Sunday, November 10, 2013

How to get out of a Puzzle Palace - Or Not


A Vestas 3 MW turbine being installed in the Baltic Sea at the Karehamn wind project. The only catch - the turbines are visible from shore, placed around 2 to 3 miles offshore. Image from http://renews.biz/50828/vestas-nails-down-129mw/

 The League of Conservation Voters (LCV) recently sent out an announcement about an upcoming meeting about Offshore Wind Energy to be held at Stony Brook University (Long Island) - see  http://www.nylcv.org/ecopoliticsdaily/20131031_please_join_nylcv_for_important_offshore_wind_conference.The meeting will be held on Nov 11, and among the speakers will be Gil Quiniones, President and CEO of the New York Power Authority, According to another attending group, Citizens Campaign for the Environment:

" Citizens Campaign for the Environment, Sierra Club, Renewable Energy Long Island, the Natural Resources Defense Council, Advanced Energy Research and Technology Center at Stony Brook, Alliance for Clean Energy New York, Environmental Advocates New York, New York League of Conservation Voters, and the National Wildlife Federation are pleased to announce the third annual offshore wind conference, "Offshore Wind Power for New York: Reaching America's Next Clean Energy Frontier."

This conference will feature presentations by key stakeholders and an exciting roundtable discussion with government and industry leaders on the current status of New York's efforts to bring offshore wind power online. Speakers will describe how New York is supporting offshore wind development, the environmental and economic benefits of investing in offshore wind, the critical next steps required to move offshore wind forward, and the advocacy efforts underway to finally make it a reality in New York."

Oh, if it would only be so….   Anyway, NYPA is THE organization that could make offshore wind a happening thing in NY State, and it could enable the electricity to be sold from such projects at about half of the price which would otherwise be the case for private developers of such projects (even if they get a NYPA Power Purchase Agreement), so it is good that they attend. But as has happened for the last two meetings, odds are, NYPA will remain noncommittal, and there will be way too much stress on R&D for offshore wind, the need for costly environmental studies and especially aquatic and avian studies prior to any possible development, so costly and lengthy that such projects might never happen in NY in most people's lifetime. In other words, there is no "push from above (Gov. Cuomo, NY legislators (Federal, state, local)) and especially a massive "push from below". Evidently, those in power in NY State may have gotten the "memo from Sandy" last year, but the lesson of the Frankenstorm is no longer of great concern….

So, what if more people could attend, especially, those unabashedly pro-wind energy, and they were allowed to make a quick (time allowed for such non-conventional ideas would be very limited, not that it would be allowed at all, except maybe in the "frank discussion" part of the meeting)? Anyway, here is an attempt at such a compressed presentation…Or, based on some existing offshore wind project data, even cheaper, such as near 7.5 c/kw-hr….. But, to do that, the dead weight of bogus assumptions, faith-based beliefs about business and capital intensive projects would need to be adjusted. And maybe that is more difficult than altering the laws of time and space, at least the ones Albert Einstein laid down, and which seem to still rule the roost…

The problem with the proposed "Offshore Collaborative approach is that NYPA, LIPA and Con Ed will be required to buy electricity priced in the range of 20 c/kw-hr or more (such as this reference from the Energy Information Agency: http://www.eia.gov/forecasts/aeo/electricity_generation.cfm) via this anti-renewable energy/fossil fuel advocating right wing group: http://canadafreepress.com/index.php/article/59071, In this case, the best guess is 22 c/kw-hr, caused by a very high total project cost (6.6 million/MW of capacity) and ridiculously high "money costs" and investors looking for 15% TO 20% returns on their investment, which is considered risky. The risk? The varying price of electricity, and the likelihoods that subsidies the project relies on might not be allowed to continue….

Anyway, a large German electricity provider/grid operator with the name of E. On recently installed a low cost offshore wind farm in Swedish waters for around $3.3 million/MW of capacity. The project was set up to use the lessons of recent offshore wind projects so as to do this one at low cost. And it worked…. So maybe these could be translated to NY City's waters…..

Karehamn - A Model Introduction into practical Offshore Wind:
The island of Oland is located in the southeast corner of Sweden in the Baltic Sea is similar in many ways to Long Island, at least size-wise. However, instead of being a sand dune pointing east west and inhabited by ~ 6 million people.., it tends to point north-south, and it is a limestone rock that managed to resin in place when glaciers were at least a mile thick 20,000 years ago. However, average wind speeds over the waters next to both islands are pretty similar. A wind farm consisting of 16 x 3 MW wind turbines was recently installed near the eastern side of the island in the shallow waters between 3 to 5 miles off the coast in 6 to 20 meters of water. Project costs were kept low by a number of ways. One was the use of "gravity" foundations (1800 ton reinforced concrete units) that were constructed on a barge, towed to the site and then placed in the specified locations by a humongous barge crane ("Rambiz"). Another was to pre-assembe the steel towers (80 meters) on the docks and then to transport them to the site and install them in a single lift onto those concrete foundations with a jack-up ship equipped with another large crane. The nacelle-hub was assembled onshore and then placed on the tower, with the blades then lifted up and attached to the hub. The goal cost of the project was $160 million, or $3.33 million per MW of capacity, or about 75% of the going rate for nearshore projects, and 57% of "deep water, far offshore projects. And, mission accomplished..

A similar arrangement could be done alongside Long Island - in shallow waters, with wind speeds similar to those at this Swedish example project, using made in America (Vestas V112 units are made in Colorado) wind turbines, using gravity foundations constructed in or near NY City on barges. But what would make thus truly low cost is the funding source. For that, municipal/state bonds could more than make up for all of the subsidies that would be heaped upon a private developer (NY or NJ projects) - especially the Investment Tax Credit (ITC) and the rapid depreciation (MACRS) which combined would mean a rebate via avoided taxes of close to 75% of the total project cost. In the NJ case, additional subsidies in the form of high priced "Renewable Energy Credits" (RECs) would also be added. But the taxes not paid by those very high income investors would need to be either paid by everyone else or else not paid at all. So, either more national debt or no school/Food Stamps/infrastructure spending… some choice, eh?

Here's the twist - public ownership financed by long term low cost bonds (the interest on them is non-taxable and thus is the only subsidy) could result in electricity sold for around 8 c/kw-hr using the Karehamn type project. That's half the price of a new heavily subsidized nuke, or less than the cost of electricity made with natural gas priced (bulk pipeline price) at $8.20/kcf (about twice the going rate today, 75% of the rate observed in the first half of 2008). But, over a 25 year period, there is no way that natural gas will stay at such low prices. After all, in Japan, gas goes for $17/kcf, and it is near $12/kcf in Europe, and such prices aren't going to remains forever low in the USA, especially given this drilling current rate for gas: http://marketrealist.com/2013/09/natural-gas-rigs-slightly-outlook-still-positive/. The present rig deployment is about half of what is needed for "steady state".

Of course, if you want to kill off any prospect for offshore wind off of the coast of NY City/Long Island, all you have to do is to pretend to be for it but make it SO expensive that nobody wants it. Oh, really dumb objections like "people don't want to look at them" can also be thrown in, thus making far-offshore, past the horizon the only choice. 


Image from http://www.eon.se/om-eon/Om-energi/Energikallor/Vindkraft/Nordiskavindkraftsprojekt/

But since that yields electricity that is too expensive, ESPECIALLY when private ownership and unknowable future electricity prices are the name of the game in NY State, well, the offshore project will get killed. And then the only choices are nukes or natural gas derived from tracking. And as "Church Lady" used to say, "Isn't that special…."


Image: http://web.mediaspacesolutions.com/Portals/131366/images/SNL%20Church%20Lady.jpg

So the Puzzle Palace/Hall of Mirrors actually has both a good exit, and an exit that just leads to economic ruin and a few more Frankenstorm Sandy's. Of course, there may also be the result favored by natural gas pushers, nuke advocates and so much of Wall Street's financialists - no exit at all, just an endless treadmill of proposals which get evaluated, then rejected as too expensive, then revised again with pretty much the same dumb rules - private financing/private ownership using loan shark financing rates and humongous tax avoidance based subsidies. It's both the definition of insanity and "ad infinitum", simultaneously. AND ISN'T THAT SPECIAL….

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