What are the principal costs associated with this Cape Wind project?
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The principal costs associated with the Cape Wind project include the cost of components and materials, foundations, construction services, maintenance, and electric grid connections (Vietor 3). Also, it should not be overlooked that, since the project met serious opposition, and the creator had to go through several burdensome legal procedures, the cost of delay should also be taken into consideration. Over the years of litigation and negotiation, the cost of materials rose significantly, and the total cost of implementing the project rose to more than twice the initially planned amount (Vietor 12). It is also noteworthy that Gordon and other people involved in the development of the project initially defrayed many costs associated with the project design and planning activities. The project team needed to take into account a large number of regulations and policies (including the regulations and policies of several federal agencies) with which they needed to comply, and preparing the project, therefore, cost a lot of money, although this cost represents a minor part of the total planned budget.
Why has the Alliance been so successful in delaying the project now for nine years?
Large energy-related projects are subject to so many regulations that building an energy-producing facility (and even just obtaining all the needed permissions before actual construction is launched) is a slow and complicated process (Vietor 13-14); however, the period of delay in the Cape Wind project (as of today, it is nine years) is quite a bit longer than could have been expected based on bureaucratic considerations alone. It suggests that there are groups interested in preventing the project from being implemented, and these interest groups have powerful instruments, including legal measures, political lobbying, and communication, to carry out their prevention efforts. It can be assumed that these groups primarily include players in the fossil fuels industry (since energy producers that use renewable energy sources are major competitors of oil, gas, and coal corporations); however, Vietor does not list them among persons and organizations that oppose the Cape Wind project (21-22). The list contains individual political leaders and organizations working on environment preservation and tourism as well as representatives of local communities and educational and academic institutions.
The wave of opposition to the project resulted in the creation of an advocacy group called the Alliance to Protect Nantucket Sound consisting of experienced environmental scientists and activists. The Alliance pursued steps to raise awareness about possible negative effects for the region of the offshore wind energy project, and the Alliance representatives’ claims were related not only to environmental concerns but also to social and civic issues. Many activities by the advocacy group can be regarded as successful: they managed to persuade prominent politicians, local communities, and the mass media to support them in opposing the Cape Wind project; for example, the fact that the Cape Cod Times newspaper became strongly opposed to the project was a success for the Alliance (Vietor 10). The group was so successful because it actively used mass communications to promote its agenda and gain more and more support from individuals and groups by appealing mostly to environmental protection issues and similar concerns that cause strong emotional responses in audiences.
How likely is it for Cape Wind to get built? Provide support for your answer.
It is evident from Vietor’s article that calculating the possibility of eventually building Cape Wind is complicated, and no definitive answer can be provided because too many changing factors and considerations contribute to the decision-making process. There are two major categories of interests involved: pragmatic, efficiency-related interests, and civic/social interests. However, in this case, neither category of interests is entirely on one side; for example, some energy industry participants may support the project because they are interested in more efficiently produced, cheaper energy, but other participants may oppose the project because its implementation would damage their specific sectors of the industry. Moreover, both supporters and opponents rely on research results, although the studies to which they refer are mostly funded by them and conducted specifically in the context of the possible construction of Cape Wind; e.g., the study of the project’s potential effects on tourism and land values in the area (Vietor 8) funded by the opponents, including the Alliance.
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At least in the public sphere (i.e., on the level of what is being claimed by the supporters and opponents publically as opposed to their non-public negotiations), the conflict’s main point is whether the construction of the Cape Wind facilities will bring about more benefit (e.g., in terms of energy costs, according to Gordon) or more harm (e.g., in terms of environmental impact, according to the Alliance). At the time the article was written, Gordon, despite several years of litigation and fierce opposition, was certain that Cape Wind would ultimately be built, and he was resolute and determined to continue the process of bringing the project to the implementation stage (Vietor 12). However, his opponents were also resolute. A lot will depend on public opinion. It has been repeatedly demonstrated in the United States that local opposition to certain energy-producing facilities can lead to shutting the facilities down (O’Connor et al. 496), and the power of the claims of environmental activists compared to the power of lobbyists for the energy industry should not be underestimated.
In your opinion, what should have been the role of the State of Washington D.C. throughout the process? In general, what should be the role of the government for these types of projects?
The appropriate role of federal and local government in cases similar to the presented one is debatable; in fact, the extent to which the government should be involved in the business world is the cause of one of the most long-standing and persistent political conflicts in the United States. What must be identified in this context to answer the question about the government’s role is the essence of the Cape Wind controversy: Is this a matter of business only? On the one hand, there are the considerations of energy cost and competition in the energy industry, and these considerations suggest that Cape Wind is a business project, and any issues arising on the way to implementation are to be resolved within the market. Therefore, if Cape Wind is in fact capable of creating a more efficient energy-producing facility, the project should move forward, and the government should not intervene because there is the most shared perception in the national economy that, within certain boundaries, the market should regulate itself.
On the other hand, it can be argued that the Cape Wind project is an example of a project that goes beyond these boundaries. The issues of energy production on such a large scale are perceived as a matter of national security, which is why the government acknowledges its responsibility to monitor and control projects of this type. Moreover, since several issues related to the environment, pollution, and biodiversity are involved, there are national agencies that are entitled to impose regulations on large-scale energy-related projects such as this one. In the present case, the local and federal government should have acted according to existing legislation regulating the initiatives for which the construction of an offshore wind farm qualifies, and this is what the governments did. Any additional interventions, including intentionally changing the existing legislation to impose additional or different regulations on the initiative or directly affecting the process of promoting the initiative, should have been avoided.
What are the effects on LCOE if the project were to be moved to a region where the wind speed decreases on average by 5% but annual output remains the same? How about 10%? Are there any other potential costs of moving the site to another location?
The Levelized cost of energy (LCOE) is the quotient of total costs and total energy produced. In the wind energy industry, if the wind speed decreases, it reduces the value of the denominator; it can also be argued that the value of the numerator is reduced, too (e.g., due to lower maintenance costs), but for the purposes of calculating the LCOE of energy production, the change of total costs due to the decrease of the wind speed can be ignored. In an alternative scenario, it is necessary to calculate how much the costs will rise if the wind speed is decreased, but the same annual output is to be provided. For this, all the contributors to the cost of producing wind energy should be taken into consideration.
First of all, providing the same output with smaller input will require activating additional capacities, thus increasing the project cost per unit of power proportionally to the decrease in the necessary input. Given that the air density in the new area (to which a facility is transferred and which has a five-percent lower average wind speed) is the same, and the mechanical efficiency and electrical efficiency equal one, it can be speculated that the output at the same capacity will amount to 95 percent of the initial output. At the same time, the cost of producing energy will depend on the cube of the wind speed (Vietor 3), which is why a 14-percent decrease in the cube of the wind speed (100% – (21.3753/ 22.53 *100%)) will result in a 14-percent increase in costs (all other factors held constant), and a 27-percent decrease in the cube of the wind speed ( 100% – (20.253/ 22.53 *100%)) will result in a 27-percent increase in costs. Therefore, if the project is relocated to a region with a lower wind speed, the LCOE will increase. Similarly, a ten-percent decrease in the average wind speed will further decrease the value. It is possible that, at some point, the LCOE will be too high, indicating that, in a particular area, a project like Cape Wind cannot be implemented because it would not ensure more efficient production of energy and would therefore not be profitable.
However, these calculations are too abstract and cannot be used in isolation for the analysis of the Cape Wind project. First of all, relocation would be associated with a large number of factors apart from wind speed alone; for example, compliance with regulations and taxation requirements can significantly affect the costs of energy production for a wind farm. Wind speed is a crucial consideration, and the project was initially inspired by the fact that there were places offshore in which significant amounts of wind energy were not being used; however, the average wind speed is a questionable indicator in planning the facility’s operation. Vietor stresses that variability in the wind speed rates is “[t]he biggest problem” (3), and even if an offshore location has a quite steady wind speed, the issues of variance cannot be fully ruled out when relevant calculations are performed.
O’Connor, Jim E., et al. “1000 Dams Down and Counting.” Science, vol. 348, no. 6234, 2015, pp. 496-497.
Vietor, Richard. “Cape Wind: Offshore Wind Energy in the USA.” Harvard Business School, vol. 708, no. 22, 2008, pp. 1-26.