Energy Market & Policy Analysis, Inc.
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Glenn R. Schleede              Overnight Mail:
President                       1414 Hemingway Court
Reston, VA 20194
October 15, 2002
 

Mr. Graham Black
Yakima Herald
Yakima, Washington

Dear Mr. Black:

Thank you for providing a copy of the report, "The Economic Impacts of A Proposed Wind Power Plant in Kittitas County, WA," prepared for the Phoenix Group by ECONorthwest and for your request for comments.
This report has one great advantage.  That is, the reader is not left to wonder whether it is an objective analysis since it is so strongly biased in its attempt to demonstrate that the proposed "wind farms" will have a beneficial economic impact.  It is a classic example of a case where the analysts start with conclusions and then construct data that they hope will support their preconceived notions!
Summary points.
A full evaluation of the report would take more time than is available before you need a response. Therefore, I will have to provide only a summary of key points and, perhaps, elaborate on one or two of them later in this letter.
1. The "analysis" focuses only on alleged "benefits," with no consideration of costs, risks or alternatives.  Therefore, it doesnít begin to qualify as a legitimate economic analysis.
2. The report does not even note the fact that the electric customers would bear millions of dollars in extra costs because electricity from the "wind farms" would cost more than electricity from other sources. These extra costs, alone, will overwhelm even the exaggerated estimates of benefits described in the Phoenix Group report.  For example, the report does not take into account the adverse economic impact resulting from the fact that consumers who must pay extra costs for their electricity will have less money to spend in Washington for food, clothing, housing, education, medical care, recreation and other purposes.
3. There would be a significant net outflow of dollars (wealth) from the State of Washington to the two out-of-state "wind farm" developers because the added costs of electric from the "wind farms" would far exceed any economic benefit accruing within the state.
4. The report fails to note that a modest sized combined-cycle gas-fired generating plant (such as those built in recent years in Oregon and Washington) would produce far more electricity reliably and when needed and would occupy only a few acres of land.  The "wind farms" would produce electricity only intermittently (when the wind is blowing within certain speed ranges) and with high variability.  Other generating capacity would have to be kept available and running to "back stop" the unreliable electricity from the windmills.
5. The conclusion that 265 huge windmills would not adversely affect property values ­ particularly if there are residential properties in the affected areas -- does not pass the "laugh test." There is plenty of evidence from sources in the US, Europe and Australia that "wind farms" are objectionable because of their adverse impact on scenic, property and environmental values.  For these reasons, proposed "wind farms" are facing strong opposition across the US, from Cape Cod and Maine in the Northeast to California in the West.  Even strong environmental advocates are now opposing projects in Maine, Massachusetts, Pennsylvania, New York, Wisconsin, Michigan, Illinois, and Kansas.
6. Most anyone familiar with the roles of tax assessors in setting property values for tax purposes would not take seriously the results of a survey of their views as the basis for conclusions about the impact of huge windmills on the value of neighborsí ­ particularly close neighbors ­ property.  Their techniques are notoriously poor in determining the true market value of property.
7. When placed in remote, very sparsely populated areas (such as West Texas), "wind farms" attract little opposition on scenic impairment grounds.  This is not true in populated areas or areas where scenery is important to tourists.
8. The authors of the report seem either unaware or unconcerned that, because of extremely generous federal tax shelters and other subsidies, "wind farm" developers (in this case, out-of-state developers) will earn huge ("wind fall") profits from their projects.  These subsidies shift costs from "wind farm" owners to taxpayers and electric customers.
9. Attempts to attribute "indirect" economic benefits should always be viewed skeptically.  Any such benefits that actually occur are highly specific and vary widely depending on (a) the nature of the spending and (b) the economic structure and conditions in the locality involved.
10. I am not sufficiently familiar with the Initiative 747 to evaluate adequately the property tax implications of the proposed projects.  However, it is clear from the report that the authors have sought to downplay the implications of that initiative on the reportís ambitious estimate of increased tax revenues.
Adverse effects of higher cost electricity.  Anyone considering the desirability of a "wind farm" should take into account the adverse economic impact of the extra costs of electricity produced by wind turbines.  Specifically:
* The report envisions two wind farms with 265 windmills with total rated capacity of 390 megawatts (MW) or 390,000 kilowatts (kW).
* If those wind turbines operated at full capacity for 24 hours per day and 365 days per year, they would produce 3,416,400,000 kWh of electricity (i.e., 390,000 kW x 8760).
* However, windmills produce electricity only when the wind is blowing within certain speed ranges and then on a highly variable basis.  Assuming they produced at a 35% capacity factor, they would produce 1,195,740,000 kWh of electricity each year (i.e., 3,416,400,000 kWh x .35).
* If that electricity cost electric customers $0.02 per kWh more (probably a low estimate) than electricity from other available sources, the annual EXTRA cost burden on electric customers would be $23,914,800 ­ far exceeding any realistic estimate of the true economic benefits of the proposed projects.
* Note that the $0.02 per kWh assumption does not take into account that fact that the use of wind turbines to produce electricity imposes additional costs.  Other generating units must be kept immediately available to supply electricity when the wind turbines are not operating or are producing only small amounts of electricity.  Still other costs are incurred in transmission and grid management because the output from wind turbines is intermittent and highly variable.
* Note also that the "wind farm" owners would receive an additional  $ 21,523,320.00 each year in federal "Production Tax Credits," in additional to millions in depreciation write-offs.
Huge machines and many acres of land but little electricity
The potential annual output of 1,195,740,000 kWh of electricity from the two proposed "wind farms" may sound like a lot of electricity.  However that amount of electricity is equal to:
* About 1% of the 117,135,248,000 kWh of electricity produced in Washington during 1999.
* About 24% of the electricity that will be produced each year by the Calpineís 630 MW gas-fired combined cycle plant at Hermiston, OR, that began commercial operations in August 2002, if that plant operates at a 90% capacity factor.
I hope these limited comments will be useful to you and in time to meet your needs.
I will send you via a separate email my recent, more comprehensive assessment of the economic impact of Zilkhaís proposed Kittitas Valley project.
             Sincerely,
             Glenn R. Schleede