As a center for energy innovation, Massachusetts should be able to provide cost-effective energy solutions with a diverse energy portfolio that includes competitive and affordable renewable energy.
Despite the abundance of reasonably priced renewable energy through hydro and competitively bid onshore wind projects, the high-priced Cape Wind project continues to dominate the headlines and the discussion about energy innovation and subjects taxpayers and ratepayers alike to unnecessary costs.
Heavily reliant on federal tax dollars despite repeated assurances that private financing would cover the costs of the project, Cape Wind currently has pending applications for a U.S. Department of Energy loan guarantee for up to $500 million and a federal investment tax credit that would cover 30 percent of the total project cost - or about $780 million - to finance major portions of the $2.6 billion project, shifting too much of the cost burden to taxpayers.
Recently, the U.S. Energy Information Administration (“EIA”) noted that offshore wind is the second most expensive electricity generating technology with costs that are over three times the cost of comparable alternative renewable energy sources. The contracted electricity prices for Cape Wind, for example, start at 20 cents per kilowatt hour (kwh) and would increase by 3.5 percent each year, climbing to 34 cents per kwh in the final contract year. At an average cost of 26 cents per kwh, this far exceeds the cost of onshore wind at 8 cents per kwh. Today, Massachusetts is buying onshore wind power from Maine and New Hampshire at significantly less expensive rates than it would from Cape Wind should the project move forward.
Not only would Cape Wind burden taxpayers and ratepayers with its high costs, it would outsource jobs abroad. For example, rather than utilizing local Massachusetts businesses such as Mass Tank, the production of turbine foundations has been outsourced to Germany, and manufacturing jobs to build the turbines have been outsourced to Siemens in Denmark.
Beyond these outdated assumptions and important economic considerations – high electricity costs and few if any local jobs - Cape Wind would harm the wildlife of Nantucket Sound. A recent federal court decision found that both the U.S. Fish & Wildlife Service and the National Marine Fisheries Service will need to conduct more scientific reviews to better assess Cape Wind’s impacts to ensure that endangered birds and marine life will not be threatened by the turbines.
As a matter of practical energy policy, renewable energy should be embraced as long as it is competitively bid, cost effective, and does not rely on federal taxpayer subsidies as a primary finance vehicle. For these reasons, the federal government should not be investing taxpayer dollars in projects that do not meet this standard.
O’Connell president and CEO of the Massachusetts Competitive Partnership.