Misleading: Delaware Energy Policy Assumptions

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The key assumptions used to develop Delaware’s energy policy have led us down a wrong and very expensive path. The first mistake began in 1998 when Delaware passed legislation de-regulating prices for the electric generation industry believing it would lower prices. In fact prices have gone up 36% compared to regulated states and this now costs Delaware residents $350 million a year.

Below we lay out other assumptions as presented in the 2009 report titled “Delaware Energy Policy 2009-2014” and the actual facts.

Highly selected information was used to prove Delaware has a higher energy use per person compared to neighboring states to create the impression some action was needed.

In fact, Delaware energy use is about equal to the US average using information from the 2008 Energy Information Agency. Compared to the averages of the neighboring states of Maryland, Pennsylvania, and New Jersey, Delaware uses 3% less for the combination of residential, commercial, and transportation energy.

The only area where Delaware uses more energy, about twice as much, is for industrial purposes. This is because Delaware has more energy intense industries such as oil refining, chemical manufacturing, metal fabrication, and food processing. These are the very industries hurt most by high electricity prices.

It is not unexpected that DNREC, a regulatory agency, would conclude more regulation is needed to change people’s behavior. They believe we won’t use their preferred solutions which include driving less, use of expensive renewable power sources, or paying more for energy savings devices with long paybacks. Without any help from the government, electricity efficiency has gone up an average of 1% a year over many decades, roughly equal to the expected increase in use. The free market works, however, when individuals and businesses follow their own best interest without government interference. For example, Delaware has reduced carbon dioxide emission for electricity use 41% from 2004 to 2009 after adjusting for recession effects. Only 4% of that improvement came from a renewable source, centralized wind farms. Fuel switching and plant closings accounted for the rest. The state would like us to install more expensive solar panels and windmills on our homes. No appreciable greenhouse gas savings have come from such small wind and solar projects.

The Governor’s Energy Advisory Council concluded Delaware was in a strong position to lead innovation in “green” energy fields and to create numerous new jobs. Our conclusion, to be released in an upcoming report, is few new jobs have, or will, be created from these initiatives. Studies have shown the extra cost of “green” energy compared to conventional energy leads to two to eight jobs lost elsewhere for each “green” job created.

The Council also expected conventional fuel prices to go up quickly while power produced from renewable sources would remain stable. The opposite has happened. Fuels for nuclear, hydroelectric, and coal plants have remained stable. Natural gas prices are about a third of the 2005 price and are expected to fall further because of massive new fields coming into production.

Only oil remains volatile and that has more to do with government restrictions on US production than free market forces. The primary emphasis of Delaware policy has been on electricity. Oil is only used for about 1% of electricity generation. Meanwhile, long term contracts for renewable power have built in price escalators of 2.5% to 3.5% a year.

The Delmarva Power contract with Blue Water Wind at $.14/KWh in 2016, will probably have to be renegotiated higher. Other offshore projects in the US and Europe are coming in at $.19 to $.24/KWh, more in line with Blue Water Winds initial proposal, but twice the price of onshore wind.

Finally, the energy plan accepts the UN Intergovernmental Panel on Climate Change Fourth report to be absolute fact. The exposure of manipulations, exaggerations and inaccuracies in “Climategate” investigations has undermined confidence in this report. We will cover the topic of global warming in an upcoming two part report.