The Economics of Wind: What's behind the interest, and what's it mean for jobs

Editor's note: This is the first of a two-part series. The second part will run on Monday, April 12.

As Maine inches toward its goal of more wind power development, the financial justifications for and against are almost as hard to grasp as the wind itself.

Environmental activist Jonathan Carter, for example, wrote in a recent newspaper opinion piece that up to 60 percent of the cost of wind power projects is covered by federal subsidies. That figure's important, with wind power opponents saying wind shouldn't rely on high government subsidies and proponents saying it deserves the same treatment as other energy suppliers.

When asked, Carter pointed to National Wind Watch as the source of his information.

National Wind Watch pointed to a semi-retired former coal official in Virginia.

When the Sun Journal contacted that man, he pointed to a Los Angeles lawyer who works with wind farm developers ... and his math, it turns out, isn’t so clear-cut.

Another example: Last fall, the Maine Public Utilities Commission inked a 20-year wind power deal among Maine’s two major utilities and Rollins Wind, reasoning the deal should save money for ratepayers in the long run. But, asked if it was possible to explain the effects on prices in a way consumers could understand, a PUC lawyer said, in short, no.

“The wholesale market of electricity is very complicated in many ways,” he said.

So is wind.

For a moment, put aside the visual impact of wind power and the health concerns, two complaints that get the most attention.  Consider instead that wind power in Maine is also big money. The industry is climbing toward $1 billion invested in Maine, millions in property taxes and hundreds of jobs during the construction phases.

Yet financial questions remain; claims and counter-claims abound. The state has been tentative about identifying long-term prospects while at the same time encouraging development with fast-track approvals and vocal support.

“The situation is too much in flux," said John Dorrer, director of the Center for Workforce Research and Information at the Maine Department of Labor. "There’s not too much history for this.”

Chuck Lawton, chief economist at Planning Decisions in Hallowell, says that so far, the debate over where to locate wind turbines has clouded the economic debate.

“I’ve seen numbers tossed around; I haven’t seen any overall ‘Here’s our energy future,'” he said. “There’s really a need to look at the bigger picture: Where are we going to get our energy, what’s the consequences of doing this one or the other? To me, the biggest question is, what’s the risk?”

In an attempt to address that question, the Sun Journal tried to answers questions about employment numbers, subsidies and the potential economic impact of wind power development in Maine.

Wind energy hasn’t had an easy time out of the gate here. In the past four years, Maine agencies have approved eight major wind power projects. Four are operational. One is under construction. One’s waiting for better market conditions. Two are being held up by challenges, with a third, the temporarily halted Roxbury project, expected to be appealed to the court next week.

Three other projects are pending approval. Around the state, multiple developers are also floating trial balloons. The state's goal of having 2,000 megawatts of power installed by 2015? A ways off.

The issue has created unlikely alliances: the Natural Resources Council of Maine and the Maine State Chamber of Commerce both support wind power. Environmentalists like Carter and Glenn Schleede, the Virginia man with a background working for coal, natural gas and oil, are opposed.

Behind all the activity:

• The country’s attempt to move away from reliance on foreign oil, and;

• Maine's ranking, according to the American Wind Energy Association, as the 11th windiest state in the country.

In addition to breeze, the state offers lots of affordable land. Attempting the same-sized project in Massachusetts would be too expensive with too much push-back, said University of Maine Professor Paul Villeneuve, who has consulted on four wind projects in Maine.

“The wind industry likes the ports of Maine because of the work ethic and logistically they can move these things around,” said Chris Gardner, port director at Eastport and a Washington County commissioner. “You don’t want to try (unloading 125-foot blades) in downtown Philadelphia.”

So, what does it mean for jobs?

Mike Daigle Jr. lives in Rumford and works for Vestas, a wind company based in Denmark. He’s the site manager at Kibby Mountain in Franklin County.

Kibby is the largest wind project so far planned in Maine with 22 active turbines and 22 more to come, this phase. During construction, more than 250 people worked on site.

Come May, Daigle will have 11 full-time employees running the works.

“All of them were Maine residents when they were hired,” Daigle said. Some were former Sugarloaf/USA ski resort mechanics. “It’s a godsend for me; it allows me to stay here. I spent a year in South Carolina, which is OK, but it’s not here.”

Developer TransCanada employs another three full-time. John Lamontagne, a spokesman for First Wind, which has five projects in various stages, said between 200 and 350 people are hired for construction of each project. Afterward, six to 15 full-time staffers stay on.

Wayne Kilcollins, wind power energy instructor at Northern Maine Community College, the only school in New England offering an associate's degree in wind power, said students enrolling straight out of high school can enter the field at $14 to $16 an hour. Nontraditional students coming in with more mechanical experience can earn $18 to $20 an hour.

It is the school’s most popular trade program. This fall, it's booked with a waiting list. The program will see its first graduates, 39 men, in May 2011. Three interned at Kibby Mountain last summer.

Wind jobs appeal to people “looking to reinvent themselves,” Kilcollins said. “There’s a lot of operators within the state and there’s also opportunity throughout the country and the world.”

A Natural Resources Council of Maine map counted 289 Maine businesses that have been paid for wind work since 2005. Dorrer said the biggest economic benefit and spin-off happens during construction. Money goes to hiring architects, lawyers and engineers. Also, people living on-site during the week — common because many sites are remote — spend money in local towns.

Dorrer estimated that, based on federal calculations, 23 jobs are created for every $1 million invested, putting Kibby’s impact at close to 1,700 people.

“We need to create employment opportunities," he said. "This to me has some real potential.” He declined to offer a jobs forecast for the industry because the situation is too fluid.

Schleede lambastes the federal estimates as being overly generous, assuming too many workers spend their entire paychecks locally and contribute to that spin-off.

Another common complaint: Not enough jobs go to locals. The expertise isn’t always there.

“We need to collectively work on getting a skilled, educated work force, and if the impetus to get us there is the promise of wind power jobs, great,” said state economist Michael LeVert.

“The big concern is, we need to be realistic about the long-term employment needs of this industry and make sure the skill investments we make in our people are transferable and broad-based,” he said.

So, what does it mean for ratepayers?

Central Maine Power Co. delivers 9 billion kilowatt-hours of electricity to Maine homes and businesses every year, give or take.

As part of a first-in-Maine deal worked out for Rollins Wind last fall, CMP will buy and deliver 80 percent of that wind farm’s power, which will account for less than roughly 2 percent of those 9 billion kilowatt-hours, according to a CMP spokesman.

That’s when Rollins is up and running. If it’s up and running. And that’s still enough to kick up debate.

Maine Public Advocate Richard Davies favored the deal, saying it’s likely to save ratepayers money in the long run and “help stabilize the otherwise rising cost of fossil-based-fuel-generated electricity.”

What’s more, the sour economy and Rollins’ financing needs resulted in an even better contract for consumers than at the start, Davies said.

However, one Wilton economist argues that by virtue of paying for the new turbines and associated costs, wind power will ultimately raise rates and that its intermittent nature makes wind more hassle than boon.

J Dwight, head of Dwight Investment Counsel, said that in Denmark turbines produce power about three out of seven days a week.

“It’s like dealing with an alcoholic in your workplace," said Dwight, a member of the Maine Heritage Policy Center’s board of advisers. "You never know when he’s going to show up and you don’t know if he’s going to be half-looped when he does. You’ve already got to have somebody standing by to take his place when he’s not there. The assertion that you, by adding wind, create a more stable price is wrong because it can’t be a stable source of power.”

The 20-year contract between Rollins’ owner, First Wind, and CMP and Bangor Hydro Electric Co. was hammered out by the Maine Public Utilities Commission. It's a technical, 11-page document that contains a broad range between the highest price ($110 per megawatt-hour) and lowest ($55 per megawatt-hour to start).

Rollins’ development is currently stuck in a challenge before the Maine Supreme Judicial Court; either electric company can bow out if it’s not churning power by the end of 2013.

CMP did initially balk, saying that if it took all of the power, the deal could cost ratepayers $1.5 million in higher rates over 10 years. Bangor Hydro, which ultimately took on 20 percent of Rollins’ future power, projected an overall slight benefit to ratepayers, according to the PUC document.

The governor’s vocal support of wind didn’t influence his decision to support the deal, Davies said.

CMP spokesman John Carroll said the contract prices are “more or less in line with the market in Maine.”

Unlike hydropower contracts of the 1980s — often tied to the cost of oil, locked in and criticized in hindsight as too pricey — this one is designed to flex and take out the gamble, he said.

PUC attorney Mitch Tannenbaum said the agency didn’t have to approve the agreement between Rollins Wind and the utilities but decided it was “reasonably likely to be beneficial to the ratepayer over time.”

If natural gas and oil prices go up, he said, the contract will look even better.

That, Dwight said, is part of the problem.

“Whatever we discuss is pure speculation,” he said. “You could make a case for the price of oil going to $200 or you could make a case for the price of oil going back to $40. Each would be thoroughly within reason.”

What he sees as the volatility introduced by wind could raise rates, burn industry and chase away jobs, Dwight said.

Former state economist Charles Colgan sees the opposite effect: a smoother, pro-job power market.

“Indirectly, the ability not to have to endure large energy pricing spikes in the commercial and industrial sector, that all saves jobs,” said Colgan, who is now a professor at the University of Southern Maine's Muskie School of Public Service. “The money that we spend on imported fossil fuels that we won’t have to spend with wind, that saves jobs too, you just don’t see them.

“We see them in the models, but it’s a piece of a job 10 years down the road; it’s not any less real for being not very visible.”

The Rollins contract could be the first of many. PUC spokeswoman Evelyn DeFrees said other proposals between wind developers and utilities are under review.

kskelton@sunjournal.com

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Comments

 's picture

what's it mean for jobs

uh, copyeditor, anyone?

JOANNE MOORE's picture

Ms. Skelton,

Have you been to the top of one of mountain ridges that have been destroyed forever? If not, I suggest you do that before you write anything about wind energy. And go to Mars Hill and talk to the people there. Then come back and give us your editorials and I, for one, would be more inclined to take your work seriously.

See for yourself the utter devastation of once beautiful places atop some of the most scenic parts of Maine. Understand that the men responsible for this destruction stand to make millions of dollars in federal and state subsidies. Understand, too, that none of the fickle trickle of power generated will go to Maine. Maine does not need this power. We have more than we use. We export power. So, who benefits?

Certainly not ratepayers who will see their rate increase to double or triple the amount they pay now. Certainly not Maine businesses who are struggling to stay afloat. The beneficiaries will be people like Angus King of Independence Wind, Reed and Reed, and Ciambro who erect them, and a few local politicians who have been bribed by taking "favors" from big wind.  This is a nasty business backed by a mafia-type mentality and backed by some of the most powerful men and women in and out of state government.

As for Mr. Davies, who is supposed to be an advocate for the ratepayers, he is nothing but a sock puppet for Baldacci, who, you may remember, has stated his intentions to enter the wind energy business in some way. Baldacci wants his "cut" too, and has plans to ensure it. In my long life following Maine politics, I have yet to see a governor so transparent in his greed that he would sell out the state and her people, while destroying our largest and most important tourism industry that employs thousands and adds millions into our state budget.

RAYMOND FRECHETTE's picture

Follow the MONEY! Who is

Follow the MONEY! Who is developing this wind power? Are they the politically favored few? Friends of those in power? What benefit will the power user (WE, THE RATEPAYERS) realize from this? Will the power generated by these windmills be economically competitive with other power sources especially factoring in cost of backup generators needed when there is no wind? Are the political backers of these windmills factoring in the real cost of these or do they say it will only cost so much after Federal dollars (TAXPAYER MONIES) are used to pay for the large part of cost? If windmills were that good at producing economical power why aren't the power companies building them? BRAVO for CMP for balking at buying this high cost energy! Mr. Dwight said it all very well.

 's picture

The secrets of this industry

The secrets of this industry is revealed in the nature of wind. No wind, No power. People require power even when the wind is not present. Consider, at any random time, you could lose electicity.  For every kilowatt of wind generated power, a kilowatt of power from reliable generators is idled.  Ask yourself, is this an efficient way to provide electricity.  The good, old reliable generator, able to produce 24/7  called to work only based on the unpredictable, frickle wants of the wind machine.

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