Old Reliable: Cape Wind

Has everyone seen the shocking news that National Grid has filed for a whopping 37% increase in electricity rates starting November 1st?  Click here and here for a couple of articles on this increase.


The other big utility in the region, NSTAR, is sure to follow suit soon.


Three things are driving this incredible increase:


• A shortage of Natural Gas due to a lack of pipelines to New England.
• The closure of dirty, old but very large power plants
• A winter cold weather prediction for the upcoming winter.


If National Grid gets its way (and it surely will), it will charge 16.2 cents/kW-Hr come November; Up 6 cents from last winter.


But guess what electricity will not increase once it’s available? You guessed it: Cape Wind’s.


See, one of the beauties of wind energy is that it’s possible to project costs many years into the future. The reason for this? The fuel (wind) is free. Wind farms like Cape Wind typically sign 15 year contracts that contain paltry annual increases like the 3.5% annual increases in the Cape Wind contracts.   By contrast, the durations of contracts for electricity generated by the burning of natural gas seldom exceed 6 months. Nobody knows what natural gas will cost 6 months down the road so nobody wants to sign long term contracts. Then, when market conditions conspire, brand new contracts with large increases are signed and the price of electricity from natural gas skyrockets.


Who knows where the cost of New England electricity will go now that the region is so dependent upon natural gas, a fuel whose prices swing rapidly. One thing is for sure, however: If the price of natural gas electricity explodes over the next 15 years, Cape Wind prices will plod along at a very slow and totally predictable rate of increase.


Cape Wind will do its part to control rates.
 

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