Koch Brothers Fund Bogus Study Bashing Offshore Wind Energy in New Jersey

As anyone who’s traversed the northern segment of New Jersey’s infamous Turnpike can attest, the Garden State has a bit of an image problem when it comes to clean air. And despite dramatic improvements over the past several decades, the state’s report card from the American Lung Association consisted almost entirely of Fs for ozone pollution, and counties received a cumulative 1.9 GPA for particle pollution, including 3 Fs and a D. Apparently, this suits the Koch brothers just fine.

Not content with the efforts of their group Americans For Prosperity to convince Gov. Chris Christie to derail New Jersey’s participation in the Regional Greenhouse Gas Initiative, or RGGI, the Koch brothers have also ramped up their efforts to ensure New Jersey’s air quality continues to live up to its historic reputation. Last month, the Koch-subsidized Beacon Hill Institute, or BHI, released the latest in a series of slanted cost-benefit analyses of offshore wind energy.

The report, proudly touted on the AFP website, misses the mark on both sides of the ledger by dramatically overstating the costs and underestimating the economic benefits of offshore wind farm. According to CAP Economist Adam Hersh, such accounting is “like trying to balance your checkbook without entering all the bills you pay or all the deposits you make.” Specifically:

•The study dramatically underestimates the economic savings realized from the environmental benefits by assuming a static price for the valuation of reduction of greenhouse gasses – which will inevitably rise over time – and by applying an absurdly high discount rate of 10 percent to the benefits when most economic studies use rates of 3-5 percent. The discount rate mistake alone could lead to underestimating the benefits of offshore wind turbines by as much as 50 percent. (This Bloomberg article contains a concise description of how an excessively high discount rate dramatically undervalues future benefits.)

•It also artificially inflates the costs of the project compared to fossil fuel generation by failing to account for the reality that as costs go up, people will reduce their consumption thereby partially offsetting the price increase. Furthermore, the study estimates the cost of natural gas and coal based on historical prices rather than based on forecasts of future market conditions. While natural gas prices are difficult to predict, experts believe coal prices will rise in the future.

•The BHI study entirely fails to account for the jobs that would be created by the wind farm. Meanwhile, according to a 2009 report by the European Wind Energy Association, the wind power sector in Europe created more than 60,000 jobs from 2004-2008. And today, Interior Secretary Ken Salazar will be in Rhode Island to tout the economic and job creation value of offshore wind power.

Furthermore, the study assigns zero value to increased energy independence and vastly underestimates the reductions in greenhouse gas emissions New Jersey’s targeted 1,100 MW of offshore wind energy would produce.

This report isn’t BHI’s first foray into the admittedly complex world of offshore wind turbines. A 2003 report from BHI on Cape Wind’s proposal to build America’s first offshore wind farm used similarly deceptive tactics, suggesting the project could cost the region $64 million to $134 million in tourism dollars. These findings were included despite polls that showed less than 3 percent of potential tourists would change their plans if the farm were built and despite ample studies of actual tourists’ behavior in areas proximate to actual wind farms in Europe.

Lesser-known brother Bill Koch has long been a vocal opponent of Cape Wind farm thanks in no small part to the fact that his seaside mansion in a gated, country club community in Osterville, MA overlooks the area of Nantucket Sound where the company is slated to begin construction of turbines as soon as 2012. A Greenpeace report details Bill’s efforts to derail the project, though it now seems his brothers and AFP are intent on using their oil-stained money to invent fictional accounts and fire up the scare tactics.

Most recently, they were joined in their erroneous interpretation of the costs of offshore wind by another prominent Cape Codder whose family manse overlooks the proposed Cape Wind site. In an error-riddled op-ed in the Wall Street Journal, Robert F. Kennedy, Jr. blasted the project, calling it a “rip-off” for ratepayers, instead suggesting Canadian hydropower would be a better way to meet clean energy standards. Amid the blatant hypocrisy of an environmentalist who has written or been quoted in multiple articles trashing hydropower as an evil that “has turned pristine rivers into power corridors, ancient lakes into holding tanks and a sacred homeland into an industrial complex,” his piece also rails against Cape Wind’s “heavy-handed backers.”

If Kennedy is looking for a “heavy” in the offshore wind conversation, he should first look in the mirror. And then look at the brothers who are standing right behind him.

Michael Conathan is the Director of Ocean Policy at the Center for American Progress. CAP Senior Policy Analyst Richard Caperton and Economist Adam Hersh contributed to this report.

Michael Conathan, http://thinkprogress.org/