Why Deepwater Wind could be the next 38 Studios
I am compelled to write after reading Deepwater Wind’s recent paid advertisement in the Block Island Times captioned “The Block Island Wind Farm: The Right Project for Block Island. Setting the Record Straight.” Deepwater has absolutely failed to “set the record straight.” The article is simply a continuation of the disinformation efforts of Deepwater, which result in the public remaining uninformed of the truth.
There is no debate when it comes to the fact that Block Islanders need relief from the high utility rates they are compelled to pay. However, forwarding the project proposed by Deepwater Wind, which calls for the construction of five wind turbines standing 660 feet tall covering 117 acres of ocean approximately three miles southeast of Block Island, is certainly not the solution. The travel of the Deepwater Wind proposal, as it left the office of Governor Carcieri in 2010 with a ringing endorsement from his Economic Development Corporation, personifies a classic example of the “inside game” that has plagued Rhode Islanders for years. If you think that Governor Carcieri and the EDC’s 38 Studios project was a fiasco, stand by; we are about to be had once again, unless we, the citizen ratepayers, stand up and are counted.
There are numerous reasons that can be voiced in opposition to Deepwater’s proposal; the most glaring being the fact that Rhode Island ratepayers will be compelled to pay 24.4 cents per kilowatt hour for electricity generated by Deepwater vs. the rate of 9.7 cents per kilowatt hour that consumers on the mainland currently pay. National Grid is compelled to pay over 200 percent more for power generated by Deepwater than the power it purchases from other traditional sources. I speak objectively about this outrage as I enjoy a residence on Block Island where rates will likely decrease and I also maintain a residence in Narragansett, where our electric rates will escalate. Significantly, it is not simply a matter of what is good for me as a resident of Block Island; what is good for the consumers of our state as a whole is what counts.
Unfortunately, the Deepwater project is not only an incredible financial burden to the consumer; it has a tremendous negative impact upon private industry. For example, Toray Plastics of America, which employs more than 600 people in North Kingstown, will see its electric rates increase $260,000 per year. This is not the type of initiative Rhode Island should endorse as we attempt to attract industry and resolve our unemployment crisis. The fact is we need an energy policy that will offer utility rates that will be attractive to private industry. Do not be deceived; Deepwater is not bringing jobs to Rhode Island.
Unfortunately, Deepwater’s impact upon our electric rates does not level off at 24.4 cents. Each year there will be a 3.5 percent increase in the cost of power generated by Deepwater, plus there will be additional fees for maintenance, and at the end of the turbines’ 15- to 20-year life span, we may be “on the hook” for costs attended to dismantling the turbines. The 3.5 percent annual increase will eventually drive the kilowatt per hour cost up to approximately 48 cents. Some have forecast that the Deepwater project, if approved, would be tantamount to burdening citizen-ratepayers with a $390 million increase over a 20-year period.
Deepwater’s most recent salvo has been an attempt to secure easements from the town of Narragansett that would permit them to bring their cable underground through the south beach parking lot and then tie into a series of 38 telephone poles, all of which will be 10 feet higher than traditional poles. Fortunately, the Narragansett Town Council has its “antenna up” and is now beginning to challenge Deepwater.
Argument has been made that it is time to “keep our money here instead of sending it to Saudi Arabia for oil,” a comment a lobbyist favoring Deepwater Wind shared with the legislature in 2010. His thoughts were absolutely erroneous. According to the U.S. Department of Energy, the production of energy resulting from the utilization of petroleum fuels is under 1 percent, both in New England and nationwide. Natural gas, nuclear and coal are sources of energy that produce the majority of the region’s sources of electricity. Natural gas, which there is currently an abundance of, produces the highest amount, which is approximately 42 percent. Studies authored in the early 2000s indicated that hydroelectric sources produced 13 percent of New England’s energy. Certainly, there is no question that we all want to work toward becoming independent of fossil fuels; however, there is a sane, sound way of proceeding. Wind will not free us from our dependency on fossil fuel; it is rated as the most undependable source of alternative energy. As we know, the wind does not always blow; unfortunately, however, when it does “kick up a gale,” there is no method that technology has developed to store the excess power. In fact, if gale force winds prevail, the turbines more often are shut down as a safety measure.
We need to join together as a region and develop a comprehensive, affordable, clean energy plan. Fortunately, it appears that our current governor has delegated staff to work toward that end. The random siting of wind turbines without a comprehensive affordable energy plan sets us back in achieving our goal of providing affordable energy to our citizens and to the industries that we so desperately need to attract.
The travel of the Deepwater project has been questionable from the onset. Power purchase agreements between a proposed generator of power such as Deepwater, and the distributor of such power, in our case National Grid, must be approved by the quasi-judicial body known as the Public Utilities Commission (PUC). On March 30, 2010, the PUC unanimously rejected the power purchase agreement proposed by Deepwater, noting that it was too costly to the ratepayers. Rather than pursuing a traditional appeal of the PUC ruling through the court system, Deepwater simply returned to the governor’s office and the EDC. Deepwater, the Carcieri administration and the governor’s Economic Development Corporation (EDC) would not be denied. The governor and his Economic Development Corporation team, aided by the leadership of the General Assembly, developed legislation that widened the “goal posts” and compelled the PUC to give Deepwater “a second bite at the apple” and evaluate Deepwater’s power purchase agreement through new parameters. That “sweetheart legislation” was opposed by a myriad of proponents of good government. Responsible members of the General Assembly, such as Larry Ehrhardt, Eileen Naughton and certain public interest groups, joined then-Attorney General Patrick Lynch, myself and former Attorney General Arlene Violet in vigorously objecting to the Carcieri/EDC legislation creating a new, unique “standard of review” that the PUC was compelled to employ. Said standard was forwarded by powerful members of the General Assembly and promptly propelled into legislation in June of 2010. A scenario not unlike that surrounding the 38 Studios deal. Believe it or not, that “sweetheart legislation” mandated the PUC to no longer consider the overall impact of the Deepwater project on the ratepayers. In August of 2010, forced to reconsider Deepwater’s application within the parameters of Carceri/EDC legislation, the PUC approved Deepwater’s power purchase agreement by a vote of 2-1.
It is interesting to note that the governor’s chief of staff in 2010, Jeffrey Grybowski, is now Deepwater’s chief executive officer, while a former member of the New Shoreham Town Council is also on Deepwater’s payroll.
Deepwater now wants to do more than force high electric rates upon us; it wants our Coastal Resource Management Council (CRMC) to waive $700,000 in fees, which Deepwater is required to pay the council to consider its application to construct the turbines in our coastal waters. This is a fee based on a formula that every permit applicant and every citizen applicant must pay to the CRMC. Deepwater certainly can afford this expense, particularly when you consider its anticipated profits. Deepwater testified before the PUC that it will enjoy $435 million in free cash flow profit during the tenure of its operation. The Deepwater Wind Project is designed to provide an incredible rate of return to its investors – this is surely not a public works project. The project costs are currently estimated at $207 million, plus an additional $50 million for installation of the proposed cable. Significantly, there is a federal investment tax credit of 30 percent, which travels with this project. Strikingly, Deepwater testified that it will make arrangements with the government so that it will give Deepwater and its capital providers over $55 million in investment tax credits on the very first day the project is operational. It appears now that the government will grant the investors a 30 percent investment tax credit once there is “a shovel in the ground,” as opposed to when the project becomes operational. Imagine if you had 55 investors and each of them owed $1 million in taxes due and payable to the government; each of the 55 investors could receive a $1 million tax credit, thereby eliminating the $55 million they collectively owed the government. Getting cash out of the project on its first day presents a handsome return to Deepwater, D.E. Shaw and its other investors. This payday will occur before a single light bulb is lit in Rhode Island by power promised by Deepwater.
Clearly, there is no economic sense to the Deepwater Wind Project, unless, of course, you are the developer or a Deepwater investor. If this project is permitted to go forward, Wall Street interests will profit while the citizen ratepayers, the working men and women of Rhode Island, will, once again, as with 38 Studios, sustain another “hit to their pocketbooks,” and our efforts to attract private industry and jobs for our citizens will be set back once again.
To enhance the economic future of Rhode Island and to protect our precious environment, please “stand up and be counted”; voice your objection by promptly contacting the CRMC: email@example.com or call 783-3370, and the
U.S. Army Corps of Engineers: Michael.J.Elliot@usace.army.mil or call (978) 318-8561
James E. O’Neil is the former Rhode Island Attorney General.