Maine tidal PPA terms for ORPC

Thursday, May 3, 2012

Last month, the Maine Public Utilities Commission approved the terms of a 20-year power purchase agreement between three utilities and Ocean Renewable Power Company.  Projected for initial development later this year, ORPC's Maine Tidal Energy Project would ultimately include a series of hydrokinetic turbine generator units spread across three project sites and phases.

Acting under a 2010 state law, the Maine PUC held a request for proposals for long-term contracts for deep-water offshore wind pilot projects and tidal energy demonstration projects.  The law required applicants to demonstrate that their project will provide tangible economic benefits to the state, as well as a commitment to invest in related manufacturing facilities in Maine.

ORPC responded to the RFP, and was ultimately selected by the PUC for a contract.  While some details of the final power purchase agreement remain to be negotiated, last month PUC approved a term sheet specifying pricing terms and a variety of non-pricing terms.

Under the term sheet, ORPC will sell the utilities energy and capacity from the Maine project.  The price of energy will start at 21.5 cents per kilowatt-hour in the first year, escalating at 2% per year over the 20-year contract term.  If ORPC can qualify the project for capacity payments in the New England market - another energy-related product - it will receive the prevailing market price, although the grid operator has recently denied capacity payments to other renewable resources in eastern and northern Maine.  The deal does not include any renewable energy credits the project earns, which ORPC could retain or sell separately.

The term sheet approved by the Commission also include a series non-pricing terms intended to ensure that the state realizes the economic development benefits required by statute.  These terms include a variety of commitments by ORPC, including:
  • to maintain or establish manufacturing, assembly, and testing operations in Maine
  • to continue partnerships with entities in the downeast Washington County region
  • to upgrade local distribution lines in Lubec, as needed to connect the project's power to the mainland grid
  • to create and/or retain at least 80 direct full-time equivalent jobs in Maine during the development, construction and installation of the project
  • to create and/or retain at least 12 direct full-time equivalent jobs in Maine during the operation and maintenance phase of the project
  • to use commercially reasonable efforts to expend at least 50% of the project's capital investments and 50% of the operating expenditures in Maine
In approving the term sheet with these terms, the Commission found that the project would yield economic benefits including direct wage growth in Maine, direct investment in Maine, improved general economic conditions in the state, and the development of intellectual capital and an expert workforce capable of supporting long-term growth.

The parties are now negotiating the final details of the contract.  Expect the PUC to deliberate on a final contract later this year.

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