The political environment in Cape Vincent spirals downward toward complete chaos, as evinced by the most recent meeting of the Planning Board. A meeting whose agenda was dedicated to subdivision proposals was largely conscripted by the seemingly endless debate over wind-power development, and the bitter battle impinged on the lives and rights of people who were before the Planning Board with legitimate, nonwind-related business.
A similar but less dramatic situation exists in Hammond, and in Lyme, and has potential to erupt to some degree in Henderson. All of this is over proposals to erect wind farms, mostly by investors far from the north country. If everyone took a deep breath and looked toward the horizon and away from their own back yard for a moment, they might see something that makes their battling meaningless.
There are significant signs that a combination of the free-market system, a new Congress and a new state administration might put an end to the fight over wind farms because the policies and economic conditions that have allowed them to grow are all but gone.
The economic reality of wind-farm development has always relied on two things: government subsidies in some form, and a growing cost of electricity. In the middle of this decade, both federal and state governments were pushing financial aid to alternative energy projects, and because its technology is largely developed, wind power was a darling of the renewable energy crowd. Significant tax abatements promoted wind-power developments, direct subsidies made them even more attractive, and rising costs of natural gas (and pressure to retire coal-fired power plants) made higher energy costs more acceptable.
Now, all of that is either gone or disappearing. When the wind power push was at its peak, natural gas was selling for $13 per million B.T.U.s. Today, it is selling for between $3 and $4, based on decreased demand from the economic downturn and increased offshore production. The New York Times reported that Edward Zaelke, an expert in the law firm Chadbourne & Parke, said “I think if natural gas were still at $12 per million B.T.U, the growth of renewables would be far beyond what we could actually manufacture right now.”
This drop in the cost of manufacturing power has taken away a major market for wind-farm developers; while high prices allow them to operate “merchant” facilities that sell the output into a daily power auction, sharply lower wholesale prices prevent them from making a profit at that. That leaves them only power purchase agreements to ensure a profit, and lower wholesale prices make profitable power purchase agreements much harder to come by. The company developing Galloo Island Wind Farm, for example, told the Public Service Commission that it could not justify the higher cost of underwater transmission without a power purchase agreement. What it didn’t say is, the prospects of that are low and declining daily.
Then there are the government incentives. Before the economic meltdown in 2008, wind farms chiefly benefited from a tax deduction of 2.2 cents per kilowatt-hour of energy produced. Developers could sell the investment credit to banks that then took the deduction. Then, banking went dramatically south. Banks, whose income plummeted, no longer needed deductions. And many of the biggest banks, the heavy players, were so distracted by the real estate debacle that investment tax credits were not even on the radar.
The wind industry suddenly went from going great guns to treading water. Then, the stimulus legislation was passed, and a component of that allowed certain projects to substitute a direct 30 percent subsidy for the suddenly unpopular tax credit. Wind, if you’ll pardon the expression, came roaring back. Galloo Island is poised to qualify for stimulus funding, part of $4.4 billion nationwide that will be pumped into wind projects before the stimulus money dries up.
However, the law that provides the subsidy limits it to projects that have significant construction under way by Dec. 31. Of all the projects being proposed and discussed in the north country, it appears only Galloo Island can meet that standard. The prospects for the program’s renewal, slim before Nov. 2, are almost certainly stone cold dead now. The Republican’s “Pledge to America” promised to halt all stimulus spending when the party takes over the House of Representatives Jan. 1.
In fact, the tax credit for renewable energy is at risk because with the new makeup of Congress, any prospect for a national renewable energy standard is extremely dim at best. A large number of new House members said during their campaigns that they were skeptical of global warming and dead-set against pollution-reduction policies such as cap-and-trade. That will translate into the elimination of government pressure on existing fossil-fuel-burning technology as the nation’s primary source of electricity. Utilities, put plainly, will have little incentive to accept wind power because its cost-per-unit is so much higher than coal and natural gas.
All of this is bad for the nation’s future. But it’s even more dire for unborn wind-farm proposals. If no one is buying what they’re selling, and nobody is subsidizing their investments, they have little future in the market place — at least for the foreseeable future. So all the shouting and jostling and acrimony and unpleasantness could very well be for naught, as wind-farm developers silently fade away.