The ins and outs of the Cape Wind debate

The story line from Monday’s gubernatorial debate was Gov. Deval Patrick defending Cape Wind in the face of strong opposition from his three rivals, including, surprisingly, the candidate of the Green-Rainbow Party. There were also lots of back stories from the debate. Here’s some of them:

Politics – If Republican Charlie Baker wants to win in November, he better start figuring out a way to marginalize Treasurer Tim Cahill, who is running as an independent in the race. Cahill seems a bit more conservative than the more nuanced and analytical Baker, but the two politicians hold similar positions and would appear to be attracting the interest of the same set of voters. At times during the debate on Cape Wind, Baker and Cahill sounded like a tag team taking on the governor. To have a chance at success, Baker needs to put Cahill in the rear-view mirror and make this race a one-on-one match between him and Patrick. Cahill isn’t making it easy. He’s hanging around and plugging away. Patrick also seems to know Cahill’s value. During the section of the debate where candidates were allowed to question each other, Patrick put his question to the treasurer.

Policy – The debate showcased big policy differences among the candidates. Patrick is a believer in activist government. He favors using subsidies and tax credits to help green businesses and answered “maybe” when asked if he would use taxes and/or regulatory policy to get people to trade in their gas guzzling cars for more fuel efficient vehicles or mass transit. Baker and Patrick said they wouldn’t support any type of renewable energy that would drive up electricity costs. Cahill went further, saying he wouldn’t support any new tax credits or subsidies, would let the private market decide which companies succeed and fail, and would oppose any policy steering people toward more fuel-efficient vehicles. “I don’t think government should be telling people what to drive,” he said.

Cape Wind – Cost is the issue. Jill Stein, the Green-Rainbow Party candidate, called the proposed contract negotiated between Cape Wind and National Grid “an incredibly expensive contract.” Cahill noted Cape Wind would be paid $18.7 cents per kilowatt hour with a guaranteed 3.5 percent-a-year escalator. “Not many private businesses get a price guarantee,” he said. Baker dubbed the Cape Wind contract a “sweetheart deal” and called the cost “astronomical compared to what we pay now.” He noted wholesale power prices have never exceeded 11 cents a kilowatt hour over the last decade. But Patrick insisted the cost of Cape Wind was reasonable. He said it amounted to an extra $1.25 on the average National Grid bill and came close to regular electricity prices once the 6-cent cost of renewable energy credits, or RECs, was removed from the overall pricetag.

Who’s telling the truth? It’s complicated, so bear with me. The current wholesale price of electricity is about 8.5 cents a kilowatt hour, well below the initial Cape Wind price of 18.5 cents. Baker is also right that the monthly average spot market price of electricity has never risen above 11 cents over the last decade. But what Baker doesn’t mention is that there have been short-term spikes, particularly when energy prices soared to all-time highs in 2008, when the cost of electricity went well above 11 cents a kilowatt hour. Consumers who purchase basic service power through their utility – the six-month contracts often carry higher prices than the spot market  – have also seen the price rise above 11 cents; the peak was 12.5 cents in 2008. Bottom line: The current price of electricity is well below the initial price of Cape Wind power, but historically the price has occasionally risen into the 11-to-12-cent range. 

Patrick’s argument about RECs was an attempt to make Cape Wind power seem competitive with those earlier peak prices, but his analysis is shaky. The governor and his aides say REC costs should be removed from the Cape Wind price to allow apples-to-apples comparisons with non-renewable forms of power. Renewable power generators receive one REC for each kilowatt hour of electricity they produce. Companies that sell power to customers in Massachusetts must purchase RECs to prove a percentage of their electricity is coming from renewable sources. The requirement is 5 percent this year, rising one percentage point a year. RECs are currently trading at about 1.5 cents, but state officials say the cost will soon settle in at the cap level of 6 cents because demand for renewable energy in New England is likely to far exceed the supply for the next 20 to 30 years. They point to a Bloomberg projection earlier this year as evidence.

But the Bloomberg projection isn’t very solid. It does project that REC prices will hover in the 5 to 6 cent range for the next 20 to 30 years, but that projection includes a lot of caveats. For example, it notes that off-shore wind projects like Cape Wind were not included in the analysis and they could “flood the market and depress REC prices.” Michel Di Capua, a Bloomberg analyst, said the REC market in New England is very unstable and difficult to predict. He now says Bloomberg feels it will take a long time before REC prices reach the 6-cent level and downplays the earlier projection. “That’s just one scenario,” he says. “There’s many other scenarios.”

Transparency  – All of the candidates seemed to agree that more transparency was needed in how renewable power contracts are negotiated and how their cost is displayed on customer utility bills. (See The Big Bet for my rant on this.) During the debate, Patrick acknowledged the problem, which was raised repeatedly by Baker. “He’s right about the importance of greater transparency around what we all contribute on renewable subsidies and credits through our bills,” Patrick said. “But it is also true that we better get past all the fighting and fussing we do about process and get on with some results.”

Boys and their cars – Whether it has something to do with Scott Brown and his truck or just boys being boys, the male candidates for governor waxed philosophically about what kind of wheels they own. Cahill did not apologize for driving a gas guzzler — a 2002 Jeep Laredo – while his wife drives a 2000 Dodge Caravan. Patrick says his state vehicle is a Chevy Tahoe hybrid and his wife drives a Mercedes sedan, but he talked wistfully of owning a “midlife crisis car” he described as a Mercedes convertible. Baker said he drives a Chrysler 300 and his wife drives a Pacifica, but he became positively starry eyed while talking about his 1966 Ford Mustang that he bought for $300 in 1980 and fixed up. Stein said matter-of-factly that she drives a Toyota Prius hybrid and her husband drives a Honda Civic.

Electricity restructuring – Patrick during the debate charged that Baker had presided over electricity restructuring in Massachusetts, which he said resulted in a four-fold increase in electricity rates. Under restructuring, utilities were forced to shed their power generating plants in a bid to open that business to competition. Baker was secretary of administration and finance at the time, but hardly the point person on restructuring. It was also strange to hear the governor appear to criticize the restructuring effort, since it laid the groundwork for much of what his administration is doing now. Robert Keough, a Patrick administration spokesman, said the governor supports restructuring but feels the market needs a government boost to kick the fossil fuel habit.

Meet the Author

Bruce Mohl

Editor, CommonWealth

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

Fact check 1 – Patrick, as part of his push for renewable energy, said Massachusetts imports a lot of its natural gas from some of the most volatile regions in the world. Administration aides say half of the gas comes from the US, 30 percent comes from Canada, and the remaining 20 percent is liquefied natural gas from Trinidad, Egypt, Qatar, and Yemen.

Fact check 2 – Cahill said the Patrick administration gave Evergreen Solar Inc. $68 million in loan guarantees and grants, while Patrick insisted the number was $21 million. The company was offered $38.5 million in loans and grants, but it only accepted $21 million in grant money. The company also received a low-cost lease and took advantage of nearly $23 million in tax breaks. Evergreen also benefited – along with other companies — from $13 million in infrastructure improvements at Devens.