NCPA - National Center for Policy Analysis


May 31, 2006

Cape Wind -- a project to put 130 wind turbines on 26 square miles off Nantucket Sound -- has generated a lot of hot air in Massachusetts, says William Koch, president of the Oxbow Corporation.

In 2002, preliminary estimates showed that the project would cost $825 million to build, the turbines would operate at 40 percent and 1.5 million kilowatt-hours of electricity per year would be produced, says Koch.

However, those estimates have changed, says Koch:

  • Today, it will cost $1.6 billion to build, operate at only 30 percent and deliver only 126 megawatts.
  • To earn the 20 percent return needed for financing, Cape Wind would have to sell electricity at 18 cents per kwh instead of 6.6 cents per kwh, which is twice the current market rate.
  • This would increase the price of electricity by $105 million per year over the current market.

So what's driving this dramatic increase, asks Koch?

  • Steel and construction costs have increased dramatically, and wind turbines must be built with steel to withstand a harsh, corrosive maritime environment.
  • Nantucket Sound has a construction window of only three to four months a year due to weather, and the technology for offshore wind turbines in the United States has not been fully developed.
  • It's estimated to cost $10 million to $15 million in R&D to build offshore wind turbines that are noncorrosive and produce 110 volt cycle power.

Moreover, any power plant developer needs a willing market to sell electricity and southeastern Massachusetts has a 50 percent excess power capacity and won't need more for perhaps the next decade, says Koch.

When you do the math, it's clear that every other form of power generation would be cheaper to build, produce more electricity at a consistent rate and save consumers more money, says Koch.

Source: William Koch, "Tilting at Windmills," Wall Street Journal, May 22, 2006.

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