Saturday, February 8, 2014

Big Sky Wind Farm Losing Money and Going to the Creditor

This is interesting.  Steven Daniels at Crain’s Chicago Business writes another interesting article about Illinois’ energy business.  Edison Mission Energy, the owner of Midwest Generation and the Big Sky Wind Farm in Bureau and Lee counties went bankrupt in late 2012.  Now it looks like the wind turbine manufacturer, Suzlon, may end up owning the wind farm.

As Daniels’ reports, Suzlon, needed to regain a reputation in the wind energy business.  Big Sky did not have a lucrative 20 year Power Purchasing Agreement far above the current market price of energy and could not get more conventional financing.  In spite of the risk, Suzlon financed the wind farm.    Now that Edison Mission, and its losing subsidiaries, Midwest Generation and Big Sky, are going bankrupt, the turbine manufacturer could end up owning the wind farm.

So here we have an Illinois wind farms going bankrupt, and there are businesses plans being proposed at the Illinois Commerce Commission to import more wind energy from Iowa with grandiose transmission projects.  Is there any reality in the wind energy business?

As Steve Daniels’ reported, this wind farm evidently can't make it without an attempt to cut a backroom deal.  As early reported by Crain’s, while Madigan did not oppose the closure of Midwest Generation’s two financially troubled coal plants, Madigan was opposed financing a troubled Big Sky wind farm or a sweetheart 25 year power purchasing agreement because it would mean higher prices.  Governor Quinn pressured Mark Pruit and the Illinois Power Agency to sign these long term power purchasing agreements starting at $55.18/MWH for ComEd customers, above current market prices.  Edison Mission Energy wanted the same deal for Big Sky. 

Ironically, these Illinois Power Agency deals for wind energy have driven ratepayers away from ComEd and Ameren through aggregation.  With aggregation, these wind companies who signed up for the governor’s deal are not getting paid.  With deregulation, there is cheaper energy out there.  

In hind sight, Edison Mission was going down the toilet.  Coal energy from Midwest Generation was becoming too costly and Big Sky wind farm was also losing due to low priced energy.  Edison Mission had nothing to really bargain but tried to bluff it with a "We'll close our 'dirty' coal plants if Illinois pays us above the market price for our "clean" wind energy."   Basically, Edison Mission attempted to have Illinois ratepayers pay Midwest Generation to close its plants they intended to close anyway due to market conditions.

Madigan did the smart thing by telling MidGen to go pound sand.  Midwest Generation goes bankrupt and announces it will close the two plants.  Illinois ratepayers are buying the wind energy from Big Sky at market prices.  Smart move Madigan!

This makes one wonder where Governor Quinn was on this proposed deal with Big Sky wind?  Rahm Emmanuel was supporting paying more for Big Sky’s energy.  Was Quinn willing to sell out the ratepayers and take the deal like he did with the Illinois Power Agency deals to buy wind energy for Ameren and ComEd customers?

As elections approach, this shows it is even more important Illinois elects a governor with a strong energy policy for the state with a priority towards a competitive energy market without sweetheart deals.  Unlike conventional wisdom, an energy policy isn’t for the federal government.  Energy policy is still the domain of state governments.  Illinois needs a governor who supports economically priced energy in an open market regardless of politics.

Illinois residents need a candidate for governor who has the imagination to conceive a state energy policy beyond "yeah clean energy".  Amazing Michael Madigan, as Speaker of the House, has a better understanding of what Illinois residents needs for an energy policy than the governor.  What about the other four guys running against Pat Quinn?

How hard is it to come out with an energy policy position that favors energy independence, not from foreign entities but from politics as usual?  Illinois needs an energy policy that promotes an open market, free of political influences, and give ratepayers more freedom to choose their energy retailer?   Governor Quinn can claim he is in favor of an open market, but under his direction Ameren and ComEd ratepayers are burdened with high costing wind energy.  With the current Renewable Energy Standard in Illinois, those still with Ameren and ComEd will continue to pay more and more.

Can a governor candidate propose an energy policy that calls for the failures of the Renewable Energy Standard and the Illinois Power Agency to be cleaned up after the mess Quinn has made it?  Sure wind energy is good to have in a state's energy portfolio, but not at artificially high prices.  Why did Illinois advocate deregulation only to have a governor force high priced wind energy on us?  Is there really the difference paying too much in a poorly regulated market or paying Big-Britches-Wind too much because the governor forces a backroom politically favored sweetheart deal?  Neither are good for Illinois.  

By the way, the Crain's Chicago article also infers big wind energy is struggling to make it with only the Production Tax Credit from the federal government.  If Edison Mission’s Big Sky can’t make a profit in an open market, how are the other wind energy companies doing?  Looks like wind energy companies needs these sweetheart 20 year power purchasing deals to survive.  If the Production Tax Credit is taken away and states have a sound energy policy that is fair and competitive for the ratepayer and all energy generators, business plans for energy transmission, like the Rock Island Clean Line and the Grain Belt Express, cannot survive.

If any governor candidates are reading this, along with greater eminent domain protection, you might want to create an energy policy for the state that is better than what Governor Quinn has given us. 

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