Stop O'Malley's offshore wind folly now, not later

March 27, 2011|By Jay Hancock

The General Assembly is wavering between approving Gov. Martin O'Malley's marquee proposal to install wind-driven electricity generators off Maryland's coast and putting the idea off for further study.

But what lawmakers ought to do is vote it down and be done with it.

Offshore wind is too risky. It's too expensive even as advertised and will probably cost more than that. Although they won't make for flashy talking points if O'Malley runs for president, there are far better and cheaper ways to meet Maryland's energy and environmental goals.

O'Malley's people hawk offshore wind the way policymakers and Enron sold electricity deregulation in the 1990s. Maryland is "in a race" with New Jersey and Delaware to develop offshore wind, O'Malley aide Joseph Bryce told The Baltimore Sun last week.

A dozen years ago Maryland needed to deregulate electricity "to keep on the cutting edge of attracting business," then-Sen. Thomas L. Bromwell told The Sun at the time. "We're not leaping ahead of our neighboring states."

Now the governor who won his first term by decrying the high BGE bills resulting from deregulation seems to want to make expensive electricity Maryland's permanent claim to fame. Put it on the state flag along with the Calvert coat of arms.

True, sooner or later Maryland needs clean, new electricity plants to fuel a growing economy and replace poisonous coal-fired generators. But a 2007 study commissioned by O'Malley's own regulators found that offshore wind is the single most expensive way for the state to accomplish this.

"Offshore wind generation incurs much greater costs" than even onshore wind, said the study, informally known as the Levitan report. The economic payoff for a hypothetical Maryland offshore project, the study said, was "extremely negative."

Since then the cost to install offshore wind generators has gotten "considerably higher," according to a September study by the Energy Department, thanks in part to rising materials prices and better appreciation of how hard it is to build and run huge windmills miles from land.

Offshore wind seems similar to the nuclear-power business around 1970 or so. Successful early projects in both industries prompted a rush to development. Like the nuclear deals of the later 1970s, offshore wind farms are having trouble coming in on budget.

It takes years to get permits. Engineers are still figuring out the best way to anchor pylons five fathoms under. Salt water and salt air play hell with hardware.

Still, regulators keep getting shocked when offshore wind proves more expensive than promised. Last fall the builder of a wind farm off England, a project similar in size to the one proposed for Maryland, booked $163 million in cost overruns.

Last year the Massachusetts attorney general projected the capital cost of that state's Cape Wind project to be $2.5 billion — more than twice the original estimate, the Boston Globe reported. After an initial, low bid to secure negotiations for an offshore project, Bluewater Wind responded with "a drastic increase in the price impact" for Delaware ratepayers, according to a 2007 report by the Delaware Public Service Commission.

Marylanders would be shielded from cost overruns because developers would bear the risk, says Abigail Hopper, O'Malley's energy adviser. But developers aren't dumb. They'll build risk and rising costs into their bids.

Maryland would pay for offshore wind with a monthly surcharge on everybody's utility bill for decades. A few weeks ago the Public Service Commission figured O'Malley's plan would cost from $3.1 billion to $12.5 billion more than conventional generation over 20 years — between $2.16 and $8.70 a month for household customers. It quickly lowered that to between $1.7 billion and $5.4 billion — 92 cents to $3 a month — over 25 years.

Naturally I asked if the commission pared its numbers after getting yelled at by O'Malley.

The PSC issued "an independent analysis," says O'Malley spokesman Shaun Adamec.

"I respectfully disagree that we changed our estimates in response to pressure from anybody," said PSC Chairman Douglas Nazarian, adding that the commission adjusted the report to be more in line with what's being proposed in Annapolis.

In any event, don't be surprised if all the numbers are low balls. On top of all the other costs, consumers might pay more than $1 billion more for upgraded transmission lines to get the juice from the coast to where it's needed inland.

While offshore wind has gotten more expensive since the 2007 study that found it would deliver "extremely negative" returns, the best alternative has gotten cheaper. Natural gas prices have plunged and are expected to stay low. Maryland can build a gas-fired generation plant with more capacity than offshore wind at perhaps half the initial investment.

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