Most of the renewable-energy business is busy fretting about the extension of federal tax credits, which expire at the end of this year.
But the real story, it seems, is how clean energy’s biggest historical handicap is coming to be seen as one of its biggest selling points: its predictable cost.
Take offshore wind power, the holy grail of big renewable-energy projects. There’s lots of wind a few miles out at sea; go out far enough, and even Kennedys will stop complaining about eyesores. The U.S. Minerals Management Service, lately notorious for opening other things up, is opening up chunks of the U.S. coastline for wind-farm development.
The problem with offshore wind has always been the cost: The turbines cost more, and installing them and maintaining them costs more than their onshore cousins. That helped torpedo efforts in the U.S. to build offshore wind farms in the past. Or, as the NYT phrased it in its lengthy review of Delaware’s battle to become the first U.S. state to embrace offshore wind with the Bluewater Wind Park:
Offshore marine construction was wildly, painfully expensive — like standing in a cold shower and ripping up stacks of thousand-dollar bills.
How did a cold shower turn into an offshore wind farm blessed by same the local power company that had actively lobbied against it? Two words: energy prices. From the NYT:
“Energy markets went significantly higher — and scarily so, particularly in the last six months,” [Bluewater Wind boss Peter Mandelstam] said. Indeed, oil has skyrocketed, and the price of Appalachian coal has more than doubled this year. Tom Noyes, a Bluewater supporter, blogger, and Wilmington-based financial analyst, says that a year ago, “the numbers that both sides of this debate were throwing around were largely academic. Now, those numbers are visceral.” Against this backdrop of steadily climbing energy prices, Bluewater’s offer of stable-priced electricity — an inflation-adjusted 10 cents per kilowatt hour for the next 25 years — became something that no utility, it seems, could credibly oppose. “A few decision-makers got it early on,” Mandelstam said, “some got it slightly later and [local power company] Delmarva finally got it.”
Wind power is suddenly becoming more attractive because the fuel is free; what makes it expensive is the up-front capital costs of the turbines and wind farm installation. That’s almost the opposite case with power sources like natural gas, where the upfront costs are pretty low, and the fuel bill is the main variable.
At a time of wildly volatile oil, coal, and gas prices around the world, that kind of long-term price predictability is a big advantage. The city of Houston is saving money on its power bill after switching one-quarter of its municipal power needs to fixed-price wind-power contracts.
It worked on Delmarva, too. President Gary Stockbridge told Delaware state authorities one of the main reasons he was able to finally agree to purchase power from the Bluewater wind farm was that ratepayers wouldn’t get stuck with much higher utility bills—which is what Delmarva had initially warned about when it opposed the wind farm.
In just the last two months, though, oil prices have collapsed; crude fell below $100 Monday. So the question for Bluewater and every other embryonic offshore wind farm in the U.S. remains the same: Will fossil fuels stay pricey enough to keep renewable energy attractive, or are fresh subsidies the sector’s only hope?