Articles in Category: Environment

Politicians, power companies and manufacturers who have closely tracked carbon cap and trade legislation may wish to pay heed to the recent developments within the US acid-rain market. The US EPA took two years to publicly announce new rules that set stricter limits on emissions and limit the ability of companies (mostly utility companies) to use allowances as part of a cap and trade program. The delay in setting those rules left the sulfur-dioxide market in disarray with the final end result a collapse in the “trading portion of cap and trade according to a recent report in the international edition of the Wall Street Journal entitled: “Cap and No More Trade.

Congress and the Obama Administration ought to pay careful heed to the failure of this market. In essence, market based approaches can work according to the article, but only if government can set clear rules. At issue in this case, the Bush Administration back in 2005 sought to create further curbs in emissions (a little known fact) and had worked with the EPA, environmental groups and utility companies to essentially tighten smog-forming and soot-producing emissions that would have the effect of expanding the cap and trade system. The EPA announced then rule changes that would set further emissions caps under the cap and trade system, but still keep the trade portion of the rules in operation. The rule change would have further decreased harmful emissions and also keep the market based system in operation.

But what happened instead will become the downfall of the US acid-rain/sulfur-dioxide market, of which the European carbon cap and trade rules are based and which current US carbon cap and trade legislation is based. In 2008, several utilities and the state of North Carolina sued the EPA over the new rules claiming they conflicted with the Clean Air Act. A federal court sided with those utilities and the State of North Carolina and “ordered the EPA to rewrite its rules to comply with existing law. The delay in establishing the rules has had the effect of causing the price of trade allowances to essentially fall to zero. From a practical standpoint this means that companies must cut emissions but they can’t rely on allowances to meet the new limits. Prior to this case, the system worked as follows: the US government limited sulfur-dioxide emissions. This primarily affected coal powered utility plants. Then the government handed out allowances and essentially a utility paid one allowance for each ton of emissions released. Any company that implemented new technologies and/or energy saving processes etc could then “sell their unneeded emissions allowances at market value. Read more

As the fall out continues from the Gulf oil spill, and we don’t just mean in BP’s share price, the repercussions are being felt all over the country like ripples spreading in a pond. We wrote last week about the likely increase in emphasis President Obama would seek to place on renewable energy sources and how we felt a focus on improving the distribution of energy was a better investment than subsidizing wind and solar power projects. Well politicians didn’t get where they are without knowing an opportunity when they see one and trying to take advantage of the moment.

Although cap and trade legislation remains mired in the Senate, emphasis is being shifted to an energy efficiency bill introduced this spring as a half way step toward cap and trade. The idea is to boost efforts to reduce energy consumption by better insulation of homes. According to the EnergyEfficiencyNews, the bipartisan Home Star Energy Retrofit Act of 2010 or ËœHOME STAR’ bill would establish a $6 billion rebate program to encourage consumers to buy energy-efficient appliances and undertake energy efficiency home refurbishment. A two-tier system would provide rebates of up to $3,000 per home for immediate energy efficiency measures such as insulation and equipment, while a second level of up to $8,000 would be available for whole-home retrofits.

No mention has been made of nuclear power plans since the spill started but several programs were announced in the spring to develop new enrichment facilities and to fund some 42 university research projects like next generation nuclear processes, fuel storage and recycling.   Although nuclear power is not a direct substitute for oil it is seen as a viable source for electricity for electric cars and attention has shifted in favor of any transport system that reduces dependence on, or consumption of, oil. Shares in makers of batteries and other electric-vehicle components have risen sharply according to a FT article. Tesla, the Californian maker of high performance all electric sports cars, is expected to press ahead shortly with a public share offering. The firm aims to raise between $155m and $178m in the offering, expected to be priced this week. The IPO has generated much attention in spite of Tesla’s modest size and the fact that it is unprofitable. As at the end of March, Tesla had delivered 1,063 of its battery-powered roadsters, which sell for a starting price of about $109,000, but the company lost $29.5m in the first quarter of this year bringing the total to about $290.2m cumulatively since its founding; losses are expected to increase as it develops new models.

Battery makers have also seen a surge of interest with their share prices rising up to double digit percentages in spite of considerable disagreement on growth prospects even in light of the oil spill. Michael Lew, analyst at Needham & Co, estimates that demand for lithium-ion batteries would grow from about $1bn next year to almost $25bn in 2015. But Roland Berger Strategy Consultants warned in a report in February that a bubble was forming in lithium-ion battery production. It said the sector would “conservatively have twice the capacity it needed to supply electric and plug-in hybrid cars by 2015.

As always there will be those with their own agenda keen to use whatever opportunity presents itself to stress the logic of their proposition.

–Stuart Burns

Electricity generators producing power from coal or natural gas in the US are not immune to subsidy that is going into the renewable power sector as can be illustrated by the situation in Europe. The European market is some years ahead of the US in terms of the percentage of electricity generated from renewable sources and therefore may have some interesting lessons for who will be winners and losers in the US in the years ahead.

How long Spain will be able to go on subsidizing wind and solar power remains to be seen if the country is forced to drive through yet more draconian austerity measures but that is a separate issue. Looking back it is clear that the supply of subsidized wind and solar power is driving down the price of base load electricity to below the cost of production. There are a number of factors contributing to this problem. First, at 40% Spain has the highest proportion in Europe of power generated from renewable energy sources such as wind, solar and hydro.

A Reuters article explained that as Spain’s pool market for determining power prices is based on variable, rather than fixed costs, (which for renewables are zero, because wind, water and sunlight come free) an ever increasing contribution from those sources has pushed the price during off peak below the cost of production. Only during peak hours can generators make a profit, driving up peak period power prices to compensate. However Spain’s structural inefficiencies contribute to the problem. The country has very limited large capacity connectivity with France its largest neighbor and so only a small fraction of excess power can be sold abroad.

Germany on the other hand has more wind power production than Spain but at 15% has less renewable power production as a percentage of total electricity generation so the pressures on base prices are not so great. In addition, Germany has excellent inter-connectivity with neighbors and more industrial base-load power demand. Smart grids in Germany also help utilities balance demand and adjust production more efficiently, a lesson for the US that maybe money should be spent on upgrading grid infrastructure before subsidizing renewable power production.

Although lower base power prices are in theory attractive for industrial users only those operating 24 hour round the clock operations can make use of them, creating distorted practices more reminiscent of third world countries that operate power intensive shifts at night to access lower power costs.

France on the other hand generates some 75% of its electricity from nuclear and 15% from hydro resulting in relatively low base and peak load operating costs and by European standards high profit margins for generating companies. One reason maybe why the French have been slow to invest in renewable energy projects such as wind or solar, preferring to focus on nuclear, hydro and even tidal power to maintain a low carbon footprint.

–Stuart Burns

Whatever the outcome of this Thursday’s congressional committee grilling of BP executives and from the point of view of resolving the crisis likely nothing will come of it the fact is this disaster will change US priorities, costs and supply sources for decades to come. At the very least when the well head is closed and the clean up complete as some day it will be and the finger pointing and politically inspired corporate crucifixions have been completed the fact will remain the US needs energy and it needs the energy locked deep under the Gulf of Mexico. One day drilling will resume but the costs and oversight will rightly be higher. How oil firms (and BP is far from alone in this respect) have been allowed to largely self police is in hindsight incredible but for sure this will not be the case in the future. As Exxon Valdez ushered in double hull oil tankers so the BP Gulf spill will usher in a much tighter regulatory regime, that much is clear but what else will change?

Well as this Reuters article explains the US will likely be more open to diversifying energy sources is one development. In spite of huge environmental objections to oil sands, development investment has continued to flow into that industry as this Reuters graph shows.

Supporters say the environmental impact of oil sands is marginal compared to what has happened in the Gulf and anyway the risks are much lower because the technology is established and controllable. How true that is will no doubt be the subject of much more debate and stringent regulatory control in the future but judging by the impact oil sands extraction has had in the last decade, greater environmental control would be no bad thing, even if it did add to costs.

The great success story over the last few years is shale gas extraction. Natural gas from shale is a relatively clean fuel, domestically secure and so extensive are reserves some claim the US could be self sufficient for a hundred years. Indeed the industry has been a victim of its own success; supply has expanded so rapidly the price has plummeted making further exploration and development uneconomical, for the time being at least. The issue going forward is more environmental than technical as opposition to further exploration grows until the industry can prove shale bed “fracking does not risk contaminating water supplies.

More profound may be the ammunition the Gulf oil spill gives legislators to push through carbon taxes and further subsidies for green energy sources like wind, solar and so on. This week’s Oval Office address by the President may well lay the groundwork for pushing through carbon cap and trade legislation that has stalled in the Senate. The President could appeal to the public that a new direction is needed away from reliance on energy sources like oil and coal, and towards less risky, more environmentally friendly technologies, with the one caveat they have to be supported by a tax on carbon use. An FT article suggests this has already been discussed as a positive outcome for the president from a situation that has so far caused considerable damage to his popularity. It would be just like a politician to use the wave of revulsion for the damage done to the Gulf coast environment and sympathy for the local inhabitants for distinctly separate political ends but that may be the most enduring outcome of this catastrophe.

–Stuart Burns

Sometimes at MetalMiner we feel like naysayers pouring cold water on every green idea that comes from lawmakers or the environmental lobby. We would like to put that idea down. We have long been supporters of new technologies and have even argued for federal dollars to be spent supporting nascent technologies that require more of a fast track than VC money is able to provide. We are staunch supporters of the nuclear industry and MetalMiner has even come out sometimes in the face of questionable economics on the side of renewables like tidal power and the development of smart grids where we see the logic if not a strong economic case but there are some green initiatives that we have a problem with. Wind power has been one of them due to the level of subsidy (in one form or another) nearly always required and carbon capture is another. So it was interesting to see an article in the NY Times analyzing one element of Senators John Kerry and Joseph Lieberman new Senate Energy Bill which calls for $2bn per year of incentives for carbon capture and sequestration as a strategy to reduce America’s carbon emissions.

The article’s author Robert Bryce, a senior fellow at the Manhattan Institute for Policy Research, eloquently argues that this is a wasteful and largely futile allocation of funds for three main reasons carbon capture greatly reduces the output of power plants; pipeline capacity to move the newly captured carbon dioxide is woefully insufficient; and the volume of waste material is staggering.

Starting with the reduction in energy efficiency of the power plant, the article says capturing carbon dioxide (Co2) from the flue gas of a coal-fired electric generation plant is an energy-intensive process. Bryce quotes analyst estimates that capturing the Co2 cuts the output of a typical plant by as much as 28%. Our own research suggests this is a conservative figure. The Intergovernmental Panel on Climate Change (IPCC) special report on Carbon Dioxide Capture and Storage states that there would be a 40-85% increase in power costs for a super critical pulverized coal (PC) plant if it had to sacrifice power to operate carbon capture. Can the US afford to reduce the output of the country’s 30%+ (lEIA figures) of power that comes from coal fired power stations by 28% or more? How would the US make up the shortfall build more coal fired power stations?

The second issue is transport of the captured Co2 as a compressed gas to a location where it can be stored. Usually this is a depleted underground oil or natural gas reservoir, an aquifer or the Co2 is occasionally used to increase the flow from aging oil deposits, forcing oil out of one bore by pumping Co2 down another. But that requires the oil reservoir to be adjacent to the power station or pipelines have to be laid 23,000 miles of them the Pacific Northwest National Laboratory estimates, which as the Co2 has little or no commercial value is going to be entirely at the taxpayers expense or electricity users via a carbon capture levy/tax/surcharge.

The third issue was the one that swung it for me, the scale of the problem. In 2009, Co2 emissions in the United States totaled 5.4 billion tons. The article assumes we aim to capture half of it in order to make any meaningful dent on total emissions. Say 3 billion tons per year; that works out to about 8.2 million tons of Co2 per day, which would have to be collected and compressed to about 1,000 lbs/in2 for transportation. In other words the article says we would need to find an underground location (or locations) able to swallow a volume equal to the contents of 41 oil supertankers each day, 365 days a year, for the foreseeable future (if anyone wants to test the math and the fundamentals of the argument please do so and let us know).

Is this really viable, and more to the point if the math is (on the face of it) so negative should we be voting through subsidies to the tune of $2bn per annum of taxpayers money to promote it?

–Stuart Burns

Yesterday, Senator John Kerry and Senator Joe Lieberman introduced The American Power Act. The act includes several provisions outlined here:

  • States can “opt out of offshore drilling up to 75 miles off their coasts the catch? Neighboring states can veto drilling plans if they see any negative impacts to their own coastline
  • State governments will receive 37.5% of offshore revenues with a portion of that going toward conservation efforts (12.5%)
  • Emissions will drop to 17% below 2005 emission levels by 2020 and by 80% in 2050
  • The price for carbon emissions will range from $12-25/ton and will only apply to those companies that generate more than 25000 tons of carbon annually (this will impact the 7500 largest companies, according to The Huffington Post)
  • Most of the revenue (two thirds) will go back to consumers in the form of rebates or discounts
  • Nuclear wins $54b in loan guarantees
  • Transportation is exempt from cap and trade but will need to comply with emission reduction targets
  • $2b investment in “clean coal technologies
  • Job stimulus funding to come from grants
  • An “international reserve requirement will go into effect if China and other key countries fail to implement climate change legislation. This would create a tariff system on imports to compensate for the cost US producers face
  • Most businesses and farms would be exempt from legislation. Farms could take advantage of other schemes to reduce emissions and increase revenues

The bill runs over 900 pages with lots of “blanks throughout, in other words, much of the bill’s details remain scant. President Obama also released a statement about an energy bill yet we couldn’t help ourselves by adding some editorial commentary. According to Politico,

Obama’s full statement:

“I applaud Senators John Kerry and Joe Lieberman for their tireless work in drafting this important legislation (Ed Note: Let’s not forget Senator Lindsay Graham too). This legislation will put America on the path to a clean energy economy that will create American jobs building the solar panels, wind blades and the car batteries of the future. It will strengthen our national security by beginning to break our dependence on foreign oil (Ed Note: and instead replace it with a dependence on rare earth metals from China). And it will protect our environment for our children and grandchildren (Ed Note: Unless your children and grandchildren live in a trade-wind path that blows Chinese smog into a US city).

“Americans know what’s at stake by continuing our dependence on fossil fuels. But the challenges we face — underscored by the immense tragedy in the Gulf of Mexico — are reason to redouble our efforts to reform our nation’s energy policies. For too long, Washington has kicked this challenge to the next generation. This time, the status quo is no longer acceptable to Americans. Now is the time for America to take control of our energy future and jump start American innovation in clean energy technology that will allow us to create jobs, compete, and win in the global economy.

“The House of Representatives has already taken historic action (Ed note: yes and it would place immense harm on US industry and move it offshore as is the case with EU manufacturing) with passage of the American Clean Energy and Security Act. I look forward to engaging with Senators from both sides of the aisle and ultimately passing a bill this year.”

Insiders tell us the bill will likely not become law before the November elections. Thank goodness for Democracy.

–Lisa Reisman

This is part two of a two part series. You can read part one here.

In the comments section of a recent article we wrote on Federal approval for the construction of 130 wind turbines off Cape Cod, Jerry Graf wrote a particularly analytical and we felt worthy reply, so good in fact that we invited Jerry to expand on his thoughts and write a guest piece for us. This he has kindly done and the following, published in two parts today, is his analysis not just of the Cape Wind Project but wind power in general in North America.

As another example of an economically non-viable project, a similar analysis can be made for the Great Lakes Wind Energy Pilot Project plan to place wind turbines offshore in Lake Erie near Cleveland.   This projected 20 MW system will really generate 6 MW on an average basis, translating to 42.2 GWh/year, or a revenue return of $2.1 million per year.   Operation and maintenance costs are projected to be just under $4.6 million per year, meaning that the $92 million investment will be completely lost, and losses will compound every year the wind turbines are in operation.   It is notable and disconcerting that a large portion of the Great Lakes Wind Energy Feasibility Report is devoted to proposals to make the project appear viable with public spending to cover the investment losses and inflated electric rates for “renewable energy to pay the operating costs and attract investors.   Other similar cases, big and small, can be found for land based wind turbine projects throughout Ohio, Pennsylvania, and other locations; and all are equally wasteful and ineffective.

Other than the waste itself, the real problem with expending resources subsidizing non-viable wind turbine projects is that this diverts resources from other efforts to improve our energy production strategy.   Because of recent events, we are seeing quite a few emotional comments lately regarding the need to reduce US dependence on oil; and the recent tragic spill in the Gulf of Mexico is being used to justify investment in wind energy projects.   However, it is reasonable to point out that, per the DOE EIA, oil is used to generate less than 1% of the total electricity used in the USA so one can effectively say that oil has nothing to do with the generation of electricity.  Unfortunately, by increasing the cost of electricity, it is likely that we will make it more difficult to transition away from oil for the main reasons we do use oil, home heating and gasoline powered automobiles.   Also, in the rush to promote wind generation, development and improvement of other more viable means of energy generation are being ignored.   Instead of diverting resources to prop up wind projects we could be improving natural gas, nuclear, and coal generation.   We could also be improving the distribution system (grid) to reduce losses and improve reliability.   Further, by subsidizing and offsetting the current deficiencies of wind generation, we take away the incentive to make the necessary improvements that might make it viable in some cases in the future.

There are real reasons to oppose the subsidized rush to wind power generation that are not at all related to not-in-my- backyard (NIMBY) or other subjective arguments.   It is necessary to ask the right questions and demand the right answers.   The questions of “Who is going to pay? and “What are the real costs? are critical.

–Jerry Graf

In the comments section of a recent article we wrote on Federal approval for the construction of 130 wind turbines off Cape Cod, Jerry Graf wrote a particularly analytical and we felt worthy reply, so good in fact that we invited Jerry to expand on his thoughts and write a guest piece for us. This he has kindly done and the following, published in two parts today, is his analysis not just of the Cape Wind Project but wind power in general in North America.

As a follow-up to the previous information presented about the Cape Wind turbine project, it is necessary to point out that opposition to Cape Wind and wind turbine projects in general is not simply a matter of NIMBY arguments.   Review of quite a few wind turbine projects in my home state of Ohio and elsewhere leads to the conclusion that few, if any, are economically viable and most are actually massive wastes of money which will raise the cost of electricity.   Further, diversion of resources to subsidize wind power ventures will inadvertently (or perhaps advertently) exclude other efforts which could be more effective at improving our overall energy strategy.   The residents of Massachusetts and the US in general need to be wary of government subsidized projects for wind power generation, and need to ask questions regarding the details before giving their support.

Given the average annual wind speeds available in most locations and the relative inefficiency of wind turbines to transform wind into useful electrical power; most government subsidized wind projects can never be expected to return the money invested in them, and will actually raise the cost of electricity.   The Cape Wind Project, for example, is supposed to produce three-quarters of the 230 MW power demand of the Cape and islands, which means a real average output of 172.5 MW.  This is about 41% of the rated 420 MW capacity, which seems a bit of an overestimate since most other wind facilities operate around 33% or less, but let’s accept the 172.5 MW figure.  Applying a generous assumption of 85% up-time means the turbines will operate 7446 hours per year; giving us 172.5 MW x 7446 hours = 1284 GWh/year.   This number is actually more-or-less confirmed (within 10%) on the Cape Wind website itself, which currently offers an updating display indicating that 11,478,274 MWh of energy could have been produced since wind monitoring commenced.   This seems like an impressive number until you divide it by the 8 years of monitoring, and you get 1435 GWh/year.   Considering the annual average wholesale value of electricity in Massachusetts is about $50/MWh per the DOE EIA, the annual energy generated by Cape Wind will be worth about $60 or 70 million per year; and subtracting annual operating and maintenance costs may leave about $40 or 50 million per year of this revenue.  Again, this sounds impressive, until it is compared to the $2 billion that the project is expected to cost.  Even if a generous inflation rate is applied to the cost of electricity, the cash flow will not pay back this investment in the 20-25 year life of the wind turbines; UNLESS SOMEONE DELIBERATELY RAISES THE COST WE PAY FOR ELECTRICITY.   Unfortunately, this is already happening because a New England based utility company, National Grid, has already agreed to pay $207/MWh (4 times the current wholesale price) beginning in 2013 for half the power produced by Cape Wind.   National Grid is doing this to comply with a state law forcing them to purchase a certain amount of power from “renewable energy sources, and the deal is considered critical to attract investors to the $2 billion project.

–Jerry Graf

China’s electricity production industry may not be particularly profitable but it is certainly expanding fast. The benefits for the rest of the economy are clear. Electricity production is growing at a breathtaking pace. Many firms (virtually all state owned) are growing at 30-40% annually. According to a (subscription only) Economist article, China’s endless power-plant construction boom has accounted for 80% of the world’s new generating capacity in recent years and will continue to do so for many years to come. Capacity added this year alone will exceed the installed total of Brazil, Italy and Britain, and come close to that of Germany and France. By 2012, China should produce more power annually than America, the current leader.

Profit motive certainly does not appear to be the main driver of this relentless program of investment. Tariffs are suppressed by the state and it is doubtful most firms are in the black let alone making a reasonable return on capital. However, with access to cheap government directed bank loans the firms can continue to invest and operate at levels that would not be feasible in the west.

The second great advantage Chinese generators have is the scale of development has spurred a thriving components and services market that is reducing the cost of constructing power plants by economies of scale. As a result, the cost of building power plants is said to have dropped by half in recent years.

There is a downside however and that is the provision of ever expanding supplies of reliable low cost energy has fathered the rise of energy dependent industries like steel production and aluminum smelting, which in turn add to the greenhouse gas emissions of the electricity producers making China disproportionately more polluting per capita income or GDP compared to others.

It has also made China even more exposed to world energy costs than more energy efficient economies. The cost of coal, oil and natural gas will have a more direct and proportionally greater impact on China’s economy than say the US.

The use of power derived from coal will continue to grow in absolute terms according to the article, but its share of total Chinese output will fall from 75% to 65%. Hydro-power will expand by more than half, but due to the overall growth of the market its share of the total will drop a bit, from 21% to 20%. Wind power will see a big expansion, taking its share from 3% to 7%, as will nuclear, up from 1% to 5%. The rest will come from such niches as solar panels and incinerators. China’s massive expansion of nuclear power provides a good example of how the country is capitalizing on both the economies of scale such expansion brings and the opportunity for technology transfers. Over the next ten years, the authorities plan to spend a trillion-odd yuan ($150 billion) to increase capacity nine-fold. The country has 21 nuclear reactors under construction. Gradually China will make more and more of the components needed to make reactors domestically. By 2020, China’s goal is to build advanced reactors entirely by itself, and to export its prowess abroad. Chinese firms have already built one reactor in Pakistan, are working on another and plan two more.

–Stuart Burns

Well Ken Salazar has spoken and it looks like Cape Cod will receive its wind farm according to the NY Times. Views still appear polarized and emotions will continue to run high as those for the project including both Greenpeace and the US Chamber of Commerce extol its virtues of low carbon and reduction in imported energy supplies while those against it led by the Kennedy family -appear to largely boil down to NIMBY (not in my back yard).

Those for, say that Cape Wind the firm behind the project – will provide 75% of the power for Cape Cod, Nantucket and Martha’s Vineyard ” the equivalent of that produced by a medium-size coal-fired plant. Although the article makes no mention of where power is going to come to when the wind doesn’t blow. It would also reduce carbon dioxide emissions by the equivalent of taking 175,000 cars off the road, officials said, and provide 1,000 construction jobs.

Apparently Senator John Kerry (not a noted sailor) is said to be in favor of the project but has kept a low profile in view of his friend, recently deceased, Senator Edward Kennedy’s (a lifelong sailor) vehement objections so much for standing up for your convictions John. Kennedy’s position is supported by many local sailing landowners for whom the possibility that they may be able to see the turbines from land or when sailing was the principal objection. Mr. Salazar said he had ordered Cape Wind to limit the number of turbines to 130 instead of the initial 170, to move the farm farther away from Nantucket (it was originally 13.8 miles) and to reduce its breadth to make it less visible from the Nantucket Historic District in an attempt to meet locals concerns. At 440 ft high there is not much one can do to limit the impact when up close by boat but Cape Wind was ordered to paint the turbines a more fetching shade of off white to make them merge into the skyline more effectively.

The people of Massachusetts are said to be overwhelmingly in favor of the project. That’s just as well as they are probably going to have to pay for it in their bills. Meanwhile the ruling is likely to open the floodgates on a host of projects lined up for the eastern seaboard for which progress was held up pending a decision on Cape Wind. Kevin Law, president and chief executive of the Long Island Power Authority, the nation’s second-largest public utility, said it would have “enormous beneficial ramifications for his own proposal ” a wind farm 13 miles off the coast of the Rockaways in Queens that would be big enough to generate twice as much electricity as Cape Wind.

Well intended as the detractors arguments are meant to be however they appear to have missed the most compelling reason for questioning the project who is going to pay. Cape Wind optimistically says the project will result in savings of $185 million annually over the 2013-2037 time period, resulting in an aggregate saving of $4.6 billion over 25 years for local electricity users. But the research they point to (and paid for) by Charles River Associates assumes the savings will come by the downward pressure Cape Winds generating capacity will have on the local wholesale power market New England generates comparatively little power buying most of it from the regional wholesale market. The report also assumes a Federal greenhouse gas program will be in place with prices of $30/ton of carbon dioxide in 2013, escalating by 2030 to $60/ton, to the detriment of coal, oil and a lesser extent gas fired power production. The report states that the variable operating cost of wind turbine generators is almost zero – that may be so but capital costs are high and maintenance and repair will be high too. In addition, the marginal cost of spot power purchased when the wind isn’t generating enough power will probably be considerably higher than base load per kWhr costs today pushing up the bill for consumers.   We at MetalMiner are naturally inclined to support new technologies that reduce man’s impact on the environment and the exposure of the US to imported fuel but we question whether offshore wind power is going to really save money once government subsidies of one sort or another and the provision of standby power sources is factored in. Wind power is not like hydro, geothermal or tidal power predictable and constant, wind power is more like solar, subject to the weather, and as the sailors of Cape Cod will tell you over a quiet martini, the wind doesn’t always blow.

–Stuart Burns

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