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Wind turbine legislation likely a done deal in General Assembly

(March 22, 2013) With approval from the state Senate and the House of Delegates, legislation sponsoring the development of an oceanic wind energy farm off the coast of Ocean City is likely to be sealed soon, as Gov. Martin O’Malley — the initiative’s major architect — will almost assuredly sign the policy into law.

But just how, exactly, a potential investor would manage the construction of such a massive and fiscally treacherous project is still unclear to many in the state and resort.

“There’s been some very preliminary discussion of what they’d need and where they’d put it,” City Engineer Terry McGean said.

In the 2011 and 2012 legislative sessions, as well as this year, O’Malley has encouraged legislation to authorize the development of wind farms off the state’s coast. For the past two years, the initiative has cleared the House of Delegates, but has been stymied by discussion at the Senate committee level. But committee re-assignments this year appear to have shuffled the cards in a way that have allowed the proposal to garner enough support.

Under the Maryland proposal, two parcels of open seas — roughly 79,000 acres each — would be auctioned off by the federal government, in whose waters the parcels reside. Any wind turbines installed would have to be at least 10 miles from Ocean City’s coast, so as not to obstruct the resort’s invaluable beach vista.

The past two years’ discussions have resulted in some parameters, however, that are extremely important to Ocean City’s role in the possible offshore development. Electricity generated by wind turbines at sea would need to be connected into a larger grid for transmission and distribution. A project currently in the works, financed by Google, would see the construction of an offshore transmission grid to connect wind farms up and down the East Coast and distribute their power to on-shore customers.

“Some of what happens depends on whether or not there’s this big offshore grid that Google wants to put in,” McGean said. “It would run up and down the East Coast, offshore, with on-shore connections at various locations.”

More likely, however, given the complexity and time scale of constructing an offshore grid, the wind farm would be tied directly into an existing on-shore power grid via an undersea cable. This connection was initially proposed to run under Assateague Island, but staunch opposition from environmental groups means that the line would have to be placed somewhere in Ocean City.

“The cable gets trenched in from offshore, and then at some point it switches to a directional drilling type of thing,” McGean said.

After having tunneled the connection under the beach, likely near the inlet, the lines would have to reach a junction.

“They would need a large manhole vault at some location,” McGean said. “A lot of the discussion so far has been at the inlet parking lot. There would have to be some sort of franchise agreement with the town to use our right-of-way.”

From the junction vault, the power from the offshore turbines would then be spliced into the existing grid. Such an operation would require a considerable step-up in voltage, however, as most large wind turbines put out power at 690 volts. Most of the area’s high-capacity power transmission lines run at 69,000 volts, and some at 138,000.

If the connection were to be brought in at the inlet, as has been discussed, the likely option would be for the lines to come above ground at the Delmarva Power substation on the bay between First and Second streets, McGean said.

The developer of the possible offshore wind farm would then need to forge a power purchasing agreement, commonly referred to in the industry as a PPA, with the owner of the power grid.

“No one will even sell you the turbines unless you have a PPA,” said Chris Graf, a former General Electric engineer and wind energy consultant, who has been assisting the state and Worcester County with the wind energy issue.

Most manufacturers of turbines, including GE, are reluctant to sell the difficult-to-produce units unless they know the buyer has a guaranteed means of revenue to pay for them. Wind farms on-shore, Graf said, typically take eight years to pay for themselves.

The exchange price reached in the PPA would have to be vetted by state regulatory agencies. Maryland’s current legislative proposal has pre-approved a rate increase of up to $1.50 for residential customers, or an average of 1.5 percent for commercial customers, to help subsidize the cost of wind power.

Delmarva Power, Ocean City’s energy provider, has not yet taken a stance on the wind legislation or the possibility of forging a PPA with Maryland’s prospective wind developer, according to spokes-man Matt Likovich.

The problem is, that wind energy, especially offshore, where capital construction is inherently more difficult than it is on shore, is more expensive than fossil fuel or nuclear production.

“It’s an un-level playing field,” said Mark Rodgers of Cape Wind, a Massachusetts-based wind developer whose project is in the final stages of development after over a decade on the drawing board. “There are a number of government incentives for fossil fuel production, but most important is that these facilities are allowed to emit carbon free of charge.”

Many state regulatory agencies in the U.S. support higher energy rates for more environmentally friendly methods. Although the legislation authorizing Cape Wind’s turbine farm in Nantucket Sound did not specifically set a price increase, as Maryland’s does, Rodgers said the effect, once approved by the Massachusetts Department of Public Utilities, was essentially the same.

“They ultimately decided that the benefits [of the wind farm] were far greater than the fiscal costs,” he said.

In Europe, where offshore wind farms are much more common and provide a sizeable chunk of energy, Rodgers said that instead of charging ratepayers extra to subsidize “green” energy, the government instead places higher pollution taxes and fees on less environmentally friendly power producers.

Further, he said, “it’s common there for the utilities to provide all the transmission apparatus, so that the offshore developer only has to focus on the turbines.”

The federal government does still extend tax credits to wind farm developers, although their future is uncertain. According to Graf, the credit system existed for nearly a decade before expiring last year and then being extended this year for another two years. The effect of sequestration is currently unknown.

“That’s what makes the wind farm development work right now financially,” Graf said. “Without that tax credit, it’s very difficult.”

 

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