100 operational and maintenance jobs during the 25-year term of the contract with Delmarva Power.
I would be delighted to speak with any of you either in person or by telephone to address any questions or comments that you may have. I hope you will feel free to contact me. I can be reached at Peter@BluewaterWind.com or at our Delaware office at 302.731.7020.
Thank you very much for your consideration.

Sincerely,

Peter D. Mandelstam, President
Bluewater Wind Delaware, LLC

Cc: The Honorable Russell T. Larson, Controller General

TommyWonk Back on WDEL for the Latest on Wind Power

With all that's happening in the wind power saga, Allan Loudell has invited me back on WDEL, 1150 AM, to review some of the latest developments. Most significant is the distant thunder of a coming showdown in the General Assembly. Meanwhile, I and many others are busy trying to make sense of the numbers.
And blogging fans, don't forget that Dana of Delaware Watch is on WDEL this afternoon with Rick Jensen. If you miss any of this live, WDEL posts podcasts of recent interviews and talk segments here.

Wind Power: Understanding the Numbers

How does one go about making sense of the numbers when it comes to evaluating offshore wind power? A Business Week article about a solar power startup called Ausra, Inc. offers a couple of useful clues. First, as to whether Bluewater Wind's proposed energy cost makes sense, here's an interesting benchmark:

The magic figure is 10 cents per kilowatt-hour (kwh) or less. "If we can lock in a 10 cents number for the life of a solar plant, it will be a clear winner," says Mark Kapner, senior strategy engineer at Austin Energy.

Bluewater Wind's proposed number is 10.9 cents per kWh.
Another clue comes from the article's discussion of financing alternative energy projects:

Coal plant builders have been able to count on 80% to 90% debt at an interest rate of 5.5% to 6%. Their equity investors expect about an 11% return on equity. That puts the average cost of capital at about 7%. But since no one has built a giant solar plant, investors demand a risk premium. O'Donnell's equity investors want a richer 20% rate of return. Plus, he can get only 50% debt, at an interest rate of 7.5%. As a result, the overall cost of capital for Ausra's first plants is 12%.

This is a hurdle Bluewater has already cleared. Babcock & Brown's purchase of a majority stake in Bluewater Wind should dramatically lower the cost of capital compared to the risk premium Bluewater Wind would have had to pay investors as a startup company. With its project experience and asset base of more than $50 billion, Babcock & Brown should has the access to capital to get the project done. Of course, a signed deal with Delmarva Power would go a long way to reducing the riskiness of the project in the eyes of investors.

An Overt Effort to Scuttle Wind Power in the General Assembly

Last week State Sen. McDowell and five colleagues sent a letter directing the controller general to hold off approving a final deal until he had consulted with the General Assembly. This week, McDowell and State Rep. Deborah Hudson sent a letter to their colleagues making the case for scuttling the current negotiations to bring wind power to Delaware:

October 2, 2007

The Members 144th General Assembly

Dear Colleagues,

Rep. Hudson and I have recently had the honor of traveling to Europe with Gov. Minner. During this business trip we had an opportunity to meet with several Dutch companies who are working to develop wind power. We have gathered a great deal of information concerning Delaware energy policy that we wish to share with you:
1. On average, the Dutch electricity consumer pays about 30 cents per kWh – twice as much as Delaware consumers – in order to justify expensive options like off-shore wind;
2. The Dutch have built many onshore wind farms. They have started only one off-shore wind power plant and it is experimental. They reported their onshore wind farms are much less expensive than the experimental offshore power plant.
3. Before deciding to build the experimental offshore power plant, the Dutch completed a detailed off-shore wind study with actual data on wind speeds for every hour of the year.
4. When the decision was made to build the experimental project, the Dutch chose a size that is one-third the size of the power plant proposed for construction in federal waters off the Delaware coast.
5. The government agreed to provide large subsidies so that the electricity price would increase but not too fast.
6. A representative from Vestas Wind Systems (a leading producer of wind turbines) recommends that off shore wind turbines should not be in service for more than 20 years.
Based on the energy information gathered on our trip to the Netherlands, we believe it would be prudent for Delaware to consider the following steps:
• Recognize that off-shore wind power plants are experimental
• Require completion of a detailed wind resource assessment based on actual data before using higher taxes or higher electric bills to pay for development of this experimental technology
• Conduct a quantitative analysis of off-shore wind, onshore wind and other renewable energy options in the PJM territory, and energy efficiency and conservation options by our households and businesses, in order to create an objectively based menu of cost-effective green energy options for Delaware (we can do this through the integrated resource planning process that the Governor and the General Assembly created in last year’s legislation)
• The choice of green energy options should be based on a competitive bidding process including all cost-effective alternatives.
In closing, wind power is certainly an exciting and intriguing form of alternative energy. Rep. Hudson and I believe that an affordable form of wind power should be factored into Delaware’s Renewable Energy Portfolio.

Sincerely,

Harris B. McDowell, III
State Senate
1st District

Deborah Hudson
State Representative
12th District

The language of the letter ("Rep. Hudson and I believe...") makes it clear that McDowell is the author.

Flag Lapel Pins: Evidence of Superior Patriotism?

Right wing luminaries have jumped all over Barack Obama's answer to a question about why he doesn't wear a flag lapel pin. Media Matters has posted a series of screen captures that demonstrates that their superior patriotic fervor is so self-evident that they don't even need to wear the emblem in question. Case in point: Sean Hannity, along with recent guests Fred Thompson, Mike Huckabee and Mitt Romney, all without their magic pins.
This is what Hannity had to say on the subject on his radio program Thursday:

Why do we wear pins? Because our country was under attack.

Except of course when we don't wear pins.

Doonesbury and War

Doonesbury creator Garry Trudeau has been press averse for most of the 36 years since he started the topical comic strip. But he recently broke his silence for Military.com and the Washington Post.
Three years ago, Trudeau started a storyline in which his oldest character, B.D., was wounded and began an agonizing journey towards physical and emotional recovery. In a shock to Doonesbury fans, B.D. lost his leg and his helmet in the same frame.
Early on, Trudeau showed a talent for crafting unexpected storylines, as he did when B.D. became close friends with Phred, a Vietcong terrorist with a taste for the songs of Check Berry and Cole Porter. The story he crafted of B.D.'s loss of his leg has brought Trudeau close to men and women in uniform, as reflected in this interview with Military.com:

Military.com: What series of events caused you to create the storyline where B.D. lost his leg?
Trudeau: The storyline began in April of 2004, shortly after coalition forces suspended operations in Fallujah. Casualties had been high, and I was looking for a way to dramatize the sacrifices that our troops had been making. I only had two established characters in Iraq -- B.D. and Ray -- and I'd already wounded Ray in Gulf War I. That left poor B.D. to take the hit. I originally considered having him die in combat, but I concluded that while that might have caused a brief sensation, it would soon be forgotten. In the alternative, by giving B.D. a life-altering wound, I could set in motion a sustained story arc that tracked the arduous recovery and readjustment issues that a survivor might expect to face. I thought that might be a more useful outcome to explore.
Military.com: What have you learned from the company of wounded servicemembers?
Trudeau: I learn something different from each one. They all have their own powerful narratives, and they handle their own set of challenges differently. Certainly these are folks we should all be proud of; they are tough and largely uncomplaining, indeed most want nothing more than to continue to serve. There is a lot to admire.

The Washington Post profile, which probes deeper into Trudeau's personal life than anything I've ever seen, is most moving when describing his connections with wounded vets. Trudeau's work on the problems vets face earned him an invitation to speak before the National Leadership Conference of the Vietnam Veterans of America:

The speech starts benignly, praising the courage of the soldiers he had met, but here's how Trudeau wraps it up:
"When I talk to wounded veterans, I usually don't ask them what they think the mission was. I don't presume, because their lives are wrenching enough without the suggestion that their sacrifices may have been without meaning. Moreover, if that is so, it will become apparent to them soon enough . . . The young men and women who we've repeatedly put in harm's way are paying the price for this misbegotten mission, and as long as it continues, I, like so many of our countrymen, must walk this strange line between hating the war but honoring the warrior. I don't know how long we can keep it up. . ."
He finishes to a standing ovation.

Not only has Garry Trudeau has covered ground foreign to the comic pages, he's ventured into areas off limits to all but the most courageous of journalists, as he did when he started a story about the recovery of a young veteran struggling with the trauma of war and rape by men she served with. Garry Trudeau's strips on the problems of vets are smart, funny and moving in a way that can only come from someone who has made friends with those who have suffered grievously from the war.