RE: Reject the Fuel Cell Tariff
DATE : 9/30/11
The Markell Administration would like you to become a high risk venture capitalist to support an expensive “green” jobs agenda. You get to bet about $1250. Tariff documents, using dubious assumptions, claim avoided Renewable Energy Credit purchases and Bloom’s sale of electricity will offset this by $1000. Economic development benefits from the Bloom Energy factory will have to offset the rest of your “investment”. Your odds are one in twenty of winning that bet. Large manufacturing and commercial customers will “invest” $2.5 million. Do you want to play? If not tell the Public Service Commission to reject Delmarva Powers’ request for an electricity rate increase to pay for power from Bloom’s fuel cell servers.
Those 900 jobs Bloom is promising may or may not happen as only between one and five percent of business startups succeed, think dot.com bubble and Solyndra. We will pay $16 million towards the $50 million manufacturing plant construction cost and another $7.5 million for roads, water, and sewers. Bloom has said that is not enough.
Bloom wants a guaranteed market for 300 to 500 servers. Keep in mind they have only sold about 100 so far with very large California and federal subsidies. Furthermore, they want the approvals in a hurry so their investors can receive a 30% federal cash grant, or about $90 million, that expires at the end of this year. They have said the manufacturing plant will not be built if these conditions are not met.
Legislation was passed in a hurry in June to define natural gas fired fuel cells as renewable energy. We will guarantee Bloom $800 million in tariff payments and guarantee Delmarva Power $300 million for the natural gas to fuel it (Delmarva does not profit from this). Bloom gets a guarantee, you get shaky assumptions in return. The “Expected Case” used to justify the tariff assumes inflated estimates of future conventional power prices and both regular and solar Renewable Energy Credit prices to calculate your offsets to this $1.1 billion price tag.
How inflated? The future electricity price is double estimates from the U.S Energy Information Agency. Standard Renewable Energy Credits from power sources like wind sell for $1.50 each now. The “Expected Case” assumes a price seventeen times higher at $25.57. Solar Renewable Energy Credits sell for $100 each but the tariff case used $205.
Now the last I checked when demand drops prices drop. Think about the current value of your home. Delmarva will have to buy one third fewer solar credits and won’t have to buy any more regular credits until about 2022 because of the tariff. But the price of these credits will increase? The law that requires power companies to buy these credits and to pass the cost onto you expires in 2025. The tariff case also assumes they continue to 2035 with no legislation to back it up. The potential impact to you is $3 to $4 a month instead of $1. This may not seem like a lot but put $3.75 a month in an IRA at 7% interest and you would have over $2,500 by the end of the contract.
It is a common tactic of proponents of this type of program to try and minimize the apparent cost impact. They break it down to a single month instead of the total cost, use only the residential impact and ignore the $25,000 to $100,000 a year cost to manufacturers, use inflated cost comparisons for conventional power, and spread the cost over as many customers as possible. This time the cost will even be spread to customers who don’t buy the generation portion of their power from Delmarva.
The Bluewater Wind offshore wind cost was originally estimated at $6.56 a month. Following the above steps, along with a price concession, proponents reduced the apparent effect to $.70 a month. No offshore wind power has been produced yet but the latest estimate is $1.70 a month because conventional power prices didn’t go up as fast as the exaggerated estimate said it would. Future electric rates are still being exaggerated so the actual cost of wind will be even higher.
Venture capitalist and business founders cash out when a startup company sells stock to the public. The Delaware project will probably be the trigger for this step for Bloom. Ratepayers have no such exit plan. Once approved the tariff cannot be revoked without paying the entire remaining cost in a lump sum. The best case for ratepayers is they recover 80% of the Tariff cost and gain some economic benefit from Bloom’s manufacturing plant. The worst case is ratepayers only recover 20% of the Tariff and Bloom stays in business just long enough to build the 30 MW fuel cell project and enough replacement cells to keep it running until the Tariff runs out and the jobs disappear.
Don’t be fooled fuel cells offer environmental benefits. If we really want to emit less carbon dioxide and fewer air pollutants we should build an advanced conventional natural gas fired generator. These plants are 20% more efficient than fuel cells, produce less carbon dioxide and emit about the same amount of other pollutants. For the same investment as the proposed fuel cell plant we could build a conventional plant with ten times the power production and reduce air pollution proportionately.
Legislators who voted for the Fuel Cell Act, some at my suggestion, need to take another look now that the illusion of low cost premiums has been exposed. Let the Public Service Commission know your objections.
David T. Stevenson
Director, Center for Energy Competitiveness
Showing posts with label Caesar Rodney Institute. Show all posts
Showing posts with label Caesar Rodney Institute. Show all posts
Wednesday, October 5, 2011
Dover Sun Park a Job Killer
RE: Dover Sun Park a Job Killer
Caesar Rodney Institute FOIA Request Sheds Light on Costs
DATE : 9/22/11
With the opening of the Dover Sun Park, proponents of alternative energy have driven another stake into the heart of the Delaware economy. Temporary installation jobs needed to build the Park, and others like it, will be offset by the loss of ten permanent jobs elsewhere. Electricity from solar farms costs four to five times more than conventional sources. The extra money spent for electricity will mean fewer trips to the mall, restaurant, or even the dentist. Every product we buy will be more expensive as higher power bills ripple through the economy.
The Dover Sun Park experience will need to be repeated another thirty-five times to meet the level of solar power required by Delaware law. Delaware has the highest percentage requirement for solar power of any state east of the Mississippi.
Dover Sun Park press releases praised the creation of 200 “green” constructions jobs to complete the second largest solar park east of the Mississippi. Also released were the actual hours worked. Those hours convert to each person working about seven weeks or the annualized equivalent of 28 jobs. Those very temporary jobs will cost us $2.3 million each over the next twenty years, the typical contract period. Building thirty-five sun parks over the next fifteen years to meet Delaware law would require 65 installers. The higher electricity costs caused by those parks will result in a loss of about 700 jobs! Please see “The Cost and Economic Impact of Delaware’s Renewable Portfolio Standard” at www.CaesarRodney.org for details.
But, you say, won’t the savings in greenhouse gas generation be worth it? Using the current value of carbon dioxide emission permits in the regional cap and trade market the Dover Sun Park carbon offsets are worth less than $25 thousand a year. The three-fold increase in the U.S. Supply of natural gas has been a carbon emission game-changer as it cuts carbon emissions in half compared to coal. Calpine Corporation switched fuels from coal to natural gas at the Edge Moor electric generating plant saving money and a years’ worth of Dover Sun Park carbon emissions every five days and the entire expected savings of the Delaware solar law in half a year.
Strangely, The City of Dover refused to release the price they will pay for power from the park citing confidentiality agreement restrictions. We believe the ratepayers of Dover and throughout the state should know the cost. Attorney John Paradee, acting at the behest of CRI, obtained the information in a Freedom of Information Act request. The City initially refused to honor the request but did so after CRI urged the Attorney General’s office to render an opinion which cited legal precedence favoring the request.
It is astonishing you are not allowed to know what the Dover Sun Park is costing you. The total added cost of the Sun Park compared to using conventional power over the twenty year contract will be $65 million or $3.25 million a year! The cost will be shared by Dover Electric Utility customers, electric customers around the state, and by tax payers. Thirty-five Dover Sun Parks would add $2.3 billion to electric rates over twenty years or $105 million a year.
The City of Dover will pay about $.155 a kilowatt-hour (KWh) including about $.135/KWh for the electricity and $.02/KWh equivalent for Solar Renewable Energy Credits (SREC). For comparison, electric generation now costs the city about $.10/KWh from conventional sources. This is an increase of 55% in the cost per KWh. Dover residents will pay about $17.25 a year more. However, large commercial users may pay an extra $35,000 a year.
The cost would have been four times higher but the Park developers used a common trick of spreading the cost over ratepayers and tax payers around the state to hide the true impact. Delmarva Power and the Delaware Municipal Electric Cooperative will buy the rest of the SREC’s at a cost of $50 million. Delmarva Power contracted to buy 70% of the SREC’s at $216.70 each and will wind up paying a $24 million premium over the current spot market SREC price. The city will pay an average of $151/ SREC.
In addition, White Oak Solar Energy, LLC, who owns the park, will receive a $13.5 million federal tax credit paid for with deficit spending. The cost of the deficit spending will add another $9.5 million in interest over the twenty years. We pay for the grant and the interest in our tax bills. CRI estimates White Oak will make a guaranteed 11% a year return on their investment at a time when thirty year U. S. Treasury bonds are paying 3% interest.
When homeowners buy a solar installation they bear the risk SREC’s may be worth less in the future. Indeed, prices dropped from $270/ SREC to $100 this year because of an oversupply caused by a more rapid increase in solar installations than expected. The risk of lower SREC values for the Dover Sun Park was shifted to residential and small commercial customers through long term utility contracts. The utilities are forced to buy the credits and pass the cost onto residential and small business customers.
Solar proponents tell us their products will become more competitive. Installed prices have come down 27% over the last two years. The Dover Sun Park uses state of the art technology and the installed price of $4 a watt reflects the recent price reductions. Solar modules in the Park have an efficiency rating of 20% and use mechanical tracking to increase the number of hours the panels are illuminated. They will produce about 50% more power per square foot than the typical module but still only operate a few hours a day and are clouded out almost half the time yielding poor reliability. Even with these improvements solar power remains four to five times more expensive than conventional power and is not reliable.
David T. Stevenson, Director Center for Energy Competitiveness
Caesar Rodney Institute FOIA Request Sheds Light on Costs
DATE : 9/22/11
With the opening of the Dover Sun Park, proponents of alternative energy have driven another stake into the heart of the Delaware economy. Temporary installation jobs needed to build the Park, and others like it, will be offset by the loss of ten permanent jobs elsewhere. Electricity from solar farms costs four to five times more than conventional sources. The extra money spent for electricity will mean fewer trips to the mall, restaurant, or even the dentist. Every product we buy will be more expensive as higher power bills ripple through the economy.
The Dover Sun Park experience will need to be repeated another thirty-five times to meet the level of solar power required by Delaware law. Delaware has the highest percentage requirement for solar power of any state east of the Mississippi.
Dover Sun Park press releases praised the creation of 200 “green” constructions jobs to complete the second largest solar park east of the Mississippi. Also released were the actual hours worked. Those hours convert to each person working about seven weeks or the annualized equivalent of 28 jobs. Those very temporary jobs will cost us $2.3 million each over the next twenty years, the typical contract period. Building thirty-five sun parks over the next fifteen years to meet Delaware law would require 65 installers. The higher electricity costs caused by those parks will result in a loss of about 700 jobs! Please see “The Cost and Economic Impact of Delaware’s Renewable Portfolio Standard” at www.CaesarRodney.org for details.
But, you say, won’t the savings in greenhouse gas generation be worth it? Using the current value of carbon dioxide emission permits in the regional cap and trade market the Dover Sun Park carbon offsets are worth less than $25 thousand a year. The three-fold increase in the U.S. Supply of natural gas has been a carbon emission game-changer as it cuts carbon emissions in half compared to coal. Calpine Corporation switched fuels from coal to natural gas at the Edge Moor electric generating plant saving money and a years’ worth of Dover Sun Park carbon emissions every five days and the entire expected savings of the Delaware solar law in half a year.
Strangely, The City of Dover refused to release the price they will pay for power from the park citing confidentiality agreement restrictions. We believe the ratepayers of Dover and throughout the state should know the cost. Attorney John Paradee, acting at the behest of CRI, obtained the information in a Freedom of Information Act request. The City initially refused to honor the request but did so after CRI urged the Attorney General’s office to render an opinion which cited legal precedence favoring the request.
It is astonishing you are not allowed to know what the Dover Sun Park is costing you. The total added cost of the Sun Park compared to using conventional power over the twenty year contract will be $65 million or $3.25 million a year! The cost will be shared by Dover Electric Utility customers, electric customers around the state, and by tax payers. Thirty-five Dover Sun Parks would add $2.3 billion to electric rates over twenty years or $105 million a year.
The City of Dover will pay about $.155 a kilowatt-hour (KWh) including about $.135/KWh for the electricity and $.02/KWh equivalent for Solar Renewable Energy Credits (SREC). For comparison, electric generation now costs the city about $.10/KWh from conventional sources. This is an increase of 55% in the cost per KWh. Dover residents will pay about $17.25 a year more. However, large commercial users may pay an extra $35,000 a year.
The cost would have been four times higher but the Park developers used a common trick of spreading the cost over ratepayers and tax payers around the state to hide the true impact. Delmarva Power and the Delaware Municipal Electric Cooperative will buy the rest of the SREC’s at a cost of $50 million. Delmarva Power contracted to buy 70% of the SREC’s at $216.70 each and will wind up paying a $24 million premium over the current spot market SREC price. The city will pay an average of $151/ SREC.
In addition, White Oak Solar Energy, LLC, who owns the park, will receive a $13.5 million federal tax credit paid for with deficit spending. The cost of the deficit spending will add another $9.5 million in interest over the twenty years. We pay for the grant and the interest in our tax bills. CRI estimates White Oak will make a guaranteed 11% a year return on their investment at a time when thirty year U. S. Treasury bonds are paying 3% interest.
When homeowners buy a solar installation they bear the risk SREC’s may be worth less in the future. Indeed, prices dropped from $270/ SREC to $100 this year because of an oversupply caused by a more rapid increase in solar installations than expected. The risk of lower SREC values for the Dover Sun Park was shifted to residential and small commercial customers through long term utility contracts. The utilities are forced to buy the credits and pass the cost onto residential and small business customers.
Solar proponents tell us their products will become more competitive. Installed prices have come down 27% over the last two years. The Dover Sun Park uses state of the art technology and the installed price of $4 a watt reflects the recent price reductions. Solar modules in the Park have an efficiency rating of 20% and use mechanical tracking to increase the number of hours the panels are illuminated. They will produce about 50% more power per square foot than the typical module but still only operate a few hours a day and are clouded out almost half the time yielding poor reliability. Even with these improvements solar power remains four to five times more expensive than conventional power and is not reliable.
David T. Stevenson, Director Center for Energy Competitiveness
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