Guest Post by David Middleton
Going Green
Offshore Wind Passes in Senate, Gov. O’Malley’s Signature Next
The construction of a wind power farm off the coast of Ocean City could begin as early at 2017
By Jessica Wilde, Capital News Service
Gov. Martin O’Malley’s offshore wind energy bill is on its way to his desk for a signature, having passed in the House in February and in the Senate on Friday.
Five friendly Senate amendments are expected to be approved easily by the House.
The new legislation will funnel $1.7 billion of ratepayer subsidies over a 20-year period toward the construction of a wind power farm 10 to 30 miles off the coast of Ocean City as early as 2017.
“It’s about a better Maryland for tomorrow,” said Sen. James Mathias Jr., D-Worcester, the former mayor of Ocean City, who changed his vote to support the bill.
O’Malley’s previous two attempts to push the legislation—the first more ambitious —never made it to the Senate floor largely because of concerns about the cost to Marylanders.
His first initiative also failed because utility companies would have had to make nearly 20-year commitments to buy offshore wind energy.
[…]
Offshore wind is, by far, the most expensive source of electricity. An offshore wind farm would have to receive 34¢/kWh, wholesale, just to break even over a typical 30-yr plant lifetime. 34¢/kWh is almost three times the average retail residential electricity rate in the U.S.
The much ballyhooed Cape Wind project, off Cape Cod, is projected to have a 454 MW installed capacity. It will cost approximately $2.5 billion to build. This works out to $5,506,608 per MW. A natural gas plant generally costs less than $900,000 per MW.
Cape Wind currently has a long-term contract to sell half its output for 18.7¢/kWh. The average U.S. residential rate is in the neighborhood of 12¢/kWh.
Maryland has come up with a novel solution to make offshore wind more affordable to consumers…
Opinion: Local Editorial
Martin O’Malley’s wind-power welfare
If offshore wind energy were the way of the future, government would not have to subsidize it at all, let alone to the tune of $1.7 billion.
Maryland Gov. Martin O’Malley, D, justifies the subsidy he will soon provide to offshore wind based on the industry’s enormous upfront costs. He routinely fails to mention that investors routinely swallow large upfront costs to get a piece of industries that promise future profits. In the case of offshore wind, because the industry is not so promising, investors would never back it without O’Malley’s massive pre-emptive government bailout.
O’Malley is campaigning already for the Democratic presidential nomination in 2016. This is the real reason behind the wind power subsidies he will soon sign into law. It is a sad reflection on the integrity of Democrats in the state legislature that they have rubber-stamped O’Malley’s latest corporate welfare plan. Although Marylanders will pay only a small additional amount on average — about $1.50 per month for residential customers, and a 1.5 percent surcharge on Maryland businesses — every penny is being directed to businesses that have O’Malley’s ear. By diffusing the costs of highly concentrated benefits, O’Malley has found a way to squeeze ordinary residents of his state even further than they are currently squeezed, enrich a few wealthy developers, and come off looking like some kind of environmentalist hero.
[…]
$1.7 billion in taxpayer-funded subsidies divided by 200 MW works out to $8.5 million worth of SUBSIDIES per MW of installed capacity!!!
They could build a 200 MW solar PV plant for less than the cost of the subsidies!
They could build 2,000 MW of natural gas-powered generating capacity for the cost of just the subsidies… 
200MW Of Offshore Wind Blowing This Way
The exact percentage of state electricity sales that must be met by offshore wind under the state RPS will be determined annually by state regulators, and will be based on the creation of “offshore wind renewable energy credits” (ORECs).
Roughly 200 megawatts (MW) of offshore wind capacity will likely be built as a direct result of the bill, and Governor O’Malley has previously said 40 turbines will be built about 10 miles off the coastline, creating 850 green jobs.
[…]
Read more at http://cleantechnica.com/2013/03/08/…z0tBdmufETJ.99
The $1.7 billion subsidy will be paid out over 20 years… $85 million per year… $100,000 per year per green job created ($2 million per green job)… 
And this is just the cost of the SUBSIDY!!!
At 12¢/kWh and a 38% capacity factor, the Maryland offshore wind farm would generate about $80 million per year in gross revenue. The levelized generation cost (LCOE) would run about $226 million per year.
So, you will have an investment that could never pay itself off or even cover half its LCOE at market prices.
For this monstrosity to break even, with the subsidy, Maryland electricity consumers will have to pay 17¢/kWh.
Maryland taxpayers will have to cover 17¢/kWh, so that Maryland’s electricity consumers will only have to pay 17¢/kWh (assuming that the power company is a non-profit). I guess this will only be a burden on the Marylanders who both consume electricity and pay taxes.
Our Department of Energy recently agreed to spend $169 million more of the taxpayers’ money to subsidize similar boondoggles.
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I’d sure like to see the assumptions underlying those “levelized” cost figures. A single figure for uncontrollable power such as wind and solar is simply not possible. For several reasons. In the case of wind, production cost is practically linear with respect to the amount of wind a given
site provides. But guess what? There is not an extensive supply of equally good wind sites. The best sites will be (or have been) developed first. Future turbines are practically guaranteed to
provide more costly power. Ditto for solar, although not as pronounced, especially when vast desert acreage is available. But both wind and solar cost more the more you produce, for the simple reason that a grid can handle without much alteration, small amounts of wind/solar (which is what we now have – small amounts). But as the volume grows, it starts seriously impacting the grid,
reducing the percentage of capacity that conventional plants can attain. That means any power they now produce will have to be a lot more costly, since basically, their only cost component being reduced by displacement is fuel, and fuel, in some cases (nuclear), is a tiny cost component (less than 10%). Therefore, each unit of power from the conventional plants has to cost more,
potentially a lot more, depending upon how much below capacity it is operating. In general, studies of power costs have in the past been the products of enthusiasts and backers of particular renewable technologies and those estimates are often preposterously optimistic. And so are any cost estimates of wind based on existing wind turbines, which practically by definition are the lowest cost producers that will ever exist in that area. Another probably not included cost
factor is the side effect cost of storage, as for example, the very costly pumped storage facilities California is building to store wind/solar power for a few hours.
I think the chart showing levelized cost of photovoltaic solar at 15-cents is off by a country mile. The European experience indicates unsubsidized solar cost is more on the order of 40-cents (U.S.) per Kwh.
That thud you just heard was the bottom falling out of the property prices in Maryland. Who’d want to buy a home where you pay boutique prices for electricity?
Ian W says:
March 13, 2013 at 8:11 am
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The thrust of your comment may be correct, but, in theory, there is nothing preventing the UK Parliament passing a law withdrawing all subsidies and providing that there will be no compensation whatsoever for any broken contracts. Parliament does not have to honour its contracts, but should it fail to do so, in the future, 3rd parties will be more wary of dealing with UK Plc.
Can’t wait to see the reactions on the greenies’ faces when a few years of Atlantic hurricanes reduce most of those windmills to twisted steel and the power company goes hat-in-hand to ask for two or three times the original price to rebuild them….
Sucks to live in Maryland. This Gov. Martin O’Malley is an idiot.
How long will it take for the turbines to become so unstable that nobody will go near them for fear of collapse? Within 20 years there will be a departure from this folly and then there will be a huge new problem in how to deal with all these massive structures that no longer work and are dangerous to maintain. By mid-century there could be a booming business in conducting tours of these abandoned farms known as relics of the “Illogical Era of Green Worship.”
No Worries, they will just jack up electric rates. In California, my ‘tier’ for over baseline presently runs about 26 cents / kW-hr headed for 30 Real Soon Now. In the early vetting / planning stages is a $1/2 / kW-hr tariff.
I’m sure everyone will be happy to pay 1/2 a buck per kW-hr just to know they are not using cheap reliable natural gas turbines at close to 1/10th that price…
Even with some of the highest gasoline costs in the nation, it is now cheaper to “Camp at home” with a gasoline stove than to use an All Electric Kitchen.
http://chiefio.wordpress.com/2012/05/29/camping-at-home-is-cheaper/
I predict a large rise in sales of outdoor propane grill / stoves … and even conversion of AEK houses to gas ranges ( presently our natural gas price is significantly lower than gasoline prices per equivalent heat content).
At the $1/2 level it will be cheaper to run my own generator at home on gasoline. It is already cheaper to do so on Natural Gas (ignoring my labor costs…)
So we’re rapidly inducing people to adopt strategies used in other 3rd world locations. Gasoline or kerosene stoves. Open fire outdoor cooking. DIY electricity – though I got good at that already under Gov. Gray (out) Davis and our rolling blackouts.
I got to looking at such things, and how folks lived elsewhere, and found that the Rocket Stove is one of the preferred methods of cooking. Relatively cheap and easy to make your own. Burns what we call “yard waste” and what they call “collected wood fuel”. Even came up with a simple DIY version using about $20 of bricks. (Primarily for my ‘after the quake’ preparations. It lets me build a working stove from the loose brick ‘rubble’… 😉
http://chiefio.wordpress.com/2013/02/24/g70-stove-pictures-and-use-report/
But there are commercial ones too. Even a nifty one for camping that lets you charge your cell phone / iPod:
http://chiefio.wordpress.com/2013/02/22/usb-wood-fired-stove-iphone/
So watch for increased use of “yard waste” in locations that adopt the high tariff model. Make electric rates match 3rd world kind of pain, get 3rd world kind of responses. It’s just the way economics works.
BTW, a first look at charcoal by the bag at Walmart looks like it may be cheaper to do your cooking over charcoal. It’s about the same cost / BTU as gasoline. So it all comes down to how efficient your BBQ is with fire. I’ve gotten my Dutch Oven out of the garage and roasted a chicken in it to test the whole process. Not too bad, but with a bit of a ‘surround’ I think I can get fuel use down even more into the “cheaper” range.
For now, at least, the gasoline stove is cheapest to cook with. (Well, propane is about the same cost, but they jockey back and forth…)
I’m sure that folks lighting fires in the backyard is going to do wonders for the environment…
Oh, and using a gasoline or kerosene heater (or lantern that gives ‘free light’ with your heat 😉 is much more economical than using an electric room heater. ( I had used an electric room heater in just the bedroom and let the whole house natural gas heater off, to save on wasting heat. With their price differentials, it is now cheaper to just let the whole house be heated. Eventually I need to put in baseboard hot water and an external fired heater that lets me just warm the one room. Using an unvented fire appliance is not a good idea. But I just know some poor folks will do it just to save the cost of $1/2 electricity…)
Oh Well, as they say… buy stock in makers of charcoal and BBQ grills…
richard verney says:
March 13, 2013 at 4:27 am
Somewhat off-topic, but energy related, see
http://www.telegraph.co.uk/finance/newsbysector/energy/9924836/Japan-cracks-seabed-ice-gas-in-dramatic-leap-for-global-energy.html
If this can be extracted safely, then burning methane produces less CO2 than either coal or natural gas, and hence for those that are concerned about the possible effect of CO2 emissions on global climate, extracting this source of energy should be high at the top of the list of cleaner energy solutions.
———-
Natural gas IS mostly methane anyway, so the methane hydrates are roughly equivalent to natural gas. Still better than coal at any rate(no sulfur or ash to worry about)
There are other problems with Maryland wind power. The power distribution system on the Delmarva Peninsula operates from west to east. If the wind power is installed, they will have to also construct an east to west distribution system and at great expense. Recently there was a plan to connect various power plants with a single grid from Virginia through Maryland and Delaware to New Jersey. The govt turned the plan down. There is no way to get this off shore wind power to market with exiting lines.
Also, they had better plan to keep these towers so far offshore that they can not be seen from the beach at Ocean City. Can you imagine people spending their hard earned dollars for a family vacation at the beach, only to see a forest of wind towers in the distance as compared to the endless horizon!
@E.M.Smith says:
March 13, 2013 at 3:11 pm
I don’t know what your construction is like, but if you’re thinking of baseboard, have you considered in-floor radiant heat? Using selector valves, you can heat as much or as little of the house as you like.
I am wondering what the line is on this venture in Atlantic City; will bet on costly overruns, 50% more cost for maintenance, a hefty price for modifying the grid to distribute the inconsistent power generated, and then a costly removal process when it is deemed unsafe…
It is exactly this level of incompetence that encourages me to suspect it is all planned (amongst MANY more issues) to fabricate plausible deniability and stall until the next bonus cheque clears.
But hey cancel a dozen F 35s and build all the statues with moving parts that you want or tidal power or geothermal power or…the experiments are being done around the world, perfect for an American redesign (innovation the US is know for) or just wait and keep spying on China…
E.M.Smith says:
March 13, 2013 at 3:11 pm
“…But I just know some poor folks will do it just to save the cost of $1/2 electricity”
===================================
Some interesting points. My two cents…
Heat pumps with underground reservoir; water radiators using the earth as a heat sink or source as required…(cost effective geothermal) This is a very hard boon to legislate away.
Ferment yard litter and extract methanol food waste for ethanol or methane. Form “tribes” in your neighborhood to pool resources (homeless do the same and squat retreat then squat again…repeat^n, i.e nomadic squatters into every nook and cranny) Collect rainwater (test it for heavy metals) and rebuild cisterns of old.
I have more ideas but i grow weary of this topic and they are more “hardcore” and will seem less crazy during the next “quantum fluctuation” lol
The pattern has been well established, incompetent “rule” with little or no accountability and then business as usual: repeat. Each iteration transfers wealth/property/money/hard assets/resources to the modern Pharaohs and…
oh and the poor folk will not do that until they cannot afford their electric bill anymore, or water bill, or property tax, or police tax or movement tax or poll tax or service tax or sales tax or, debt recovery taxes, transmission tax or data tax, or…you know that 47 percent that pay no taxes hehehehe
errr, not to be confused with the 2% that pay no taxes.
Something wrong with that chart which shows the fuel costs of a coal plant being lower than the original investment costs. That could only be true over a short period of time. Certainly not over a 40 year lifetime as most UK power stations are designed for.
FYI, MA is the state abbreviation for Massachusetts. The state abbreviation for Maryland is MD (which I always write as Md so it doesn’t look like Missouri, which is MO).
Rart,
You have really a lot to learn about basic econ. In your case it almost appears hopeless.
To quote Anthony in another blog thread.. “The stupid, it burns…”
Why are we subsidizing some thing that is 3-4 time more expensive than other sources? This throwing money at a problem and never solving it… and that money they are throwing away is MINE!
Rud Istvan says:
Wind does not always blow. So for grid stability there must be offsets. The more wind in the grid mix, the more the mandatory ( since brownouts or grid failures are not acceptible options) offsets. Today, that means peak load natural gas turbine/gensets roughly equivalent to wind capacity.
Do the math, and those stand alone would be cheaper than wind (hint, since with wind they are still needed anyway).
With wind (or solar) power the alternative generating capacity has to be able to rapidly vary output. This is likely to decrease efficiency and increase maintainance costs for the power plants concerned. Thus using “renewables” can easily push up the cost of electricity from all sources.
Phillip Bratby says:
The good news is that the sooner they fail, the shorter time that electricity consumers will have to pay the ridiculously high prices for the meagre amount of electricity they might produce.
But the taxpayers might be stuck with paying for them. Even if they no longer even exist…
Apples and oranges:
34¢/kWh, wholesale, price of wind power
34¢/kWh is almost three times the average retail residential electricity rate
Residential rates not only inlude wholesale prices, but the costs for transmission ditribution, billing etc.
In maryland, wholesle power is bought on sold on the PJM market (www.pjm.com)
The price is called the locational marginal price It has averaged 4 cents a kwhr for the past few years.
Thus 34 cents is EIGHT times the average wholesale rate.
How many pelicans will have to,die this time?