Post columnist Robert McCartney makes some interesting points when he suggests that Dominion Virginia Power may not actually build an offshore wind farm for which it is paying $1.6 million for leases. But I fear he may not have taken a full accounting of the energy economics at play.
McCartney was critical of the “favorable publicity” that Dominion won when it outbid other contenders at the recent auction for sites off Virginia Beach. I assume that could include me, since I praised Dominion for taking the step.
McCartney may be buying too much into the arguments of environmentalists who believe that Dominion bought the leases as a blocking action to prevent anyone else from building offshore wind and competing with it.
Could be. But the real issue is cost. The bottom line is whether Dominion customers are willing to pay a premium for a renewable resource such as wind, as electricity users in Europe do.
Another question is whether the State Corporation Commission, which approves Dominion’s rate requests, would allow such an increase. Virginia utilities are not legally required to switch a portion of their energy sources to renewables, as ones in North Carolina and Maryland are.
McCartney rightly raises this point (as I did), but the truth is more complicated. One can’t just say the word “renewable” and then magically bring in power from offshore wind to power that wide-screen television.
The problem: The U.S. Energy Information Administration estimates that by 2018, offshore wind will cost $221.5 per megawatt hour. Basic coal will cost $100 per megawatt hour and coal with carbon capture gear will cost $135 per megawatt hour. Nuclear power will cost $108 per megawatt hour. Natural gas is the price champ at $67 per megawatt hour.
In other words, as great as offshore wind sounds, it is still about double the cost of nukes and coal-fired plants — the bugaboos of electricity generation. It is three times as expensive as gas.
Don’t get me wrong. I love wind. But I am not making up these numbers.
The New York Times had an instructive piece this week about Germany’s attempt to do right with power generation. Germany wants to phase out coal and nuclear plants. Sounds great, but the reality is a bit more complex.
Higher power rates worry business executives who fear higher costs jeopardize their competitive edge. Rates for consumers have risen so much that the phrase “energy poverty” is becoming widespread. Lower-income people have started choosing whether they want to turn on the light bulb in their living room or not. There’s offshore wind, but a bit of it remains unconnected to the electricity grids on land. One problem is that the turbines are on Germany’s northern coast and some of the biggest demand is in the south.
Commenters will probably think I am in the pocket of big utilities. I’m not. I am all for using more renewable power, but there are realistic limits, at least in the short term.
What could be done is for Virginia to put together a real energy plan. It should be accomplished by all people with an interest, including critics, and not just by the usual lobbyists and energy company executives that tend to dot the closed-door committees appointed by Gov. Robert F. McDonnell.
Then the state should consider putting real teeth into forcing renewable standards. Dominion is certain to develop offshore wind if it either has to by law or the price is finally right and it can pass costs along to customers without ruining their lives. And the SCC lets it.