A high price for a modest contribution


The May 7 announcement of a 15-year deal between Cape Wind and National Grid prices electricity created by wind turbines at 20.7 cents per kilowatt-hour. The deal will help Cape Wind secure financing to build its 130-turbine generating plant at Horseshoe Shoal in Nantucket Sound.

This page has opposed the Cape Wind development, mainly on grounds that its contribution to the nation’s supply of electrical energy does not warrant the industrialization of a natural resource that is and has been for centuries a wild, empty, clean ocean acreage prized by vacationers, yachtsmen, and fishermen.

The argument in favor of Cape Wind’s plan and the state’s enthusiasm for near-shore wind power generally runs as follows: We need to wean ourselves from fossil fuels, and the combination of discouragingly high prices for energy, and incentives for non-carbon based generation will speed our migration from old, dirty fuels to new, environmentally benign ones. It’s the price of progress, according to both the Obama and Patrick administrations, which have political and intellectual commitments to this line of argument. They also believe that voters will reward them for these positions.

But, as the Cape Wind deal with National Grid shows, the price of electricity from wind will be more than twice what consumers now pay, and it will rise significantly and annually, 3.5 percent a year, no matter what occurs in the rest of the energy market. Gov. Deval Patrick compliments this deal for the price predictability it promises, as if that were somehow as desirable as lower or steady prices might be to family or national economies.

Electricity produced by conventional power plants today costs about nine cents a kilowatt-hour. The claim is that average electric bills will rise about $1.59 a month, which may seem modest, but that’s because the highly valued electricity created by Cape Wind will be heavily diluted. Most electricity will continue to be created by conventional means, and Cape Wind won’t contribute much new capacity at all.

The Cape Wind-National Grid deal adds as much as $443 million in new energy costs, and that doesn’t count the federal subsidies that Cape Wind will receive from national taxpayers. It does take into account the extra 6.1 cents per kilowatt-hour that Massachusetts utilities are required by state law to pay for wind/solar energy contributions.

Which helps to explain what keeps the price of Cape Wind power as low as its touts claim. First, there is a very large financial contribution from taxpayers who will subsidize with grants and loan guarantees the capital cost of building wind generating plants such as Cape Wind. Second there is state and federal legislation that requires National Grid to buy the power Cape Wind generates, at prices it would otherwise not pay. And, thankfully, there is the low-cost power that continues to be produced by conventional plants that will be needed for the foreseeable future to supply the largest share of the power the nation needs to grow its economy.

Taxpayers nationwide will pay to build Cape Wind and then pay some more, at enormously inflated prices, to use the power Cape Wind creates. Business owners and employers generally will pay even more, with consequences for economic growth and jobs.