Energy Musings - June 19, 2024

This is the text of an op-ed I wrote about the high cost of offshore wind in the Northeast. USA Today and the Gannett syndicate published it.

https://www.usatoday.com/story/opinion/2024/06/19/northeast-offshore-wind-will-impact-taxpayers/74137608007/

OFFSHORE WIND ENERGY COMES AT A HIGH COST

By G. Allen Brooks

When it comes to offshore wind, this renewable energy resource is free. In reality, it is among the most expensive electricity options available, and the current plans to develop giant wind farms off the U.S. East Coast will dramatically increase the already high cost of our power.

Coastal states, like Rhode Island, are blessed with substantial offshore wind resources. These resources have attracted significant interest from offshore wind developers with encouragement and generous subsidies from federal, state and local governments.

Today, Rhode Island’s residential electricity costs nearly two and half times more than the U.S. average. Over the past decade, the state’s electricity prices have risen 81 percent, two-and-a-half times the rate of increase of the average U.S. residential price. Why is it so expensive? Renewable energy and green mandates. Is it going to get more expensive? Yes, and offshore wind will be the primary driver.

We are told offshore wind is competitive with other energy sources, especially because the fuel is “free.” But with all energy sources, it costs money to get the power from where it is produced to your home. This is where the transmission and distribution expenses come into play. These expenses pay for high-tension wires, utility poles, transformers, substations, and meters that enable electricity to get from a power plant, solar panel, or wind turbine to the light switch. For offshore wind, there are also costs to erect the turbines and build the ocean-based substations, as well as lay the underwater cables that bring the power ashore. These facilities and equipment come with sizable construction and operational costs, including regular maintenance, repairs, replacement, and eventual decommissioning. Every dollar of these costs hides inconspicuously in the transmission and distribution charge paid by consumers.

The capital investment for offshore wind is nearly five times that of gas-fired electric generation, and the annual maintenance expense is likely to reach twice the current average, based on the government’s data from BIW, the test turbines off the coast of Virginia and offshore wind projects in Europe. New England’s Revolution Wind offshore project, rejected by Rhode Island Energy, would only secure about half of Rhode Island’s current generating capacity while adding $3 billion to ratepayer electricity bills. The Public Utilities Commission and the Office of Energy Resources, both Rhode Island State government entities, agreed with that assessment. However, consider that, at this cost, the actual power delivery of the generating capacity is less than half because of the intermittency of wind. The actual cost of replacing Rhode Island’s current generating capacity with offshore wind will be several times higher than the $3 billion.

Another challenge to wind energy, and another driver of higher costs, is the need for backup power. For offshore wind, backup energy is needed to ensure that the grid always meets consumer demand, even when Mother Nature fails to deliver the wind. Another power source must be ready to take over when the wind stops blowing, often at times of highest demand. That could be batteries – but, in addition to being expensive and environmentally harmful, they could really only serve for about four hours. Fossil fuel power plants are currently the only suitable guarantee of electricity to meet consumer demand during these times. As a result, consumers must support a secondary utility system to offshore wind to ensure a dependable energy grid. In essence, offshore wind guarantees that ratepayers assume the cost of two independent generation systems.

To stimulate the creation of renewable energy, including wind energy, the federal and state governments are providing increasing levels of subsidies and incentives to encourage private investment. These taxpayer-supported subsidies take the form of tax credits and financing mechanisms such as tax-exempt bonds, loan guarantee programs, and low-interest loans. Our elected leaders may wish to ignore basic economics, but there is no denying that state and federal taxpayers will shoulder the cost of these financial benefits for developers.

For many states, especially coastal states that are planning to develop offshore wind, electricity is expensive and will become even more so. As renewables become a greater proportion of the electricity generation capacity, electricity costs rise – as the experiments in Germany and California have shown. Increased energy costs have a significant negative effect on economic activity. And offshore wind is the most expensive of the renewables. Our government has already admitted that there is no evidence that offshore wind energy will make any measurable impact on climate change. Despite the high costs that we will all be forced to bear, not to mention the environmental, security and fishing impacts resulting from offshore wind, development is still planned. This is a bad deal by any measure for Rhode Island. Hold on to your wallet as the government and developers recklessly industrialize our coastal waters.

G. Allen Brooks is a supporter of Green Oceans and is an experienced energy securities analyst, author, and consultant to the energy industry.