Masschusetts governor Deval Patrick is as green-power mad as any up-and-coming Democrat, and he has set an ambitious goal for the commonwealth’s utilities: begin producing 2,000 megawatts of power from environmentally preferred sources by 2020. Patrick’s green dreams are way up in the air; on the ground, things look starkly different.
Last September in the tiny town of Princeton, Mass., the general manager of the local utility authority sent out an extraordinary little memo that is one part standard bureaucratic posterior-covering and one part cry for help, noting that a modest wind-energy project already has lost nearly $2 million — a whopping number for a community of only 3,413. For perspective, consider that those losses occurred despite all of the subsidies the utility received for its wind-energy work; when the cost of those credits is accounted for, the real losses are even higher, but of course subsidy expenses are not borne in full directly by Princeton residents. Nevertheless, customers of the Princeton Municipal Light Department now pay more than a third more for their electricity than does the average Massachusetts residential customer, adding some $774,000 to their power bills in 2011. The financial position of the PMLD has been weakened, and there is little hope for significant improvements under current conditions.
“As best I can look into the future,” general manager Brian Allen wrote, “I would expect the wind turbine losses to continue at the rate of around $600,000 a year. This assumes current wholesale electricity rates, no need for extraordinary repairs, and that both turbines continue operating. If any major repairs are required, this will be an additional expense for the PMLD. The original warranties on the turbines have expired, and extended warranty options are not available.”
Those warranties are an acute concern: After becoming operational in 2010, one of Princeton’s two wind turbines broke down in August 2011 and was not back online until nearly a year later. Princeton had a warranty from the turbine’s manufacturer, the German firm Fuhrländer, but the usual political cluster of agents and subcontractors meant that the whole mess still is in litigation. If Princeton does not prevail in its lawsuit, it will suffer hundreds of thousands of dollars in additional expenses. The cost of replacing a gearbox on one of the Fuhrländer turbines is estimated at $600,000.
Those breakdowns are real concerns. According to the trade publication, Wind Energy Update, the typical wind turbine is out of commission more than 20 percent of the time — and regularly scheduled maintenance accounts for only 0.5 percent of that downtime. The group also estimates that some $40 billion worth of wind turbines will go out of warranty by the end of 2012, leaving the Princetons of the world looking at a heap of expensive repair bills. In Europe, the largest wind-energy market, operations-and-maintenance expenses already are running into billions of dollars a year.
So where does that leave our friends in Massachusetts?
Mr. Allen did not return messages seeking comment, but he has offered his ratepayers a possible solution: Get the hell out of the wind-energy business. Or, to be more precise, stay in the wind-energy business, but get somebody else to pay for it: “One possibility is to maintain the wind turbines in Princeton but to offload all or a portion of the electricity output, the associated costs and of course future risk and benefits. I personally like this option. Princeton will continue to be a leader in green energy production without having to burden its residents.” And that’s the green-energy ethic in miniature: It’s a wonderful thing, so long as somebody else is paying for it.
Not far away, the town of Portsmouth, R.I., went through a similar drama: After issuing some $3 million in bonds to build a wind turbine, Portsmouth saw the new unit quickly go dark because of mechanical problems. Reports the Westerly Sun: “The wind turbine, erected at Portsmouth High School in 2009, has been idle since June because of a faulty gear box. The town is evaluating whether to replace the gear box, with costs ranging from $611,000 to $703,000.” Local critics have taken to calling the turbine the “$2 million mistake,” although it is in fact a mistake worth at least $3 million plus interest on the bonds.
For small towns, wind power is a big idea with big costs — too big for their budgets. To understand the scale of Princeton’s multimillion-dollar wind-power losses, consider that its public-library budget amounts to just over $129,000, and that the municipality’s entire budget runs only about $8 million.
Needless to say, when the wind-power project was pitched, Princeton was told that it would be a profit-making enterprise, not a loss-making one — one more example that the word “investment” means the opposite of “investment” when it comes out of the mouth of a politician or a rent-seeking supplicant.
Wind energy is not always a boondoggle. As I have reported, Valero has installed at its refinery in the Texas panhandle a massive wind farm that, when operating at capacity, generates enough electricity to power the entire complex. The Texas panhandle has lots of wind, lots of real estate, and not very many people. Wind makes sense for some large industrial users. Similarly, a great deal of the equipment used to run Marcellus Shale gas wells runs off of solar power, again for very good economic reasons. Purpose-specific commercial uses are in fact one of the most productive applications for wind and solar power. A good indicator that a project makes sense is that a firm is willing to invest its own money in the project; conversely, an excellent indicator that a project makes no economic sense is that the local utility is scrambling desperately for a way to stay in the wind-energy racket without having to assume the associated costs and risks.
The real cost of these projects is not only the utility losses and the price of the subsidies. The unseen and unaccounted-for cost is that politically driven green-energy incentives cause utilities and other producers to make investments that are not in reality economically viable and to forgo more productive investments — including more productive clean-energy investments. Once the incentives end and market forces reassert themselves — which they always do in the end — the whole house of cards comes tumbling down. Capital that could have been invested in developing fruitful wind and solar applications for industrial or agricultural users instead has been diverted into municipal utilities, users for whom such products have not shown themselves to be very efficient.
Governor Patrick has called wind power the “centerpiece of the clean-energy economy we are creating for Massachusetts.” With Princeton residents eating millions of dollars in losses and paying substantially inflated power bills, the clean-energy economy appears to be anything but economical.
— Kevin D. Williamson is roving correspondent for National Review.