Sunday, September 23, 2007

UD Professors Analyze Costs and Benefits of Wind Power

Delmarva Power has been trying to portray itself as the champion of its customers' interests. The company has balked at agreeing to terms with Bluewater Wind, referring to analysis (not yet released) that cost of wind power would be too great for ratepayers, and by conducting polling (not yet released) that it hopes will show that consumers won't want to bear the cost of wind power.
Jeremy Firestone and Willett Kempton of the University of Delaware have been working on these very points. They have produced an estimate of the possible cost of wind power compared to power from fossil fuels:
Based on figures provided by the companies and the state, Firestone and Kempton preliminarily estimate that, at most, the Bluewater bid would cost Delmarva ratepayers on average $5.04 per month more than conventional power over the 25-year contract term.
Would ratepayers be willing to bear that cost?
If one were to spread the $500-550 million premium found in the study over all Delaware households over 25 years, the average monthly household premium would be $4.82 to $5.26 per month, Firestone said. “People (in the survey) were very supportive of wind even when we asked about price premiums much greater than the per-month premium they actually will have to pay,” he said. “Approximately 80 percent of Delaware residents would rather pay at least $30 per month for three years to locate a wind farm off the Delaware coast than to build another coal or natural gas plant.”
Is this rational behavior on the part of ratepayers?
The public's willingness to pay $500 million extra, as found by the survey, is actually sound economic policy, Kempton added.
“By our estimates, health benefits from this much improvement in air quality include approximately eight fewer deaths per year from power-plant pollution-related causes, 3,500 fewer asthma attacks, and 10,000 fewer person-days of restricted activities,” he said. “Over 25 years, the financial value of these health benefits is over $1 billion.”
We will surely hear more from Delmarva Power on these points in the near future, as the company prepares its next move in its strategy to block implementation of the PSC's order to bring wind power to Delaware. I will have more to say on how to make sense of the numbers in the next few days.


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