Massachusetts OKs Cape Wind Deal with National Grid

1 by Timothy Hurst on November 22, 2010

Cape Wind, the first offshore wind farm ever approved in the U.S., today passed another major milestone with the approval by the Massachusetts Department of Public Utilities of a 15-year Power Purchase Agreement with the utility, National Grid, to buy Cape Wind’s energy, capacity and renewable energy credits.

“Massachusetts is now in a position to become a global leader in offshore wind power creating thousands of new jobs and a more secure, hopeful energy future," Cape Wind President Jim Gordon said. "This long-term contract not only secures an abundant, inexhaustible clean energy resource but protects consumers from rising fossil fuel and environmental compliance costs,” Gordon continued.

The Department of Public Utilities (DPU) decision culminates a comprehensive six-month review of the project, including 13 days of evidentiary hearings with testimony from 15 witnesses, 1,362 exhibits and nearly 3,000 transcript pages.

"This is a major victory for renewable energy in the United States," said attorney Matthew Pawa, who represented one of the intervening organizations, Clean Power Now, in the DPU proceedings. "We are particularly pleased that the DPU agreed with our position that it should include in its analysis the future cost benefits of complying with the state global warming law and that it rejected the Attorney General's argument to ignore those cost benefits as speculative," Pawa said.

In its decision, the DPU wrote: “[I]t is abundantly clear that the Cape Wind facility offers significant benefits that are not currently available from any other renewable resources. We find that these benefits outweigh the costs of the project.”

Approval by the Massachusetts DPU comes on the heels of news that Cape Wind project construction will soon bring over 1,000 new manufacturing, staging, assembly, construction, and operations jobs to Massachusetts.

"National Grid recognizes that as a public utility, we need to facilitate these important renewable projects while maintaining a focus on minimizing the cost to our customers," said National Grid President Tom King when the utility first announced its intention to purchase the Cape Wind output in December of 2009.

http://energypolicyupdate.blogspot.com/ Todd Griset

With this deal approved, Cape Wind is now poised to move forward with its project. Under the deal, National Grid will buy half of Cape Wind’s output for 18.7 cents per kilowatt-hour, with a 3.5% annual escalator in each of the 15 contract years.

In its order approving the deal, the DPU acknowledged that the pricing is high but offered an explanation:

“The power from this contract is expensive in light of today’s energy prices. It may also be expensive in light of forecasted energy prices—although less so than its critics suggest. There are opportunities to purchase renewable energy less expensively. However, it is abundantly clear that the Cape Wind facility offers significant benefits that are not currently available from any other renewable resource. We find that these benefits outweigh the costs of the project.

One of the many benefits that Cape Wind provides is that it will assist National Grid and Massachusetts in meeting the renewable energy requirements of the Green Communities Act, as well as the greenhouse gas emissions reduction requirements of the Global Warming Solutions Act. Meeting those greenhouse gas emission mandates will require significant investments across all sectors of the economy, and especially from the electricity sector. We conclude that those requirements are unlikely to be met without the Cape Wind contract and the associated emissions reductions from the project.”

If 18.7 cents seems high, interestingly it is among the lowest of the many of the recent proposed prices for offshore wind. It’s worth noting that 18.7 cents per kWh is lower than the price set in previous proposed iterations of this contract. In May 2010, National Grid agreed to a deal at 20.7 cents per kWh (subject to DPU approval, which was withheld). The May proposal in turn was lower than the initial Deepwater Wind proposal off Rhode Island’s Block Island, which proposed 24.4 cent per kWh power escalating 3.5% annually for 20 years to a final price of 48.6 cents per kWh. (And even that price was lower than the one Deepwater initially offered National Grid: 30.7 cents per kWh.)

I write a blog on energy policy. If you’re interested in Cape Wind, and whether the prices we will pay for renewable power are worth it, you can find more there.

Todd Griset
http://energypolicyupdate.blogspot.com/
Energy Blog