Off­shore wind en­ergy is wrong for Mary­land


In May, the Mary­land Public Ser­vice Com­mis­sion ap­proved elec­tric­ity-rate in­creases to fund two wind projects off the Ocean City shore­line. Over their 20-year life spans, th­ese projects will cost Mary­land elec­tric­ity con­sumers more than $2 bil­lion. Will they de­liver eco­nomic ben­e­fits that jus­tify their costs? Al­most cer­tainly not.

The Mary­land Off­shore Wind En­ergy Act of 2013 cre­ated a 2.5 per­cent set-aside in the state’s re­new­able en­ergy port­fo­lio for off­shore wind en­ergy. The Off­shore Wind En­ergy Act also au­tho­rized the Mary­land Public Ser­vice Com­mis­sion to raise elec­tric rates to sup­port off­shore wind projects but ex­empted large in­dus­trial and agri­cul­tural cus­tomers from such rate in­creases. Con­se­quently, Mary­land’s res­i­den­tial and smaller busi­ness elec­tric­ity cus­tomers will be forced to sub­si­dize th­ese off­shore wind projects.

The Off­shore Wind En­ergy Act in­cludes two im­por­tant con­sumer pro­tec­tions. One pro­hibits the com­mis­sion from ap­prov­ing any project that does not demon­strate “pos­i­tive net eco­nomic, en­vi­ron­men­tal and health ben­e­fits to the State” based on a cost-ben­e­fit anal­y­sis that in­cludes “any im­pact on res­i­den­tial, com­mer­cial, and in­dus­trial ratepay­ers over the life of the off­shore wind project.” The other pro­tec­tion caps the com­bined costs im­posed by all ap­proved projects at a max­i­mum of $1.50 per month (in 2012 dol­lars) for res­i­den­tial cus­tomers and at a max­i­mum of a 1.5 per­cent in­crease for busi­ness cus­tomers’ bills.

The com­mis­sion’s out­side con­sul­tant es­ti­mated that the two ap­proved projects, on av­er­age, will raise res­i­den­tial cus­tomers bills by about$1.40 per month and raise busi­ness cus­tomers’ bills by about 1.4 per­cent, start­ing in 2020. Al­though th­ese in­creases ap­pear small when viewed on a per-cus­tomer ba­sis, their to­tal cost over 20 years will ex­ceed $2 bil­lion (in to­day’s dol­lars).

The con­sul­tant also es­ti­mated that th­ese projects would cre­ate about 9,700 one-year full-timee­quiv­a­lent jobs over 25 years. That’s $200,000 per job. Yes, th­ese projects will stim­u­late eco­nomic ac­tiv­ity and cre­ate jobs in the state, but Mary­land res­i­dents’ money could be bet­ter spent on other projects pro­duc­ing greater eco­nomic ben­e­fits and cre­at­ing more jobs at lower costs.

De­spite the Off­shore Wind En­ergy Act’s clear lan­guage re­quir­ing each project to pass a cost-ben­e­fit test, the com­mis­sion never com­pared the ratepay­ers’ costs to sup­port ei­ther project with the mon­e­tary value of the ben­e­fits that project is ex­pected to de­liver. In­stead, the four com­mis­sion­ers in­ter­preted the lan­guage as al­low­ing them to con­sider only the eco­nomic, en­vi­ron­men­tal and health ben­e­fits with­out com­par­ing th­ese ben­e­fits with the ratepay­ers’ costs.

Be­cause th­ese off­shore wind projects will pro­duce en­ergy cost­ing three to four times as much as re­new­able en­ergy pro­duced by on­shore wind or largescale so­lar, it is in­con­ceiv­able that ei­ther project would pass a bona fide cost-ben­e­fit test. In­ter­est­ingly, the Mary­land Public Ser­vice Com­mis­sion staff did not rec­om­mend ap­proval of ei­ther project, stat­ing only that: “The is­sue of cost should be of para­mount con­sid­er­a­tion in the de­ter­mi­na­tion the Com­mis­sion must make in this pro­ceed­ing.”

The com­mis­sion ap­pears to have tele­graphed its agenda when it said, “the State has al­ready made the pol­icy de­ci­sion to au­tho­rize OSW devel­op­ment and the ratepayer im­pacts that may re­sult from it.” Then why did the Off­shore Wind En­ergy Act in­clude the cost-ben­e­fit anal­y­sis re­quire­ment?

The com­mis­sion’s de­ci­sion is ap­palling. Mary­lan­ders de­serve bet­ter.


Wind tur­bines off Rhode Is­land.



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