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Renewable energy procurement announced
Agreement to provide 565 MW at weighted average price of less than 8 cents per kWh
September 24, 2013
STATE HOUSE NEWS SERVICEThe largest renewable
energy procurement in state history, which involved the six Massachusetts electrical utilities teaming up to increase their buying power, will provide electricity at a fraction of the cost of Cape Wind.
The agreement announced Monday between the six utilities and New Hampshire and Maine wind developers First Wind, Iberdrola Renewables and Exergy Development Group provides 565 megawatts of power at a weighted average price of less than 8 cents per kilowatt hour, compared to the 18.7 cents per kilowatt hour that National Grid and NSTAR agreed to pay the long-planned offshore wind project.
“We are still strongly supportive of Cape Wind and think Cape Wind makes sense on a lot of different fronts,” Secretary of Energy and Environmental Affairs Rick Sullivan told the News Service. He said, “Being the first of its kind in the country, it’s going to be more expensive.”
NSTAR’s energy purchase agreement with Cape Wind was “part of a larger agreement” with the Department of Energy Resources related to its merger with Northeast Utilities, said Mike Durand, spokesman for NSTAR and Western Massachusetts Electricity Company.
The purchase agreement for northern New England wind may fulfill requirements for utilities to competitively bid among renewable energy providers for 4 percent of its total energy demand, part of a 2012 energy law.
“We’re pretty confident that this procurement, if it doesn’t totally fulfill, it comes pretty close to fulfilling the renewable obligations that the utilities had,” Sullivan said.
Sullivan said the procurement is before the Department of Public Utilities, and the average price is below that of coal or nuclear.
“The thing that makes this such an interesting project, is because the utilities came together as a group, it increased the buying power we had,” Durand told the News Service. He said, “The projects are in varying stages of completion.”
Purchasing agreements can help the viability of an energy project, and Durand said the company is “fully anticipating that they will come online between 2014 and 2016.” Durand declined to provide an average of what NSTAR pays for wind power.
The gulf between the cost of power from the planned New Hampshire and Maine facilities and that of the 130-turbine project planned for off the coast of Cape Cod provided an opening for critics of the Cape Wind project, which was first proposed well over a decade ago.
“The announcement today that Massachusetts utilities will be purchasing green wind power from New Hampshire and Maine facilities at an average price of less than 8 cents per kilowatt hour is the death knell for Cape Wind. Support for Cape Wind’s massive price tag to ratepayers was based on the idea that we needed to pay more – much more – for green energy. Today’s competitively bid deals prove otherwise,” said Alliance to Protect Nantucket Sound President Audra Parker, in a statement. “Cape Wind’s contracts with National Grid and NStar call for a minimum price of 19 cents per [kilowatt hour] rising 3.5% per year to reach over 30 cents per kwh in the final year. No utility, business or consumer should be forced to underwrite a private developer at more than three times the cost of readily available green energy from other sources.”
Located in Nantucket Sound, Cape Wind will serve the southeastern part of the state, which has larger electricity demands than western and central Massachusetts and other areas of New England, according to grid-manager ISO New England.
“Offshore wind is a more valuable product, it delivers power here, to southeast Massachusetts, where the power is most needed. Due to electric transmission constraints wind farms in Northern Maine cannot reliably deliver power here. Those remote wind farms also do not create jobs here,” wrote Cape Wind spokesman Mark Rodgers in an emailed response to the News Service. “Offshore wind also tends to be producing more power when electricity demand is high. Taken together, utilities purchase of offshore wind and remote land based wind contribute to having a cleaner environment and greater energy supply diversity.”
Cape Wind is currently seeking investors, and is still marketing the remaining power capacity that is not subject to purchase agreements from NSTAR or National Grid.
Unlike coal, nuclear and natural gas plants that expend fuel to generate electricity, wind farms are powered by the free-flowing air, and are thus able to under-bid competitors on the daily auction for additional electricity maintained by ISO New England.
“Cape Wind will be able to bid ‘$0’ (because the fuel—wind—is free) for the energy it provides, lowering the overall cost of that day’s market,” the wind farm wrote on its website.
The 565 megawatts of power will power about 170,000 homes. The companies received 40 bids to procure the electricity.