Category Archives: Off-Shore Wind

Deepwater forgot to read PBN

In last night’s Channel 10 interview, Governor Carcieri’s former chief of staff – now lobbyist for Deepwater Wind, Jeff Grybowski, claimed that if Deepwater is allowed to create the larger wind farm “800 to 1000 jobs could be created.”

Unfortunatly, when Deepwater Wind CEO Bill Moore testified at the PUC, he admitted there was no evidence to prove that point and more recently the RI house of representative subcommittee on ports commissioned a report that shows future jobs supporting the ‘big wind farm’ probably would not materialize.

But why let facts get in your way.

Don’t forget to visit the RI Supreme Court today for the Toray Plastic/PoliTop case.

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Windy Pork

Published in the Providence Business News on Monday.

Offshore Wind is Pork

Should that matter to the RI Supreme Court

Deepwater Wind has accomplished something that we at the Ocean State Policy Research Institute (OSPRI) thought impossible. Their proposal to create 6 permanent jobs with $400 million in excess costs to Rhode Islanders makes the federal stimulus $646,214 per job look positively cost effective (Cato, 2009).

The truth is that neither is a good idea. Both show what happens when government money is funneled to politicians’ favored projects. This isn’t an allegation of corruption, per se, but recognition that government, operating without competitive pressures, isn’t very efficient and can’t out-perform the market when it comes to picking winners.

To be fair, the legislature has its eye on more jobs later, although no one has suggested how it can happen without even more enormous subsidies. And to add insult to injury, after all but ordering electric customers to spend the rent money on expensive windmills, the general assembly got a note of caution recently from a study for its special commission on ports. The report urged that Rhode Island go slow on investment in facilities for windmill support at Quonset, because the industry may not materialize.

But this is the purported pot of gold at the end of the ‘green’ rainbow that justifies us overpaying for electricity. What happened?

Despite Quonset’s extant facilities, the folks bilking Massachusetts ratepayers, Cape Wind, have decided to build from scratch in New Bedford, Mass. Shocking!

You start to see a pattern here?  The folks with an IV into our wallets in Rhode Island tout Rhode Island facilities, while these snake oil salesmen in Massachusetts offer the same patronage to Massachusetts.

Thankfully, although National Grid has thrown in the towel, no doubt thanks to a rich load of perks tossed in its direction, NSTAR the other major utility in Massachusetts, showed how effectively open bidding, rather than sole source contracting, can be for its ratepayers. NSTAR put its renewable energy contracts out for bid and market estimates show it will be paying under 10¢/kwh while the average pricing for Cape Wind and Deepwater Wind, considering escalators, is over 30¢/kwh.

This is a green apples to green apples comparison. Clean natural gas, which currently provides 97% of RI’s energy, is falling in price towards 5¢/kwh due to growing supply.

Even as the legislature gets a consultant’s report dismissing the promised benefits, the Deepwater project forges forward — facing perhaps its last significant governmental hurdle in the form of a case to be heard at the RI Supreme Court this Wednesday, Mar. 11th.

Should the emerging picture of these windmills as pork affect the Supreme Court review? The separation of powers tells us that policymaking is the job of the General Assembly and even if they made a bad decision to support Deepwater, it is not the Court’s job to act as a safety valve.

But the Court should take a “hard-look” at the administrative process that actually approved the contract. If, as it appears, the Economic Development Corporation’s testimony that economic benefits would flow from this project did not consider relevant factors in an open process, this undercuts the reliance courts normally place on agency decisions.

OSPRI has filed an Amicus Brief in the case asking that the court take cognizance of the “hard-look” doctrine in federal precedents that requires a court not only to find the administrative decision plausible, but to look to whether the decision was “fully reasoned”.

The RI Supreme Court has embraced the early “hard-look” precedents. Then Superior Court judge judge, O. Rogeriee Thompson, cited the penultimate in that line of cases, State Farm in deciding Manglass v. RIDHS, but the RI Supreme Court never reviewed that case. Now would be the time for the court to validate Judge Thompson’s citation and renew its commitment to the critical function of meaningful judicial review.

Agencies are not elected and yet they effectively make laws that govern our daily lives. There is no sleight to the separation of powers if courts take a “hard look” at agency decisions, so long as the court does not substitute its judgment for that of administrators. Typically, however, a decision that is deficient from a “hard-look” perspective is returned to the agencies for further consideration.

This is a process oriented rule, it may not result in a different decision, but it ensures that the fullest consideration has been afforded significant public policy decisions, and handing a $400 million bill to Rhode Islanders is just that.

From a political theory perspective this “hard-look” approach has a tension, serving as an implementation the separation of powers through the check and balance of judicial review while nonetheless mildly blurring the lines of the separate departments. To further public understanding of our arguments, we have arranged for a critique of their strong and weak points by visiting Brown University professor Steven Calabresi and others at the Political Theory Project at Brown on Tuesday, May 10th at 2:00.

Professor Calabresi teaches constitutional law at Brown, is a professor of law at Northwestern, a prolific legal author, a co-founder of the Federalist Society, and effectively a native son of Rhode Island. It is with great pride that OSPRI joins with the local Federalist Society organizing caucus to welcome Professor Calabresi to the legal theory discourse in our state.

Those interested in public policy generally and especially relative to the Deepwater Wind case are encouraged to attend both this forum and the court hearing.

Brian Bishop is the director of OSPRI’s Founders Project and Fellow on Regulatory Affairs.

Call to action

As you may know, after the PUC decision to approve the Deepwater Wind project the RI Attorney General, Torray Plastics, PoliTop, and the Conservation Law Foundation, filed appeals with the RI Supreme Court, along with amicus briefs filed by OSPRI and the RI Manufacturers Association.

Tomorrow, the RI Supreme Court will hear oral arguments on the issue of “standing” in this case.

These litigants participated with OSPRI before the PUC
with the withdrawal from the case by the new AG, the court has decided of its own accord to examine whether  CLF or Toray have interests allowing them to appeal.

Regardless of what you think of the substance of the case, if significantly affected businesses, like Toray and PoliTop, and public policy institutions, like CLF and OSPRI, are denied access to the courts, all Rhode Islanders will suffer from this lack of accountability.

While Toray and PoliTop seem clearly to  have standing, with millions of dollars and the jobs they provide on the line, both they and CLF will also argue that this is a compelling public policy issue meriting a “prudential” grant of standing.  One way the court will know this is a critical issue of public policy, is if the gallery is full of “the public.”

Please make time to  attend the hearing tomorrow at 9:30 AM at the Supreme Court Building, 250 Benefit Street, Providence, RI 7th floor – supreme court chambers.

Landing the America’s Cup

In case you missed it, we had an OpEd in today’s Providence Journal discussing our bid for the America’s Cup. Here is an excerpt.

After a year of work on detailing the absurd costs of the proposed Deepwater Wind farm, we appeared recently for the Ocean State Policy Research Institute on “Ten News Conference,” with Jim Taricani, to discuss the latest developments at the Rhode Island Supreme Court in our continuing effort to protect consumers from paying three times the going rate for fossil-fuel energy for green energy.

But the clip that keeps coming around isn’t our explanation of the amicus brief; rather, it is our unvarnished opposition to state expenditures being promised to attract the America’s Cup to our shores, painting us as the perennial Dr. No – all opposition and no solutions.

….

But wait, the lead negotiator, the Economic Development Corporation, now touts the Kahn, Litwin and Renza report suggesting $1 billion in economic activity associated with the races. The problem? We’ve heard this from the EDC before, when it commissioned one of these “multiplier” model studies to try to convince the Public Utilities Commission that spending $700 million on the Deepwater Wind project for six permanent jobs was a good idea. If we are Dr. No, these are the Boys Who Cried Wolf.

Click HERE to read the entire commentary.

Also, if you missed the 10 News Conference interview, you can find it HERE (third video on list).

45 and dropping

PBN reported on the “The Small Business Survival Index 2010″ showing RI ranking 45th on the “costs and burdens of government on small business and policy areas that enable their competitiveness and growth.”

The SBE pointed to Rhode Island’s high corporate income and corporate capital gains taxes, high property taxes, high unemployment taxes, highest number of health insurance mandates (No. 51), high electric utility costs, high gas and diesel taxes, and the state’s poor private property protections as weighing on its ranking. (emphasis added)

I added the emphasis on “high electric utility costs” to point out that the results of this report reflect current prices – not what we will be burdened with once the Deepwater (and other smaller) windmill projects get underway and energy prices rise even more.   It is reasonable to expect that our taxes won’t be going down  anytime soon either – so don’t be surprised to see  a lower rating next year.

A sucker born every kilowatt hour.

Do you ever get the feeling someone isn’t being honest with you – it’s an especially sinking feeling when it comes from people you thought were trustworthy.  From a recent ProJo article:

At a board meeting of the state Economic Development Corporation, (Governor Carcieri)  referred — not for the first or last time in public — to TPI Composites, the national manufacturer of wind-turbine blades that was founded in Warren, telling those in the room that day that he was trying to persuade the company to open a factory in the Quonset Business Park in North Kingstown.

“If we get moving, we could be building the blades here,” he said.

At a news conference Wednesday, TPI Composites announced that it will indeed open a state-of-the-art blade manufacturing facility in Southern New England. But it will not be in Rhode Island. Instead, the company’s new 69,000-square-foot factory will be located across the state line in Fall River.

What is written between the lines is that the plant in Fall River has been in construction for months, maybe longer.  Were those promoting the Deepwater project ignorant of this fact or did they choose to ignore it so they could continue making false promises?

This would be bad enough but let’s not forget that the other “evidence” that business would come to Rhode Island if we approved the Deepwater Wind project was a group of three letters from three different businesses, from three different countries – that seem eerily similar.

From the TX company:

We have been engaged with Deepwater Wind Block Island, LLC regarding the possibility of supplying cables to the Block Island Wind Farm as well as other Deepwater Wind projects.

Alongside those discussions we are exploring the possibility of locating a new manufacturing facility in the United States, including locations in Rhode Island.

From the Chinese company:

We have been engaged with Deepwater Wind Block Island, LLC regarding the possibility of supplying turbines to the Block Island Wind Farm as well as other Deepwater Wind projects.

In connection with those discussions we are exploring the possibility of locating new manufacturing facilities in the United States to serve for the market in N. America.

From the Japanese company:

We have been engaged with Deepwater Wind Block Island, LLC regarding the possibility of supplying cable to the Block Island Wind Farm as well as other Deepwater Wind projects.

In connection with those discussions, we, together with our strategic Japanese partner in Power Cable manufacturing, are exploring the possibility of locating a new manufacturing facility in the United States, including locations in Rhode Island.

What are the odds that three companies from three different countries would all write almost identical letters????

Clearly, the governor knew the turbine manufacturing was going to Fall River but he continued to  “sell” it to us.  Then, clearly, someone wrote a letter and had three different companies sign them. Quite frankly this is an insult. Those promoting this project must think the electric consumers of Rhode Island aren’t very bright but then again, the PUC went along with it too.

Do you feel like suckers?

As goes MA – so goes RI

As Rhode Island moves forward with its off-shore wind farm, the info below is worth keeping in mind.

February 12, 2010

The Editor
Cape Cod Times
319 Main Street
Hyannis, MA 02601

Dear Editor:

Thanks for the article in your February 11, 2010, edition, but electric customers in New England should not believe the claim that the Cape Wind project will save them “Billions” on their electric bills.

Frankly, the numbers in the slick 9-page “consultant” study[i][i] released by the developer of the Cape Wind project claim of $4.6 billion in savings over 25 years just don’t add up for at least four  major reasons:

1.      Huge Cost of Cape Wind electricity. The true cost of electricity from wind – particularly offshore wind — is huge. No one who is paying attention expects the price that Cape Wind charges for its electricity to be cheap.  In fact, over 25 years, the wholesale cost to New England utilities for electricity from Cape Wind apparently will be well over $5.75 billion and probably much more.

The arithmetic is simple:  The CRA “study” (table 1, page 6), shows that the developer expects to produce about 1,150,000,000 kilowatt-hours (kWh) of electricity per year.  If utilities are forced to pay even $0.20 per kWh, the utilities cost over 25 years would be $5.75 billion.[ii][ii] The cost would be $6.9 billion if utilities have to pay the $0.24 per kWh that NatGrid apparently agreed to pay for electricity from the planned Rhode Island offshore “wind farm.”

Does anyone in New England seriously expect that the WHOLESALE price of non-Cape Wind electricity in New England will average $0.20 or $0.24 per kWh over the next 25 years (up from about $0.08 per kWh in 2008.[iii][iii])  You would have to believe that it would be well above $0.20 to $0.24 per kWh to believe that electric customers would SAVE $4.6 billion if Cape Wind is built.

2.      The CRA “study” used old data.  For some reason not explained in the “study,” CRA used the Energy Information Administration’s (EIA’s) 2009 energy forecast (AEO2009 revised) rather than its 2010 forecast (AEO 2010) that has been available since last December.  The fact is that a lot has changed since EIA’s 2009 report, particularly on US natural gas resources.  As a result, the prices now expected by EIA for natural gas, electricity, and oil are dramatically lower than the outdated forecast used by CRA.[iv][iv]   Using current data would lower significantly the CRA-Cape Wind claim for savings.

3.      Doubtful Assumptions.  The “savings” shown by the CRA report are driven by assumptions, including the assumption that Federal legislation will impose a $30 to $60 per ton charge for carbon emissions.  Because of the high uncertainty, an objective analysis would have shown results both with and without this dramatic assumption.

4.      Missing Costs.  The CRA report is silent on who would bear the cost of the transmission capacity that would be needed to bring the electricity from the Cape Wind project to New England customers.  Unless Cape Wind is going to absorb those costs within the price it charges, those costs undoubtedly will be passed along to New England’s electric customers and hidden in their monthly bills.

Not mentioned at all – probably because it doesn’t affect electric bills – is the fact that the owners of the Cape Wind project would enjoy huge tax breaks if they build the project, and taxpayers in New England, as well as the rest of the US, will share in the tax burden that would be escaped by Cape Wind owners.  These tax breaks are in addition to the income the owners would receive by selling electricity to New England utilities and selling “green energy” credits. For example:

a.    Production tax credit (PTC).  The Cape Wind project owners would be eligible to receive a federal tax credit, currently $0.021 per kWh for electricity produced during the first 10 years of the project life.  Using the production apparently expected by Cape Wind (1,150,000,000 per year) a $0.021 per kWh credit (which is adjustable for inflation), would permit the owners to avoid federal corporate income taxes of $24,150,000 per year or $241,500,000 over 10 years.

The recent federal “stimulus” legislation[v][v] gives “wind farm” developers the option of selecting an investment tax credit in lieu of the PTC or electing to receive from the US Treasury a cash grant equal to 30% of eligible capital costs!  Again, ordinary taxpayers pick up the tab.

b.    Accelerated depreciation.  “Wind farm” owners are also permitted by the IRS to use the lucrative “5-year double declining balance accelerated depreciation” (5-yr; 200%DB) to recover the capital costs from their otherwise taxable income.[vi][vi]  Depreciation deductions would permit the owners to avoid $490 million in federal corporate income taxes – in addition to the Production Tax Credit – again shifting the tax burden to ordinary taxpayers.

c.    Additional tax breaks and subsidies.  The above does not include other federal or Massachusetts tax breaks and subsidies that could be available to the Cape Wind owners.

The electric customers in New England – as well as the taxpayers – deserve a far more complete and objective analysis of the potential cost impacts on them of the proposed Cape Wind project than is provided by the 9-page “study” attributed to Charles River Associates (CRA) and released by Cape Wind.

Sincerely, 

Glenn R. Schleede (former Massachusetts resident)
18220 Turnberry Drive
Round Hill, VA 20141-2574