A bad deal for Delaware
Sadly, the offshore wind boondoggle shows no signs of abating here.
While many folks were out Christmas shopping or just getting ready for the holidays, the state of Delaware was trying to slip a present into the stocking of prospective offshore wind operators. On December 19, it was announced by Governor John Carney - who, by the way, is the lamest of ducks, as his second and final term expires next year - that the state would negotiate with US Wind regarding the terms of the infrastructure necessary for having a pair of offshore wind farms off the coast of Ocean City, Maryland. It’s legacy-building time at our expense.
US Wind describes itself as “majority-owned by Renexia SpA, a leader in renewable energy development in Italy and a subsidiary of Toto Holding SpA. Toto Holding SpA has more than 40 years of experience specializing in large construction and infrastructure projects, primarily in the energy, transportation, and aviation sectors. In 2020, Apollo Global Management became strategic investors in US Wind.” It also has a promised investment in the moribund Sparrows Point steel plant outside Baltimore, in partnership with the Haizea Wind Group.
These projects, which US Wind dubs as MarWin and Momentum Wind, have a curious customer base. For example, MarWin promises:
…an offshore wind facility that will deliver approximately 300 MW of clean, renewable electricity to Maryland by constructing 22 turbines or less more than 20 miles from shore. Generating 300 MW of offshore wind energy will power more than 92,000 homes for a year, reducing emissions of carbon dioxide and other harmful air pollutants.
Expected to start generating clean energy in 2025, the MarWin offshore wind farm will also boost Maryland’s economy. By supporting more than 1,300 local jobs, investing over $75 million in Maryland ports, and revitalizing the state’s industrial waterfront, US Wind’s development of the MarWin project will make Maryland a leader in the new clean energy economy.
The Momentum project is similar, but larger. Yet here’s the issue: Maryland doesn’t want the required infrastructure to mess up the Ocean City beach (even though the massive towers will ruin the view and starlit skies) so the proposed transition between sea and land will instead be built on a beach in Delaware Seashore State Park, which is about 11 miles into Delaware.
The proposed wind farm would already be in the viewshed of the park, but would also require a facility on the beach (which, of course, isn’t shown on the BOEM renderings.) And while Maryland gets the power, much of the infrastructure is being built in Delaware, including the repurposing of the existing Indian River generating facility. The claim by US Wind is that the outward face of the electrical entrance would be a manhole in a parking lot.
Yet while there are always lessons learned with each new project, park users should have good reasons to be concerned with this work. In Rhode Island, where the first wind project came online several years ago, they’ve been plagued with issues with the cable burial and overall reliability. Indeed, the legitimate question is “how can they make any money when the turbines are never running?”
Well, the answer is that they baked it in up front. The feds have been tossing billions into incentives to get this industry running for well over a decade, regardless of its capricious nature and deleterious effects on the power grid.
In our case, the term sheet, which is described as the “proposed terms and conditions from a proposed agreement” between the state of Delaware and US Wind, outlines a series of sweeteners US Wind is prepared to give the state of Delaware. As the website CleanTechnica vomits, “This magnificent display of wind-supported riches could help offshore wind advocates beat back the opposition when the time comes for Delaware to plant its own ‘steel in the water.’” Hopefully that will occur about the twelfth of never.
The first and foremost “benefit” to Delaware ratepayers is renewable energy credits (RECs). In essence, once fully operational, US Wind will be donating 150,000 of them a year to the state - in other words, producing 150,000 mWh of electricity a year will pay the state for this obligation.
There are two issues with this first pledge. First, with a rated capacity once fully online of 1,133 megawatts, we basically get 132 hours’ worth of them annually. (Of course, that’s presuming these things work full-time to peak efficiency, but I leave that to the
types to figure out. I just know natural gas is much more predictable.) Supposedly this saves ratepayers $76 million over the life of the agreement, but we could save a lot more by just eliminating this phony market and all its carveouts and exceptions.As an example, here’s what they don’t tell you in the press release, but is found in the Term Sheet:
These benefits are anticipated to reduce the average residential ratepayer's annual electricity bill by $9.
Wowww-eeee! I can buy that one extra cup of Starbucks this year! Of course, that will be more than swallowed by the annual increase in my electric bill.
And, as you might expect, the state decides who gets those RECs so they get to see who whores themselves out to them the best.
Secondly, the other rub - according to CRI’s John Toedtman - is that US Wind’s deal with Maryland “promised all the available RECs to Maryland utilities if the projects operate the planned 44% of the time. Unfortunately, our regional grid manager predicts offshore wind projects will only run 37% of the time.” In his assessment, “it is unlikely Delaware will receive any RECs.”
Of course, this could end up being negotiated with Maryland and they’ll relent, which isn’t out of the question with their pitiful excuse for a governor. But remember: we’re doing all this for $9 in your pocket when doing nothing might be more of a net benefit given the potential tourism and property value losses.
On the flip side, US Wind is paying a pretty penny for our piece of the beach: $350,000 a year annually, increasing by 3% a year. Over 20 years that equates to roughly $9.4 million, although if inflation reaches pre-Milei Argentina levels that would be a huge savings.
They are also using “over $200 million in upgrades to the transmission system on the Delmarva peninsula in connection with the Projects” as a negotiation on their side, upgrades to be as directed by our interconnection service PJM. Again, that’s basically a transfer of taxpayer funding and it’s nice, but in scale maybe not so much: our electric co-op of maybe 100,000 customers claims to have spent “tens of millions” over the last thirty years. In another example from the other main electricity supplier in Delaware, in requesting a recent rate increase, Delmarva Power said it “intends to spend $430 million on plant over the next three years. This represents an increase of 155% over Delmarva’s 2019 plant spending.” That’s a case of desiring more specifics regarding that benefit, because $200 million sounds a lot less enticing when annual spending by the state’s utilities approaches that figure. We also have no timeframe from US Wind for that additional transmission system spending.
Finally, and probably most importantly to those in Delaware’s growing bureaucracy, the state will get another $40 million from US Wind for a slush fund, which can be distributed in several various ways: dredging, workforce development (particularly in the offshore wind industry), money for youth indoctrination, and a Delaware State Parks Resiliency Fund. It’s a full-employment program for select bureaucrats.
And remember: the project is intended to supply Maryland with a portion of its electricity. They just happen to need Delaware for the infrastructure because there’s an existing electrical generation facility they’ve been wanting to do away with for awhile since it was a coal-powered plant, parts of which dated back to the 1950s.
Because US Wind is in for a penny for this project, Delaware does have the whip hand on this. Yet its misguided rush to pay more for “free” but unreliable energy ignores the needs of consumers who don’t want to pay an arm and a leg to keep their lights on. A better deal would be to cancel the entire US Wind project and look for ways to improve reliable methods of power generation so they’re less polluting, such as converting the Indian River facility to natural gas. Just because Maryland wants to play with this insanity doesn’t mean we have to be involved, too.
A century ago, rural Americans got away from power by windmill when a more reliable source came along. Do we have to relearn a hard lesson?