Rising Ratepayer Costs Sink Long Island Offshore Wind Project
Thursday, August 23, 2007
By: Alliance Press Release

Calls Cape Wind into Question

The Long Island Power Authority (LIPA) yesterday decided to terminate a controversial project to install 40 wind turbines off the coast of Jones Beach because of a recent report showing the costs of this $700 million project to be significantly higher than traditional forms of energy generation. While earlier estimates from LIPA consultants estimated energy from the wind development would cost between 6 and 9 cents per kilowatt hour, well above the 4.5-cent average LIPA has paid, recent analysis by Dowling College's Long Island Economic and Social Policy Institute showed the cost would approach 19 cents in the latter years of the contract. 

While wind may be free, this development demonstrates that turning it into electricity is more expensive than most conventional generation sources because of high capital costs, and ultimately it is the consumer that covers those costs. When LIPA first announced its plan, it estimated a cost of between $150 million and $200 million, but current estimates are nearly $700 million. Similarly, while Cape Wind initially estimated $700 million to build their 130 turbines, recent estimates are over $1 billion and likely far higher given LIPA’s $700 million price tag for 40 turbines.

In other recent developments, plans to build an even larger 500 MW wind project in Texas were called off because the multibillion-dollar project didn't make economic sense according to the developer. While electricity prices are higher in MA and NY than they are in TX, they were still not high enough to make the proposed project economically viable.

An August 2007 report by New England’s Independent System Operator confirmed that wind power has high capital costs and would be expensive to build. It goes on to say that to fill the gap between the revenue these projects would receive in the New England wholesale market and the revenue they need, they would depend on additional sources of revenue including tax credits, renewable energy certificates, and long term purchased power agreements. On top of rates New England residents would pay to Cape Wind for their electricity, federal and state taxpayers would be paying over $1.3 billion in tax credits and subsidies over the life of this project. 

While Cape Wind once claimed their project would save $25 million annually, or 10 cents per month per New England household, they have failed to disclose their project’s overall financials. Given that the escalating costs of this project would ultimately be borne by New England ratepayers and taxpayers, Cape Wind should fully disclose the financial information necessary to substantiate the project’s viability and the price residents would pay for this expensive source of electricity generation. The New England public needs full disclosure to decide whether the Cape Wind project makes sense or is no more than an economic boondoggle for the developer as the LIPA project has been described.