Utilities back out of N.C. wind project over high prices

ELIZABETH CITY, N.C.

At least two utility companies have declined deals to buy power from Iberdrola Renewables' proposed large-scale wind farm here, potentially derailing the $600 million project.

Both companies - Dominion Power and Progress Energy - say the price of the power was simply too high.

Iberdrola Renewables' project would erect as many as 150 wind turbines on 20,000 acres in Pasquotank and Perquimans counties. The 300 megawatts it would be capable of producing could power about 60,000 homes. It would be the largest wind farm in North Carolina and one of the largest in the nation.

"...We have carefully reviewed Iberdrola's proposal and concluded that a power-purchase agreement with the proposed facility is not in our customers' best economic interest," Dominion CEO Thomas F. Farrell II wrote in a Nov. 28 letter to North Carolina Gov. Bev Perdue.

Although Farrell said Dominion already has contracts with wind farms in Indiana and West Virginia, he noted that wind power costs are "significantly higher than other forms of power production," including natural gas.

The governor had written Dominion Power on Nov. 17, asking the company to sign a contract with Iberdrola. She also wrote Progress Energy and Duke Energy. The letters were provided by Perdue's office at the request of The Virginian-Pilot.

In a Dec. 1 letter, Progress Energy also responded to Perdue saying costs of signing with Iberdrola were too high. Duke Energy had not responded as of this week, Perdue spokesman Mark Johnson said.

Dominion would not comment on the Iberdrola deal.

Another renewable energy company, Invenergy, plans to build a 300-megawatt wind farm in Camden County and another 80-megawatt wind farm in Beaufort. Company officials declined comment on their contract negotiations.

Iberdrola had planned to begin construction before the end of the month, thus qualifying it for government subsidies. Spokesman Paul Copleman said the project is not dead, but he acknowledged that Iberdrola will not begin to build the project without a power contract.

Earlier this year, the company's plans called for contracting with Dominion and tying into a major transmission line that runs near the project site.

The project was expected to generate more than $700,000 in local annual tax revenues and create about 19 permanent, well-paying jobs. It was anticipated that other supportive industries would locate nearby and further add to the tax base and job opportunities.

The company met behind closed doors with county officials Wednesday, Pasquotank County commissioner Jeff Dixon said.

"Fortunately, the county is not on the hook for anything," he said. "If it doesn't happen, then both parties can walk away. We knew that the wind and solar industries were sort of fickle right now. We weren't going to jump off the cliff if it didn't happen."

John Droz Jr., a physicist and wind energy opponent, isn't surprised that the economics of the project have gotten in the way.

A federal report on the cost of electricity production, based on the source, seems to show wind to be highly competitive with other energy sources. Natural gas is the cheapest, at 6.5 cents per kilowatt hour, with coal (9.5), inshore wind (9.6) and nuclear (11.4) following.

But that cost fails to take into account that wind energy does not produce electricity on demand, so you must have a backup. That, Droz said, adds significantly to the cost and is one reason the federal government's subsidies of wind energy have grown from $475 million in 2007 to $4.9 billion in 2010

, according to the Energy Information Administration.

"This is a science thing," Droz said this week. "It has nothing to do with politics. It's lobbyists versus science, and science is losing."

Part of the push for renewable energy can be traced to a 2007 North Carolina law that mandated that 12.5 percent of retail sales by utility companies come from renewable energy by 2021. Earlier this year, though, the General Assembly amended that law to allow energy conservation to account for some of the mandate.

In the 2010 election, the state's lawmaking body shifted to a Republican majority. Many in the GOP ranks have expressed concern that the renewable energy mandate could drastically raise utility rates. That, they say, could discourage industries from locating in North Carolina.

Some lawmakers wanted to repeal the 2007 mandate, Rep. Mike Hager, R-Rutherford, said. Duke Energy and Progress Energy told Hager renewable mandates would cost an extra $250 million that would be passed on to customers, he said.

"This is a step backwards when it comes to attracting business," Hager said.

Jeff Hampton, (252) 338-0159, jeff.hampton@pilotonline.com