"First they ignore you, then they ridicule you,
then they fight you, then you win."
-- Mohandas Gandhi
Here is a much better description of the just completed auction of offshore wind blocks off the MD coast than the description in my earlier post. It’s not surprising that the winning bid went to a European-based company.
MD Governor Martin O’Malley is a strong supporter of offshore wind for his state, because he understands that a strong marine wind generation industry could revive the economy in Baltimore and the Chesapeake Bay region. Note also that MD has a real RPS.
In addition to federal support, Maryland Governor Martin O’Malley has promised a $1.7 billion, 20-year taxpayer subsidy for a 210-MW offshore wind farm at the site, the first subsidy created for a lease site. Once the project is commissioned, household electric rates will increase up to $1.50 per month and businesses will see a 1.5 percent monthly surcharge. The bill was signed into law after several years of debate, and coincides with Maryland’s renewable portfolio standard (RPS), which calls for 20 percent of its electricity to come from renewables by 2022. O’Malley hopes the law will not only help reduce emissions, but also boost the economy.
“We need a jobs agenda to match our climate challenge,” said O’Malley in a statement. “Expanding renewable energy, like we’re doing here, will bring Maryland’s vision for clean energy one step closer to reality and clearly set our State apart on the country’s renewable energy landscape.”
The Renewable Energy World article also notes that the federal Bureau of Ocean Energy Management will hold other lease auctions for offshore blocks in MA and NJ in the next year.
The article also provides a good summary of past auctions. Note that New Bedford, MA, a formerly important port city, has already begun rebuilding its industrial infrastructure in anticipation of offshore wind power development.
Last year, BOEM held two offshore wind auctions. Deepwater Wind won the first auction for two parcels off the coasts of Massachusetts and Rhode Island with a $3.8 million bid. The 164,000-acre area holds an estimated 3.6 GW of potential. Dominion Virginia Power won the second auction for land 23 miles off the Virginia coast with a $1.6 million bid, which amounts to 2 GW of potential on 112,000 acres. BOEM also has a hand in facilitating the 454-MW Cape Wind project, which will likely be the first U.S. offshore wind farm, and the 30-MW Block Island Wind Farm, which is following close behind. Hoping to capitalize on these developments, the city of New Bedford, Massachusetts is constructing an offshore wind port to facilitate the construction and transportation of materials for the U.S. Atlantic coast.
Look especially at the capacity numbers in the paragraph above. The estimated potential of the Deepwater Wind and Dominion blocks in New England and VA together totals 5.6 gigawatts. That is serious generation capacity, all of it available right next to some of the most constrained regions of the US electrical grid.
How strong do you think the wind off the New England coast was blowing last January when New England was starving for power as natural gas plants couldn’t buy fuel and coal plants were shutting down because their coal piles were frozen? Too bad that offshore wind capacity wasn’t available then.
Bidding on the two big ocean blocks for offshore wind development off the Maryland coast happened today. US Wind was high bidder on both blocks. Here is the Department of the Interior’s announcement.
In 2013, PJM Interconnection replaced its goofy transmission “planning” process with a new process that conforms to FERC requirements spelled out in the Commission’s Order 1000. Under its new process, instead of just picking transmission developers with very little transparency (as with TrAIL and PATH), PJM identifies reliability problems and then sets an annual deadline for project developers to propose solutions.
This year, PJM’s Transmission Expansion Advisory Committee received 106 project applications by its July 28 deadline. RTO Insider has a good description of these projects.
Here is a map and list of those projects. Note that none of them involve massive HV lines in WV. PPL wants to get on the gravy train, though.
FirstEnergy’s experiment in selling retail electricity below cost blew up in recent months. Here is the story in The Cleveland Plain Dealer. The geniuses that run FirstEnergy cooked up their new deregulated retail company, FirstEnergy Solutions, and created a business plan based on undercutting everyone else in the market, regardless of how much money it lost them. Surprise, surprise. This brilliant strategy succeeded in losing so much money that FirstEnergy Solutions almost blew up the FirstEnergy holding company.
The collapse of FirstEnergy Corp.’s retail marketing company is news — but not to national retail power suppliers or to local electricity brokers working with them.
For months they saw it coming, a failure signaled in the spring when FirstEnergy Solutions said it would be passing on to its customers the “polar vortex” surcharges that grid manager PJM Interconnection levied against the company.
Then a week ago during a quarterly financial conference Anthony Alexander, FirstEnergy’s CEO, confirmed the rumors.
He said the company had decided that FirstEnergy Solutions — which also owns the corporation’s power plants — would focus on selling its power into wholesale markets and stop pitching retail deals to commercial and most industrial customers, leaving only a few very large industrial customers and its long-term, less risky municipal retail contracts serving residential customers.
About 70 FirstEnergy Solutions sales and sales-support positions will be cut next week, leaving the company’s commercial and industrial customers scratching their heads, and competitors scrambling to grab new customers as their contracts with the Akron-based company run out.
Competitors — about 30 of them in Ohio alone — are ready for what will be a marketing bonanza. And they are not shedding tears.
“They took a strategic approach to sell their generation at retail prices that were less than the wholesale market (prices) that would support them,” said J.D. Burrows, vice president of marketing at Houston-based competitor GDF Suez Energy Resources, North America.
“It is my opinion that FirstEnergy Solutions’ behavior was irresponsible. It is almost unbelievable. They bought market share but in the long run, they short-changed their customers,” he said in an interview earlier this week.
Heckuva job, Tony.
WV has been subsidizing AEP’s John Amos and Kammer coal-fired power stations by allowing the outlaw company to pollute our state’s rivers. That subsidy got a little smaller a few weeks ago. Here is the account from the WV Highlands Voice:
American Electric Power and its affiliates have agreed to bring its John Amos power plant in Putnam County, West Virginia, and its Kammer and Mitchell power plants in Moundsville, West Virginia, into compliance with the federal and West Virginia Clean Water Acts. This is in settlement of a two lawsuits brought by the West Virginia Highlands Conservancy, Ohio Valley Environmental Coalition, Sierra Club, and the West Virginia Rivers Coalition. Because some of the facilities were in northern West Virginia and some were in southern West Virginia, there were actually two separate lawsuits although they were negotiated and resolved together.
The John Amos power plant in Putnam County discharges into the Kanawha River and two of its tributaries, Little Scary Creek and Bills Creek. As a condition of its permit, it is required to test the water that is leaving its operations and report the results to the WestVirginia Department of Environmental Protection. The reports that American Electric Power has provided to WVDEP for the period from June 1, 2008 through September 30, 2013, from its Putnam County plant show that it has violated the limits set in its permit at least 870 times. The reports showed that at various times the discharged water contained excess amounts of aluminum, iron, copper, arsenic, selenium, and mercury.
There were violations at its Kammer plant in Marshall County as well. There, its discharge reports showed that between June 1, 2008, and September 30, 2013, it had violated its permit limits 157 times. At various times the discharged water contained excess amounts of aluminum, iron, and total suspended solids. These discharges enter the Ohio River.
There were also violations at its Mitchell plant in Marshall County. The reports showed that between June 1, 2008, and September 30, 2013, it violated its permit 1211 times. At various times the water contained excess amounts of aluminum, cadmium, selenium, barium, manganese, nickel, arsenic, thallium, and total suspended solids. Some of the violations were in monitoring wells designed to monitor groundwater near the site. American Electric Power had also discharged water from an ash impoundment which contained sulfates. These caused a violation of what are called the “narrative” permit conditions. These conditions are statements which describe things someone with a permit may not do.
AEP settled the lawsuit with the four citizens groups.
In settlement of the claims, American Electric Power has agreed to:
•Bring its facilities into compliance. This will require some new equipment and some change in the way AEP does things. The Mitchell plant must convert its wet coal ash pond to a less polluting dry ash containment facility. The Kammer plant, already tentatively slated for retirement, will now cease operations on December 31, 2015. Both, the Mitchell and Kammer plants must study aquatic life near their coal ash ponds.
•Make a mitigation payment to the West Virginia Land Trust for its land acquisition, restoration and/or conservation activities.
•Pay a civil penalty.
•Pay the Plaintiffs’ attorney fees.
•Agree to pay a set amount for each future violation.
•In total AEP will be required to pay nearly $100,000 in fines, penalties, and fees.
I am always pleased when citizens of WV act to restore law and order in our state when our regulators fail to do their jobs.
The NY Times has an interesting article today on electricity speculators DC Energy and their exploitation of exotic financial instruments to profit at times of peak demand in NY ISO, New York state’s regional transmission organization.
Wholesale electricity prices skyrocket in times of high demand. The term congestion is used when there is not enough transmission capacity to bring the lowest cost electricity into a particular area during peak load events. Electricity still flows to these areas, but it is purchased at higher prices from more local higher cost generators. RTOs have different methods of spreading this extra cost across their systems, insulating rate payers from most of these costs.
Power companies, particularly distribution owners who have to purchase higher cost peak energy, execute derivatives designed to hedge against peak load congestion costs. These hedging contracts (essentially insurance premiums) are costs that are passed on to rate payers.
The NY Times article describes how speculators like DC Energy exploit these hedging contracts to skim off money that should have been credited back to NY ISO rate payers.
For DC Energy, the derivatives seem close to a sure thing. Former employees said the executives had told staff members that the firm lost money for two months in its decade-long history. DC Energy bought the same Northport-Port Jefferson contracts on Long Island 47 times since 2005, earning $2 million, The Times found.
Dr. Stevens said via email that the firm was involved in markets across the country. “We invest in hundreds of thousands of contracts across the marketplace,” Dr. Stevens said. “Any subset of these contracts in some subset of time will show gains, while another subset will show losses.”
Yet in places like upstate New York or Long Island, the market is so small, and the participants for certain contracts so few, that knowledgeable traders can collect rich rewards. Frank A. Wolak, an economics professor at Stanford who studies commodities, said the congestion markets created perverse incentives because profits rise when grid congestion becomes worse.
“If traders are making money, then consumers are paying more,” Mr. Wolak said. “The money that these guys are making has to come from somewhere.”