Costing Cape Wind: Was Teddy Right for the Wrong Reasons?

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cape wind

Yesterday, Interior Secretary Ken Salazar gave the green light for the Cape Wind wind farm project off Cape Cod. In a May 16, 2006 article in the Boston Herald, then-Sen. Ted Kennedy, whose family famously owns a "compound" overlooking the site of the future wind farm, denounced the project as a "special interest giveaway."

At his press conference yesterday Salazar said, "I don't know the cost of the project, but I know it will be subsidized, but not sure by how much." In fact, Cape Wind Associates, the developer of the project is treating the cost estimates as a trade secret. The 130 wind turbines each have a maximum capacity of 3.6 megawatts, which sums to a total maximum capacity of 468 megawatt for the project. However, the wind doesn't always blow, so a generous estimate of a 40 percent capacity factor suggests that Cape Wind's generating capacity would average of about 184 megawatts.*

Cost estimates for the Cape Wind project run from $1 to $2 billion. Let's assume the lower capital cost estimate and compare it to the capital costs for other types of electric power generation. Using cost estimates from the Electric Power Research Institute, I roughly calculated last year that building a 1,000 megawatt combined-cycle gas turbine power plant would cost about $1 billion, and a modern 1,000 megawatt coal-fired plant would cost about $2.8 billion. Now let's assume that they run at 90 percent capacity. 

Crunching through the numbers, it appears that Cape Wind's capital costs are roughly 5 times greater than those of a comparable natural gas plant, and nearly double that of a modern coal-fired facility. Speaking of "giveaways," the sting of Cape Wind's high capital costs will be offset by federal subsidies amounting to $300 to $600 million.

Instead of trying to calculate the wholesale costs of Cape Wind's electricity, let me just cite the findings of the project's Final Environmental Impact Statement:

The proposed site at Horseshoe Shoal [Cape Wind's site] has the lowest estimated cost of energy, equal to $0.122/KWhr, or $122/MWhr, while none of the sites appear to be profitable at today's electricity prices. The average locational marginal price for southeast Massachusetts reported by ISO New England, Inc. for the real time market, was $65.97/MWhr over the two year period from February 2005 through January 2007. For January 2007, the average price was $58.77/MWhr.

As I somewhat gleefully noted earlier, renewable energy development is exacerbating the contradictions in the environmentalist movement between its naturalist and its energy factions.

*Fixed my confusion over megawatts and megawatt hours in accordance with H&R commenter llamas' astute observations.

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75 responses to “Costing Cape Wind: Was Teddy Right for the Wrong Reasons?

  1. Costing Cape Wind: Was Teddy Right for the Wrong Reasons?

    Probably the few times Teddy was right about anything.

    1. And…….

      First for the first time

    2. He only opposed them because they would ruin the view from the Kennedy compound.

      1. How many people only support them because they ruin the view from the Kennedy compound:)

        1. Thumbs Up!

  2. I like the sentiments, but FGS please have someone who understands these matters sort out the UNITS. Watts are a measure of the rate of delivery of energy, watt-hours are a measure of the amount of energy delivered. They are NOT interchangeable. I am getting tired of reading articles on “alternative’ energy which constantly commingle the two, and it so often seems that the commingling always happens in such a way as the present the ‘alternative’ solution in the best possible light. I expect better from Reason.

    llater,

    llamas

    1. llamas: Thanks for the whacking. I believe that I have now straightened out the confusion over megawatts and megawatt hours in the article. Thanks again.

      1. I always thank profusely (PROFUSELY) the Asian women who give me whackings.

        1. Meh. Your coin of the realm is all the thanks they are interested in.
          NTTAWWT.

      2. Sorry if I came across as excessively whack-atory. I see so much of this – usually along the lines of “I spent $47,000 on this 1.3 kilowatt-hour solar installation that delivers 256 watts per day, and now the power company is paying ME $3,200 a week!” – but I should not have vented that accumulated frustration on you.

        llater,

        llamas

  3. Can you run those numbers again, this time including fuel costs?

    I know natural gas is cheap, but it’s not free.

    1. That was my thought. Nuke plants, for example, have a much higher up front cost that coal plants, but the fuel costs are (relatively) cheap.

      1. Yeah, but what about “peak uranium?” 😉

    2. jasno et al: You may want to take a look at Energy Information Administration’s levelized cost numbers for 2016 here. Including fuels costs, the EIA estimates the levelized cost for combined cycle gas plant at $79/MWhr, advanced coal at $110/MWhr. If you include carbon capture and sequestration, those costs respectively rise to $113/MWhr and $129/MWhr.

      In comparison, the EIA estimates that in 2016, offshore wind is $191/MWhr and solar PV is $396/MWhr.

  4. EXTERNALITIES!

    1. Since I know you are spoofing, you only get one:

      COASE

      1. Aw, dangit.

  5. good analysis of cost, however you really need to factor in the cost of carbon as this would be a renewable and not generate CO2 and in fact offset other power generators using coal and natural gas. This really then normallizes the true cost of renewable power. Until the US develops a Carbon trading system renewables are out of the money!

    1. Mark,

      Ron has already run the numbers for pretty much every available option for electricity generation -both renewables and fossil- and included the external costs associated with fossil fuels.

      Once the numbers are crunched renewables simply can’t generate enough electricity on a consistent basis to compete cost-wise with fossil fuels.

      1. That really all depends on the prices of fossil fuels though doens’t it.

        During the run up of NG in 2007-2008 there were places in FL that were getting cheaper electric from wind that from NG.

        So any cost benefit analysis should take into account that fossil fuels prices will be going up, and probably WAY up (and that’s before any carbon taxes).

        1. Kroneberge: Why do you think coal prices absent carbon rationing will become so expensive? In any case, see the EIA levelized costs including fuel I cite above.

        2. Coal will not change substantially in terms of price for a long time, and lucky for us in the US, we have vast quantities available. It’s true that natural gas has spiked and dropped and spiked again which I agree would substantially alter any cost analysis.

          But if you are going to factor in the cost variables with natural gas, then you have to factor in the cost variables with wind, mainly that the wind doesn’t blow all the time, and when it doesn’t blow you need backup fossil fuel generation to handle the load.

          Brits and Europeans have suddenly discovered that in their zeal to build these massive wind farms, they are having to build an equal amount of new fossil fuel plants to back up the wind farms.

          They could’ve just built new nukes plants and saved the trouble. This is what we need to be doing. Nuke plants for electricity is the only feasible non-carbon emitting option that makes sense both economically and logistically.

          1. ?you need backup fossil fuel generation to handle the load?

            There is another alternative for some locations, however I have no idea on how the costs workout.

            In Scotland, in a number of locations they use excessive power generation capacity at non-peak times to pump water up a hill to a reservoir. The reservoir may also have significant natural filling. If there is a sudden demand on the power grid, they can open the gates to a hydro-electric plant and get additional power generation capacity online almost immediately. Other types of power plants have spin-up times. (I am repeating the tour guide from the Ben Cruachan power plant) http://www.scotland.org/about/…..achan.html

            1. There is a large pumped storage facility right here in the good old USA. it is used to ballance demand from nuclear power plants.
              http://en.wikipedia.org/wiki/B…..ge_Station

          2. I believe coal will keep moving in synergy with the rest of the carbon based fuels. So they when oil and NG go up, coal will as well.

            In addition, from the reports I’ve read, US coal reserves have been Massivly overstated. It’s from a paid subscription letter, otherwise I would post it (sounds lame I know, but still true).

            Anyway, no wind can’t be the only solution by itself, and no it doesn’t blow all the time. But according to department of energy research we could get 20%+ of our energy from wind (and do it with minimal investment over the cost of fossil (not including rising fuel costs).

            1. Kronenborge,

              I urge you to read the link I posted above where Ron has run the numbers for costs on energy futures. It’s very extensive and takes in to account each of your externalities specifically.

              Wind energy would not exist in the US today without generous federal subsidies and FORCED “green power” electricity rate increases. It is not anywhere close to competing on a level playing field with fossil or nukes. Same can be said about Solar, or pretty much any other renewable besides hydro.

              1. Oh no, I agree with you that renewables are still generally more expensive than fossil fuels especially coal.

                Although, I believe the cost curves will cross (2015 or so probably for wind, and 2025 or so for solar. That’s assuming fossil fuels don’t really take off).

                Of course we shouldn’t pretend that fossil fuels don’t have a large subsidies either. (and of course there is the exteranlity factor).

                Anyway, I look at renewable subsidies as the cost to get new tech off the ground. Most tech costs more at the start, and then decreases in cost. Renewables have been doing the same.

                It’s a long process, but then again, energy is a big problem.

                1. Interestingly enough, Ron included the subsidies for all of the fuels sources in his calculation, as you correctly note that fossil fuels also have subsidies.

                  The numbers still don’t add up.

                  I’m not saying we shouldn’t try to look for non-fossil fuel sources, but the answer -nuclear power- is so abundantly clear that I don’t see the point in massively subsidizing wind farms before we try and build new nuclear power stations. We haven’t built a new nuclear power station in the US in 30 years.

                  1. In Ron’s article, didn’t coal recieve about 10x the research and investment as wind?

                    And that’s just for R&D, that doesn’t cover all the hidden tax subsidies.

                    Anyway, I’m not against nuclear power. But it’s not cheap either. And it doesn’t have a downward sloping cost curve either like the rest of the renewables.

                    1. Yes, coal did receive a significant amount of research and investment dollars. I’m not sure it was 10X but the bottom line is that all of these factors were included in the calculations.

                      Wind power just isn’t remotely cost effective.

                    2. Coal
                      Production cost of a kilowatt-hour without carbon capture: 6.5 cents

                      Estimated production cost of a kilowatt-hour with carbon capture in 2025: 8.5 cents to 10 cents

                      Wind

                      Production cost of a kilowatt-hour: 9.3 cents

                      Estimated production cost per kilowatt-hour in 2025: 7.3 cents

                      That doesn’t seem like it’s that big of a difference, and the cost curves cross shortly.

                    3. Three cents is actually quite a big difference when put in context. It’s a third more expensive.

                      And keep in mind that the estimates for Wind generation are based on a capacity percentage that they don’t even come close to meeting on a full time basis.

                    4. Actually the wind estimates take into account that wind doesn’t blow all the time. Off shore wind especially is known to be much more consistant (althoug it has higher capital costs)

                      And note that by 2025 wind is estimated to cost less than coal. Depending on coal prices it will probably cross paths sooner, possibly much sooner. And coal is the cheapest (although dirtiest) of the fossil fuels.

                    5. If you think CCS is only going to cost 2 cents a kilowatt hour, I’d like to buy some of the physics-defying crack that you are smoking. CCS will reduce the efficiency of the plant by around 25% (that’s just thermodynamics, so no arguing there!), which means your 6.5 cents will jump to over 8 cents even if God Almighty were to drop down, install all the equipment, and run it in perpetuity. And of course, having to burn more coal or gas to run all this equipment means even MORE of every other kind of pollution.

                      CCS is an industry-sponsored red herring boondoggle, and everyone knows it.

                    6. Or the hundreds of billions in “hey, go ahead and dump your toxic waste on public property for free” subsidies.

                      Why libertarians support such policies is beyond me. It is sickening. Actually, it is a good test to determine whether your libertarianism is based on fact, or whether it is simply stupid anti-government nonsense. If you are arguing against basic economics, which indicates that putting a price on pollution is the correct path, then you are just a black-helicopter fearing hack.

                    7. As opposed to your stupid pro-government nonsense, Chad?

                    8. I am “pro” whatever works. Unlike you, I am not ideologically commited to a particular solution before looking at the facts.

                    9. Bullshit, Chad. You’re committed to this notion that mankind – short of unleashing every single nuclear device at the same time – can actually damage the climate.

                      “I’ll start walking everywhere when they start walking everywhere.” – Harrison Ford, who can only fly one of his seven planes at a time. Good for him, standing up to the likes of Chad.

                    10. Yes, LG, I am committed to the understandings of century-old science. The question is why aren’t you?

      2. Assuming your post is not a spoof, those of us in the science/reality based community do not necessarily believe that there is global warming, let alone that man has any significant impact on the planet’s temperature.

        I have always been skeptical of the “A” in AGW, but bought in to the “GW” part. However, after the revelations of Climategate, I have no way of knowing whether the earth’s climate is changing to any extent at all. What I do know is: 1) If I handled the raw data for our operation as they did at East Anglia CRU & Penn State or 2) I allowed our software developers to maintain and document their code as East Anglia did, I would not have a job on Monday morning.

        I let the actions of the high priests of AGW, rather than their words do the talking: http://www.latimes.com/feature…..3538.story & http://jammiewearingfool.blogs…..lding.html

        If CO2 really is a pollutant, do your bit and stop breathing.

        1. You claim to be in the “science/reality based community”, yet apparently believe that the observed warming was caused by magic pixies, and bought into the repeatedly debunked “climategate” nonsense.

          Ever heard of Dunning-Kruger effect?

    2. Unless, of course, you are intelligent enough to realize that carbon offsets are a totally artificial cost factor.

  6. A stopped windmill is right twice a day.

    1. Maybe we can use them to gibbet Teddy’s corpse, Cromwell-style.

      1. You, sir, are a fountain of superb, if twisted, ideas.

  7. Don’t think of them as power-generating windmills. Think of them as celebratory monuments to the long-overdue demise of whatever grotesquely obese rapist-murderer live-pickled in gin they bring to mind. All better.

  8. “In our view, by far the most important subsidy consists of the Renewable Portfolio Standard (“green”) credits that result from recent changes to the law in Massachusetts: electricity consumers in the Commonwealth are required to buy a growing proportion of their electricity from renewable sources, and will in practice have to pay a premium for this power. We assume that there will be a continuing shortage of qualifying renewable power, that this will keep prices for that power near the maximum allowed by law, and that all of Cape Wind’s power will qualify for the premium. This premium will raise the price received by Cape Wind by about 5.3 cents/kWh., and amounts to a subsidy (in present value terms) of $791 million from Massachusetts ratepayers.”

    From http://www.beaconhill.org/BHIS…..pril18.pdf

  9. “I don’t know the cost of the project, but I know it will be subsidized, but not sure by how much.” said Salazar…

    Therein lies our problem, spend without concern regarding costs.

    1. Letmebeclear…this should be seen as an investment in our collective future, not pointless spending to enrich my party’s political backers. Anyone who says otherwise is itching for a BATF raid.

  10. They should just build a massive coal power plant there. The smoke will drift over the Atlantic where it won’t hurt anyone.

  11. Now let’s assume that they run at 90 percent capacity, meaning that would produce on average about 900 megawatts per hour.

    Speaking from the energy industry, your usage of the term “capacity factor” (CF) is slightly different than as used in the industry.

    CF refers to the total possible generation, in MWh, versus the actual. There are 8760 hours in a year, hence we talk about the “8760” budget for generating units.

    Generally, power generating companies try to bid their lowest-cost units in first and for the full load capability in a day-ahead market. There are many different strategies as to how to capture the most revenue, but there are significant incentives to avoid having the ISO dispatch a running unit into reserve status or vice versa. Wind power is nearly impossible to bid into the day-ahead market, so it’s usually dispatched in a real-time market. The real-time market can offer higher prices, but probably never enough to make any money for high-cost generators. The downside is that bidding in real-time can negatively affect capacity factor as a lack of demand (hence less required generation) will eat into the total possible 8760 generation of a unit.

    Saying that a wind unit will generate an average of 40% of its full-load capacity when it’s CF is 40% is not quite correct, and it overestimates the revenue that unit will see because (a) that 40% CF is likely dominated by the timing of when the wind blows, and
    (b) the real-time market prices are crap when the wind is blowing (generally at night).
    So using the CF to comparatively estimate revenue only works between similarly operated units. Comparing fossil units using capacity factor to wind units is apples to oranges.

    Doesn’t change the fact that nukes or fossil units are better deals than wind units, but it does show that wind units are even worse of an investment.

    1. Unless, of course, the energy generated by the windmills is somehow stored and then spooled out when it’s needed. Of course, this would mean another, very expensive, storage and distribution system.

      1. See my post about Ben Cruachan above.

        Not that I don’t agree with you, but it is possible to “store” the excess capacity “…when the wind is blowing (generally at night).”

        1. http://news.scotsman.com/inver…..6171993.jp

          Seems the greenies in Scotland are as bothered by putting wind farms up as Dead Teddy.

          RSPB = Royal Society for the Protection of Birds

        2. It being “possible” and it being “cost effective” or even “economically logical” are two different things.

          This may work great in an area similar to the one in Scotland, but I can imagine places like Kansas might not be as conducive.

          (By the way, that link was pretty fascinating)

          1. Agreed

            I visited the power plant at Ben Cruachan at least 30+ years ago, long before AGW meant anything to the NYT. At the time, the facility was presented as a means to smooth the differences between generating capacity and demand curves. The near instantaneous, according to the guide, ability to put additional power on the grid was the rational for the project.

            As an ironic aside, when I was last in Kansas on my way to go pheasant hunting near Larned, I was driving down the road near some windmills that were being built. As I was looking at the windmills and wondering how many hawks they would kill, I hit an in-flight cock pheasant with the leading edge of the hood of my car. It was the only bloody pheasant I managed to hit for the first two damn days of our hunt! I was doing better at the quail.

  12. Let’s assume the lower capital cost estimate

    Why? If the higher estimate is $2 billion, that means it’ll probably end up costing 5 or 6.

  13. All costs aside, the schadenfreude element on this is great.

    Environmentalist are all for thee ugly wind farms so long as they go somewhere they don’t have to look at them.

    They only care about “special interest giveaways” when it ruins their summer home’s view of the ocean.

    1. chadenfreude” works better.

  14. http://www.wind-watch.org/

    I don’t know anything about this organization, other than what the home page says.

  15. “about 900 megawatts per hour. ”

    I quite reading after this. Ron, you’re a good science writer, but Jesus tap dancing Christ are the standards low.

    1. Just read the article from last year. With a few caveats it’s pretty good. Considering a plant engineer once asked me what the O2 level should be at the FD fan (air inlet), I’ll give it an A-.

      1. Fixed at last. Thanks.

    2. Sidd Finch: Ouch. I thought I’d fixed that. My bad. Try reading me again some time.

  16. The big mistake in this and other articles is that it prices the cost of a kilowatt hour at the point of production (POP) when it should be using the price at the point of consumption (POC).

    Energy is useless unless you have where and when you need it. Therefore, the cost of electricity at the generator is ultimately irrelevant. If you had an absolutely free source of electricity but couldn’t connect a grid to it, it wouldn’t do any good.

    The POC price of alternative power is way, way higher than an analysis of POP price would suggest because alternative power is massively unreliable so you the POC of alternative power has to include the cost of the non-alternative near 100% backup generator that will be required to reliably deliver a kwh to a real world POC when it has to be there.

    Worse, given the physics dictated need to balance the entire power grid, an intermittent and unreliable source is often worse than not having that generation capacity at all. A loss of even 5% of a grids power can bring the entire grid down. The Texas grid was nearly blackout in Feb 2008 when a freak drop in wind knocked 4% of the power offline. If that had happened with Texas getting 10% of its power from wind instead of just 6%, the entire grid would have gone down.

    So, you have to include the cost of adapting the grid to intermittent power as well. Right now, most states force non-alternative generators to subsidize the alternative generators by forcing the non-alternatives to step in and take up the slack of alternatives without paying the market cost for doing so.

    I’m not even sure that in the end, alternative power even saves any CO2 on net. It certainly does not do so in comparison to nuclear power.

    1. Good points. It needs to be noted also that not all alternative energy is created equal; solar power has the benefit of producing power during peak hours. Because of that it also has the benefit of reducing the load on peak coal units which are old and dirty even when they run at their optimal efficiency.

  17. This is probably too late to make a difference, but “megawatts per hour” doesn’t really make any sense. Megawatts is already a measure of how much energy is delivered per hour. A megawatt is a million watts, or a million joules per second. A joule is about a quarter of a calorie, but even that is confusing, because what we think of as a (food) Calorie is actually 1,000 thermochemical (small) calories. So a joule is .000239 food calories. A megawatt, then, is 239 food calories per second. In everyday terms, about half of a regular order of french fries (I mean FREEDOM fries!) at McDonald’s. 900 megawatts is equivalent to the caloric content of 450 orders of McDonald’s fries, delivered every second. In terms of 100-watt incandescent lightbulbs, it’s enough to power 9 million such bulbs continuously. I am in no way saying that it’s worth the cost, just trying to put the nebulous concept of watts in perspective that I think most people can understand.

    1. noted two comments above

  18. Damn. I know, I know. Megawatt means the amount a facility can produce at any moment, and hours is the measurement over time of the amount produced. Dumb mistake on my part. Fixed now.

  19. Thanks for your article. The latest figures from Europe place the cost of constructing offshore wind at $5000 a kw. During the hearings before the RI PUC on the Deepwater Wind proposal (off the shores of Block Island) the figures presented were $4500 to $5000 per kw. At 468 megawatts installed, Cape Wind will easily be $2 billion or better to get built. And the cost will be borne by public and ratepayer dollars. Please see our editorial on the cost and other issues here: http://www.windaction.org/faqs/27065 .

    –Lisa Linowes
    http://www.windaction.org

  20. http://www.youtube.com/watch?v=BiAHeEmxZnw

    We’ve been lied to by Cape Wind states Fox News. Cape Wind National Grid PPA 20.9 cents will increase yearly until N.Grid contract (3.5% annual increase) reaches .35 cents per KWh. N.Grid customers pay 9 cents now.

    This includes transmission according to Cape Wind President Jim Gordon with zero credibility. Jim is referring to the project connection to the Cape Cod Barnstable sub-station, only.

    But, the Governors’ ISO NE study on wind required transmission upgrades provides a $10 billion “procurement fee” or delivery charge, above and beyond. What percentage of this $10 billion delivery charge will we pay for Cape Wind energy AFTER public subsidies equal to 77% of project construction costs at $2 billion, and above triple current cost of energy, if all goes well?

    There is zero transparency about wind required transmission costs that will be folded into Cape Wind cost, already presenting the threat of fuel poverty.

    http://www.iso-ne.com/nwsiss/p…..emarks.pdf

    New York Times

    Op-Ed Contributor

    Home-Grown Power

    By IAN BOWLES
    Published: March 6, 2009

    “The cost of building transmission lines to connect new power plants to the grid ought to be covered the way we cover it in the Northeast, by folding it into the price of the power that the lines deliver. That allows the market to help keep prices as low as possible.”

    “The cost of transmission should be incorporated into the overall cost of bringing clean energy to market. Then let the chips fall ? and wind turbines rise ? where they may.”

    http://www.nytimes.com/2009/03/07/opinion/07bowles.html

    N. Grid customers will not be driven to fuel poverty alone. Who will next sign a PPA with Cape Wind?

    Expect an exodus of businesses from Mass under the rule of the Patrick Administration tyrants.

    ‘The Cape Wind offer National Grid couldn’t refuse’

    http://bjdurk.newsvine.com/_ne…..nt-refuse-

  21. Senator Kennedy cited many reasons for his informed opposition to Cape Wind.

    ‘Why I oppose Cape Wind’
    by Ted Kennedy

    http://capecodliving.blogspot……-wind.html

    Thank You,

    Barbara Durkin

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