Stevenson: Offshore wind bill disastrous for ratepayers
David T. Stevenson is the director of the Center for Energy & Environmental Policy at the Caesar Rodney Institute.
In 2008, the Delaware legislature passed a requirement that 25% of our electricity should come from wind and solar power by 2025. Legislators back then were wise enough to protect electric consumers with a 3% cost cap on their electric bills. A recent Delmarva Power residential bill revealed that the average premium cost was $10 per month or 6%, double the cost cap.
Additionally, another calculation performed on the “proposed offshore wind procurement” bill (Senate Bill 265) reveals that these premium costs could increase to $27 per month or 14%. What happened to the cost cap protection promised by Delaware legislators?
The state adopted a “deal” with Bloom Energy to have Delmarva Power customers pay a huge premium for a small fuel cell power plant in exchange for a fuel cell-manufacturing plant in Newark. Over the 20-year contract, customers will pay about a billion dollars in electric premiums.
Two years ago, the legislature raised the goal to 40% wind and solar by 2035. The cost cap was in the way, so it was replaced with a price cap on the purchase of renewable energy credits that substitute for the actual purchase of electricity. If the market price for these credits exceeds $25, Delmarva Power can simply pay $25 for each equivalent alternative compliance payment. Over the last three years, the average price of RECs has been $21, which is close to the price cap. SB 265 ignores this price cap.
SB 265 requires Delmarva Power to obtain bids from only offshore wind developers for 20-year contracts. This bill ignores the 2018 recommendation from the governor’s Offshore Wind Working Group that offshore wind was too expensive, and any future bidding system should include competitive bids from onshore wind and solar developers.
SB 265 ignores recent offshore wind price increases and the plain good sense of using competitive bids from other low-emission technologies to get the best deal for electric customers. The bill establishes a bidding price cap, but the cap is set so high it could add $2.5 billion in cost premiums. That could add an average $200 a year to residential electric bills.
Legislators favoring this bill frequently cite polling showing that 70% of the population favors more wind and solar power. While correct, people answering these polls also want reliable and affordable power. Polling, summarized by the University of Michigan, showed that half the people in surveys say they are willing to pay $5-$20 per month more on electric bills for 100% wind and solar power. The study goes on to compare “Willingness to Pay” survey results to what people are actually willing to sign up for when they get the chance from their utilities. The mean participation rate in utility offers of $5-$20 per month is 1.1%. The Delaware Electric Cooperative offers 100% solar for $10 a month extra. The participation rate is 0.3%.
SB 265 is a bad deal for Delaware and should not pass the legislature. For details, go to caesarrodney.org.
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