Outdated Cape Wind financial boondoggle

Offshore wind farm’s electricity exorbitantly high

There are good reasons why Cape Wind has struggled to get off the ground for the past 13 years. Not only is the project outdated, but its location in the heart of Nantucket Sound has now been determined to pose significant risks to a variety of endangered and threatened species. These environmental impacts are the basis of a recent federal court decision that sent both the US Fish and Wildlife Service and the National Marine Fisheries Service back to the drawing board to conduct more scientific reviews.

But Cape Wind’s impacts extend far beyond the environment. The controversial project would also jeopardize public safety, put fishermen’s livelihoods at risk, and desecrate sacred tribal lands. As a result of these impacts and the choice of a highly conflicted location, Cape Wind continues to face litigation and opposition.

Likely the single biggest reason Cape Wind is no closer to being built today than it was 13 years ago is simple economics: its cost is exorbitantly high. Any electricity Cape Wind would produce is guaranteed to be some of the most expensive in New England and the nation. (Read a Cape Wind official’s defense of the project here.)

Cape Wind’s contracted electricity prices start at roughly 20 cents per kilowatt hour (kwh) and would increase by 3.5 percent each year to reach an exorbitant 34 cents per kwh in the final contract year. To put these numbers in perspective: Cape Wind would cost $3 billion more than electricity bought at market rates. It would also be more than three times as expensive as competing land-based wind projects that sell electricity at a flat 8 cents per kwh – with no annual increase. Cape Wind’s high rates would burden families, businesses, and communities all throughout the Commonwealth.

Leading business groups in Massachusetts – organizations that clearly support renewable energy – have sounded the alarm about the high cost of Cape Wind. Groups such as the Associated Industries of Massachusetts and the Massachusetts Competitive Partnership have warned that the state’s energy costs, already far higher than most other states, would become even less competitive. Cape Wind’s billions of dollars in added costs would make a difference on where businesses choose to locate and expand.

While Massachusetts businesses and residents would get saddled with the bills, the Commonwealth wouldn’t have any new jobs to show for it. Middleboro’s Mass Tank worked tirelessly for two years meeting milestones for Cape Wind after being promised the job to manufacture its turbine foundations. The result? Cape Wind spurned Mass Tank in favor of a European competitor in Germany.

The National Electrical Contractors Association of Greater Boston has a similar story. After years of touting the economic benefits of the project for the Commonwealth, Cape Wind signed a contract with a Maine-based company for an electrical service platform – breaking another promise and leaving thousands of Massachusetts electricians and contactors out in the cold.

At the end of last year, in an attempt to qualify for $800 million of expiring tax credits, Cape Wind signed a contract with Siemens to manufacture its turbines in Denmark – meaning the outsourcing of even more jobs.

Cape Wind’s long-time struggle to secure financing – even with overpriced power contracts in hand – is another strong indicator of just how much of a financial boondoggle the project is. For years the developer has asked the Department of Energy (DOE) for help by having US taxpayers guarantee its loans. In 2011, Cape Wind was denied a $2 billion loan guarantee from DOE – an amount nearly four times that lost on the now bankrupt Solyndra. Today, Cape Wind continues to seek hundreds of millions of US taxpayer dollars from the same agency under a different loan program. And while promises of Danish employment may have helped Cape Wind attract conditional foreign investments from groups like EKF, Denmark’s export credit agency, Cape Wind has yet to receive financing from a single US entity.

Meet the Author
Massachusetts is a hub for energy innovation. With all of this talent and creativity, the Commonwealth could do so much better than be saddled by an industrial relic with high costs and few benefits. After 13 years, it’s becoming increasingly clear that Cape Wind shouldn’t be built and it won’t be.

Audra Parker is the president of the Alliance to Protect Nantucket Sound.