• 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
    Energy Blog