Simply reading the 77-page decision by the Rhode Island Supreme Court provides a thorough and authoritative tutorial to the exercise in backroom politics that lies behind the approval of the Deepwater Wind “demonstration project” off Block Island. It’s all there: how the Public Utilities Commission (PUC) initially found that the agreement to sell wind power at three or four times market rate made the project not commercially viable, and then in response to the state legislature ordering a change in the evaluation rules reversed the earlier decision. There is also no shortage of examples of how numbers were just fudged to provide a result more favorable to the outcome desired by the legislature and then-governor.
It makes sense that there has to be some above-market investment in capital expenditure to do something new and experimental, but commercial reasonableness is a matter of degree. The accounting is so warped that it is absurd to claim that the ratepayers in the state will get any direct economic benefit from the hundreds of millions of dollars in excess payments they make. It doesn’t pay off in jobs, as the evidence showed only six permanent jobs created by the project. Ultimately, the PUC, in order to bring its fact-finding into line as directed by the legislature, had to make nebulous assumptions such as the value of being “first” relative to other states in implementing a comparable project. How can anyone purport to measure that?
The real problem is that the state meddling in the market to this extent is putting a finger on the scale not only when comparing off-shore wind generation to fossil fuel, but also to other clean, renewable methods such as on-shore wind, geothermal and hydroelectric generation. If it turns out that some other green technology such as on-shore wind is more cost-efficient than off-shore wind, RI will be stuck with a “demonstration project” about as useful as converting the state airport for dirigible service.
It is no exaggeration to draw the inevitable comparison between Deepwater Wind and that other notorious economic debacle of the Carcieri administration, 38 Studios: the same elements of hubris in defiance of market forces, of warping financial predictive models into fantasy, and the stubborn denial that changing circumstances affect or even falsify critical prior assumptions. And, in the end, the people of the state, the ordinary individuals and businesses who buy electricity, will be stuck with the bill.