Federal energy regulators have denied a complaint by a Newport, Rhode Island city councilor against state regulators' approval of a power purchase agreement for an offshore wind project off Block Island.
At issue is Deepwater Wind Block Island, LLC's small-scale 30-megawatt offshore wind project located near Rhode Island's Block Island. The project sells its output to utility Narragansett Electric Company, Inc. d/b/a National Grid (National Grid), pursuant to a power purchase agreement approved by the Rhode Island Public Utilities Commission on August 16, 2010.
On June 7, 2018, Ms. Kathryn E. Leonard filed a complaint to the Federal Energy Regulatory Commission, alleging that the implementation of the power purchase agreement violated various federal laws, including the Federal Power Act, Public Utility Regulatory Policies Act of 1978 (PURPA), and the Supremacy and Interstate Commerce Clauses of the U.S. Constitution.
On April 24, 2019, the Commission issued its order denying Ms. Leonard's complaint. In the seventeen-page order, the Commission noted that the complainant provided no evidence in support of her assertion that the power purchase agreement was entered into pursuant to Rhode Island's implementation of PURPA. Instead, the Commission found that the Rhode Island Public Utilities Commission's approval of the contract was pursuant to state law, not pursuant to its PURPA regulations -- but that even if it were pursuant to PURPA, federal regulations governing sales by qualifying facilities to electric utilities explicitly permit negotiated rates.
The Commission similarly found that the complainant failed to show that the contract or its pricing was unjust and unreasonable under the Federal Power Act, and to provide sufficient support for its constitutional claims. The Commission also distinguished the Block Island PPA from contracts it previously invalidated in another case, Hughes v. Talen, which involved contracts for differences and an explicit requirement of participation in the capacity market. For these reasons, the Commission denied the complaint.
The Block Island project is the first commercially-operating offshore wind project in the United States. A number of other projects are currently under development, and several states in the Northeast have enacted laws requiring utility procurement of offshore wind energy. According to a 2016 analysis by the U.S. Department of Energy, U.S. offshore wind has a technical resource potential of more than 2,000
gigawatts of capacity, or 7,200 terawatt-hours of generation per year -- nearly twice the nation’s current electricity use.
Energy powers society; society's choices shape energy policy. A blog about our energy resources and the choices they present for society.
Showing posts with label Block Island. Show all posts
Showing posts with label Block Island. Show all posts
US releases new offshore wind strategy
Monday, September 12, 2016
U.S. executive branch agencies have released an updated report presenting a national strategy to facilitate the domestic development of offshore wind energy. According to the administration, the strategy could enable 86 gigawatts of U.S. offshore wind by 2050.
The new strategy document, "National Offshore Wind Strategy: Facilitating the Development of the Offshore Wind Industry in the United States", was prepared by the U.S. Department of Energy's Wind Energy Technologies Office and the Department of the Interior's Bureau of Ocean Energy Management. It builds on previous efforts, including the first national strategy for offshore wind released in 2011.
Consistent with previous Obama administration approaches, the revised U.S. offshore wind strategy rests on the premise that offshore wind energy can provide significant economic and environmental benefits. Estimates suggest the nation's total offshore wind energy technical potential is roughly twice as large as our demand for electricity, and almost 80% of U.S. electricity demand is located in coastal states. Offshore wind provides a low-carbon, fuel-free energy resource; if projects can produce power at low, long-term fixed costs, they can provide a hedge against fossil fuel volatility.
The new U.S. offshore wind strategy is designed to realize these benefits by overcoming challenges in three strategic themes: reducing costs and risks, supporting effective stewardship of U.S waters, and improving market conditions for offshore wind investment:
As noted in the report's introductory message, "There has never been a more exciting time for offshore wind in the United States." States and some utilities are increasingly interested in procuring offshore wind energy. In recent years, BOEM has awarded 11 commercial leases for offshore wind development that could support a total of 14.6 gigawatts of capacity. Earlier this summer, Deepwater Wind completed construction of its 30-megawatt Block Island wind project, the nation's first offshore commercial wind farm. That project is expected to enter commercial operation later this year.
The new strategy document, "National Offshore Wind Strategy: Facilitating the Development of the Offshore Wind Industry in the United States", was prepared by the U.S. Department of Energy's Wind Energy Technologies Office and the Department of the Interior's Bureau of Ocean Energy Management. It builds on previous efforts, including the first national strategy for offshore wind released in 2011.
Consistent with previous Obama administration approaches, the revised U.S. offshore wind strategy rests on the premise that offshore wind energy can provide significant economic and environmental benefits. Estimates suggest the nation's total offshore wind energy technical potential is roughly twice as large as our demand for electricity, and almost 80% of U.S. electricity demand is located in coastal states. Offshore wind provides a low-carbon, fuel-free energy resource; if projects can produce power at low, long-term fixed costs, they can provide a hedge against fossil fuel volatility.
The new U.S. offshore wind strategy is designed to realize these benefits by overcoming challenges in three strategic themes: reducing costs and risks, supporting effective stewardship of U.S waters, and improving market conditions for offshore wind investment:
First, to be competitive in electricity markets, offshore wind costs and U.S.-specific technology risks need to be reduced. Second, environmental and regulatory uncertainties need to be addressed to reduce permitting risks and ensure effective stewardship of the OCS. Third, to increase understanding of the benefits of offshore wind to support near-term deployment, the full spectrum of the electricity system and other economic, social, and environmental costs and benefits of offshore wind need to be quantified and communicated to policymakers and stakeholders.The report further describes seven action areas, and 34 specific actions, that the Energy and Interior Departments can take to support offshore wind development.
As noted in the report's introductory message, "There has never been a more exciting time for offshore wind in the United States." States and some utilities are increasingly interested in procuring offshore wind energy. In recent years, BOEM has awarded 11 commercial leases for offshore wind development that could support a total of 14.6 gigawatts of capacity. Earlier this summer, Deepwater Wind completed construction of its 30-megawatt Block Island wind project, the nation's first offshore commercial wind farm. That project is expected to enter commercial operation later this year.
Offshore wind in Massachusetts energy bill
Tuesday, August 2, 2016
The Massachusetts legislature has enacted an energy bill that will require utilities to purchase offshore wind energy by 2027. The legislation, known as H. 4568, "An Act to promote energy diversity," has been laid before Governor Charlie Baker for signature.
Earlier this session, the Massachusetts House and Senate had passed two different bills calling for renewable energy procurement. A conference committee reported out the final bill, H. 4568, on July 31. Through the newly enacted law, the Massachusetts legislature has added a new program of offshore wind energy procurement.
The final enacted bill adds a new section 83C to the state's 2008 Green Communities Act. Among other provisions, section 83C provides, "In order to facilitate the financing of offshore wind energy generation resources in the commonwealth, not later than June 30, 2017, every distribution company shall jointly and competitively solicit proposals for offshore wind energy generation; and, provided, that reasonable proposals have been received, shall enter into cost-effective long-term contracts."
Much of the solicitation and contracting process will occur pursuant to regulations yet to be promulgated by the Department of Public Utilities. The law provides a framework for developing and approving the competitive bidding process, and requires the schedule to "ensure that the distribution companies enter into cost-effective long-term contracts for offshore wind energy generation equal to approximately 1,600 megawatts of aggregate nameplate capacity not later than June 30, 2027." Individual solicitations must be seek proposals for 400 megawatts or more, and may be conducted jointly with other states.
Proposed long-term contracts are subject to the review and approval of the Department of Public Utilities. The law requires the department of public utilities to weigh the potential costs and benefits of the proposed long-term contract, and directs it to approve a proposed long-term contract "if the department finds that the proposed contract is a cost-effective mechanism for procuring reliable renewable energy on a long-term basis," taking into account factors like reliability, mitigation of price volatility, cost-effectiveness, mitigation of environmental impacts, and economic development.
The law requires the implementing regulations to be adopted by the Department of Public Utilities to "provide for an annual remuneration for the contracting distribution company up to 2.75 per cent of the annual payments under the contract to compensate the company for accepting the financial obligation of the long-term contract." It also entitles distribution companies to cost recovery of payments made under an approved long-term contract. Utilities may elect to to use any energy purchased under such contracts for sale to its customers and retain renewable energy certificates for their use, or may sell the energy and RECs into the market. Any proceeds from such market re-sales will be netted against the cost of contract payments, resulting in a credit or charge to all distribution customers through a uniform fully reconciling annual factor in distribution rates.
The law also provides a variety of "outs" or circumstances under which contracts might not result, such as if a "proposal’s terms and conditions would require the contract obligation to place an unreasonable burden" on a distribution company’s balance sheet.
Notably, the law's definitions of “Offshore wind developer” and “Offshore wind energy generation” place a variety of restrictions on projects eligible for contracting. The definitions effectively require that projects be located on the Outer Continental Shelf, in a designated wind energy area for which an initial federal lease was issued on a competitive basis after January 1, 2012, have no turbine located within 10 miles of any inhabited area, and have a commercial operations date on or after January 1, 2018, that has been verified by the department of energy resources. This effectively limits projects to a subset of those winning recent (or future) federal Bureau of Ocean Energy Management lease auction sales.
To date, no commercial offshore wind projects operate in U.S. waters, although Deepwater Wind is currently constructing the Block Island Wind Farm off Rhode Island. Federal programs, along with some state incentives, are available to support qualifying offshore wind projects.
Earlier this session, the Massachusetts House and Senate had passed two different bills calling for renewable energy procurement. A conference committee reported out the final bill, H. 4568, on July 31. Through the newly enacted law, the Massachusetts legislature has added a new program of offshore wind energy procurement.
The final enacted bill adds a new section 83C to the state's 2008 Green Communities Act. Among other provisions, section 83C provides, "In order to facilitate the financing of offshore wind energy generation resources in the commonwealth, not later than June 30, 2017, every distribution company shall jointly and competitively solicit proposals for offshore wind energy generation; and, provided, that reasonable proposals have been received, shall enter into cost-effective long-term contracts."
Much of the solicitation and contracting process will occur pursuant to regulations yet to be promulgated by the Department of Public Utilities. The law provides a framework for developing and approving the competitive bidding process, and requires the schedule to "ensure that the distribution companies enter into cost-effective long-term contracts for offshore wind energy generation equal to approximately 1,600 megawatts of aggregate nameplate capacity not later than June 30, 2027." Individual solicitations must be seek proposals for 400 megawatts or more, and may be conducted jointly with other states.
Proposed long-term contracts are subject to the review and approval of the Department of Public Utilities. The law requires the department of public utilities to weigh the potential costs and benefits of the proposed long-term contract, and directs it to approve a proposed long-term contract "if the department finds that the proposed contract is a cost-effective mechanism for procuring reliable renewable energy on a long-term basis," taking into account factors like reliability, mitigation of price volatility, cost-effectiveness, mitigation of environmental impacts, and economic development.
The law requires the implementing regulations to be adopted by the Department of Public Utilities to "provide for an annual remuneration for the contracting distribution company up to 2.75 per cent of the annual payments under the contract to compensate the company for accepting the financial obligation of the long-term contract." It also entitles distribution companies to cost recovery of payments made under an approved long-term contract. Utilities may elect to to use any energy purchased under such contracts for sale to its customers and retain renewable energy certificates for their use, or may sell the energy and RECs into the market. Any proceeds from such market re-sales will be netted against the cost of contract payments, resulting in a credit or charge to all distribution customers through a uniform fully reconciling annual factor in distribution rates.
The law also provides a variety of "outs" or circumstances under which contracts might not result, such as if a "proposal’s terms and conditions would require the contract obligation to place an unreasonable burden" on a distribution company’s balance sheet.
Notably, the law's definitions of “Offshore wind developer” and “Offshore wind energy generation” place a variety of restrictions on projects eligible for contracting. The definitions effectively require that projects be located on the Outer Continental Shelf, in a designated wind energy area for which an initial federal lease was issued on a competitive basis after January 1, 2012, have no turbine located within 10 miles of any inhabited area, and have a commercial operations date on or after January 1, 2018, that has been verified by the department of energy resources. This effectively limits projects to a subset of those winning recent (or future) federal Bureau of Ocean Energy Management lease auction sales.
To date, no commercial offshore wind projects operate in U.S. waters, although Deepwater Wind is currently constructing the Block Island Wind Farm off Rhode Island. Federal programs, along with some state incentives, are available to support qualifying offshore wind projects.
Block Island offshore wind celebrated, challenged
Thursday, August 20, 2015
U.S. and Rhode Island officials recently celebrated the start of construction on the Block Island Wind Farm, which is on track to be the first commercial offshore wind farm in the U.S. The five-turbine, 30-megawatt project under development by Deepwater Wind is scheduled to come online in 2016; turbine foundation construction and other "steel in the water" activities are underway. As a pioneer in U.S. offshore wind development, the Block Island project has survived years of permitting uncertainty and repeated legal challenges by project opponents. But another such lawsuit was filed this week in federal court. What does the future hold for the Block Island Wind Farm?
Project developer Deepwater Wind is owned principally by an entity of the D.E. Shaw group. Its Block Island project is currently under construction in Rhode Island state waters about three nautical miles southeast of Block Island. The project will feed power directly to consumers on Block Island, but also includes a 25-mile bi-directional submerged transmission cable between Block Island and the mainland. The project's finances rest in part on a power purchase agreement through which Deepwater Wind will sell power to utility National Grid.
That power purchase agreement, or PPA, has been the subject of several legal challenges. Those challenges often cite the deal's cost: pricing for the Block Island power starts as high as 24.4 cents per kilowatt-hour, and escalates 3.5 percent annually. These prices are more than double the typical Rhode Island energy price, for an estimated $497 million in above-market costs over the 20-year deal.
In 2009 and early 2010, the Rhode Island Public Utilities Commission rejected proposals by Deepwater Wind and National Grid, largely over cost. The parties then returned with a revised proposal. In 2010, TransCanada Power Marketing Ltd. unsuccessfully argued that the Rhode Island commission shouldn't consider that proposal due to constitutional infirmities in the Rhode Island law favoring renewable power contracts with in-state projects. On August 16, 2010, the Commission issued its order approving the PPA. After that order was appealed to the state Supreme Court, the Supreme Court issued a written opinion upholding the Commission's Order on July 1, 2011. In 2012 and in 2015, project opponents petitioned the Federal Energy Regulatory Commission to invalidate the Rhode Island commission's action, which FERC declined to do. Through all this, the project moved forward and ultimately began local construction earlier this year.
But the project is not yet completely out of stormy seas. On August 14, 2015, plaintiffs with a history of engagement in some of these earlier challenges filed a lawsuit in U.S. District Court in Rhode Island. As in previous challenges, this complaint argues that the Rhode Island Public Utilities Commission violated federal laws in approving the Block Island deal because only the Federal Energy Regulatory Commission may regulate wholesale electricity sales. While it is possible that this case could be swiftly dismissed, if it lingers it could add uncertainty to the project until its resolution. Last year a federal court invalidated a FERC ruling on the grounds that it impermissibly tread on state rights to set retail electricity rates. That case, Electric Power Supply Association v. Federal Energy Regulatory Commission, has been appealed to the U.S. Supreme Court.
With construction underway, the Block Island project now has significant inertia behind it. What impact will the recently filed lawsuit have? Will it affect Deepwater Wind's position as "first in the water" in the race for U.S. commercial offshore wind development?
Project developer Deepwater Wind is owned principally by an entity of the D.E. Shaw group. Its Block Island project is currently under construction in Rhode Island state waters about three nautical miles southeast of Block Island. The project will feed power directly to consumers on Block Island, but also includes a 25-mile bi-directional submerged transmission cable between Block Island and the mainland. The project's finances rest in part on a power purchase agreement through which Deepwater Wind will sell power to utility National Grid.
That power purchase agreement, or PPA, has been the subject of several legal challenges. Those challenges often cite the deal's cost: pricing for the Block Island power starts as high as 24.4 cents per kilowatt-hour, and escalates 3.5 percent annually. These prices are more than double the typical Rhode Island energy price, for an estimated $497 million in above-market costs over the 20-year deal.
In 2009 and early 2010, the Rhode Island Public Utilities Commission rejected proposals by Deepwater Wind and National Grid, largely over cost. The parties then returned with a revised proposal. In 2010, TransCanada Power Marketing Ltd. unsuccessfully argued that the Rhode Island commission shouldn't consider that proposal due to constitutional infirmities in the Rhode Island law favoring renewable power contracts with in-state projects. On August 16, 2010, the Commission issued its order approving the PPA. After that order was appealed to the state Supreme Court, the Supreme Court issued a written opinion upholding the Commission's Order on July 1, 2011. In 2012 and in 2015, project opponents petitioned the Federal Energy Regulatory Commission to invalidate the Rhode Island commission's action, which FERC declined to do. Through all this, the project moved forward and ultimately began local construction earlier this year.
But the project is not yet completely out of stormy seas. On August 14, 2015, plaintiffs with a history of engagement in some of these earlier challenges filed a lawsuit in U.S. District Court in Rhode Island. As in previous challenges, this complaint argues that the Rhode Island Public Utilities Commission violated federal laws in approving the Block Island deal because only the Federal Energy Regulatory Commission may regulate wholesale electricity sales. While it is possible that this case could be swiftly dismissed, if it lingers it could add uncertainty to the project until its resolution. Last year a federal court invalidated a FERC ruling on the grounds that it impermissibly tread on state rights to set retail electricity rates. That case, Electric Power Supply Association v. Federal Energy Regulatory Commission, has been appealed to the U.S. Supreme Court.
With construction underway, the Block Island project now has significant inertia behind it. What impact will the recently filed lawsuit have? Will it affect Deepwater Wind's position as "first in the water" in the race for U.S. commercial offshore wind development?
Rhode Island offshore transmission line
Thursday, November 20, 2014
Federal regulators have granted a right-of-way in federal waters for an electric transmission line connecting to the proposed Block Island offshore wind farm off Rhode Island. The Bureau of Ocean Energy Management describes the grant as the first right-of-way grant offered in federal waters for renewable energy transmission.
Proposed by Deepwater Wind, the Block Island Wind Farm is a 30-megawatt offshore wind farm to be located approximately three miles southeast of Block Island. Located entirely in Rhode Island state waters, the 5-turbine project is expected to generate over 125,000 megawatt hours annually. The project received its final required permit in September 2014, and in 2010 secured a 20-year power purchase agreement with Narragansett Electric Co.
Block Island is about 13 miles off the mainland coast, and is not connected to the mainland by a power cable or road. While the island's population does consume some electricity, most of the wind farm's power will be exported to the mainland electric grid via a newly built 21-mile submarine cable. Because the proposed Block Island Transmission System is bi-directional, it would also transmit power from the existing onshore transmission grid on the mainland to Block Island, stabilizing supplies of electricity available to islanders.
The Block Island Transmission System is proposed to make landfall in Narragansett, Rhode Island. Rhode Island's territorial waters extend 3 miles seaward from shore. To reach the mainland, the submerged transmission line must cross about 8 nautical miles of federal waters.
The Bureau of Ocean Energy Management regulates the use of federally controlled Outer Continental Shelf sites for energy production. In 2012, Deepwater Wind applied to the BOEM for a right-of-way about eight nautical miles long and 200 feet wide. Before reviewing this application, BOEM was required to determine whether there are other developers interested in constructing transmission facilities in the same area. Therefore, BOEM published a Commercial Renewable Energy Transmission on the Outer Continental Shelf (OCS) Offshore Rhode Island, Notice of Proposed Grant Area and Request for Competitive Interest (RFCI) in the Area of the Deepwater Wind Block Island Transmission System Proposal in the Federal Register on May 23, 2012 under Docket ID BOEM-2012-0009. BOEM also solicited public comment on site conditions and multiple uses within the right-of-way grant area.
Following the public comment period, BOEM determined there was no overlapping competitive interest in the proposed right-of-way grant area off Rhode Island and published a "Notice of Determination of No Competitive Interest" in the Federal Register on August 7, 2012 under Docket ID: BOEM-2012-0068.
Because most of the activities and permanent structures related to the entire wind farm project will be sited in state waters and on state lands, the U.S. Army Corps of Engineers is the lead federal agency for analyzing the potential environmental effects of the project under the National Environmental Policy Act. In September 2014, the Corps completed its Environmental Assessment (EA) for the wind farm and transmission system, and issued a Finding of No Significant Impact (FONSI). BOEM subsequently adopted the Corps EA after conducting an independent review that found no reasonably foreseeable significant impacts are expected to occur as the result of the preferred alternative, or any of the alternatives contemplated by the EA. On October 27, 2014, BOEM issued a FONSI for the issuance of a ROW grant, and approval of the General Activities Plan (GAP), with modifications.
On November 17, 2014, BOEM announced the agency offered the ROW grant to Deepwater Wind for the Block Island Transmission System.
Proposed by Deepwater Wind, the Block Island Wind Farm is a 30-megawatt offshore wind farm to be located approximately three miles southeast of Block Island. Located entirely in Rhode Island state waters, the 5-turbine project is expected to generate over 125,000 megawatt hours annually. The project received its final required permit in September 2014, and in 2010 secured a 20-year power purchase agreement with Narragansett Electric Co.
Block Island is about 13 miles off the mainland coast, and is not connected to the mainland by a power cable or road. While the island's population does consume some electricity, most of the wind farm's power will be exported to the mainland electric grid via a newly built 21-mile submarine cable. Because the proposed Block Island Transmission System is bi-directional, it would also transmit power from the existing onshore transmission grid on the mainland to Block Island, stabilizing supplies of electricity available to islanders.
The Block Island Transmission System is proposed to make landfall in Narragansett, Rhode Island. Rhode Island's territorial waters extend 3 miles seaward from shore. To reach the mainland, the submerged transmission line must cross about 8 nautical miles of federal waters.
The Bureau of Ocean Energy Management regulates the use of federally controlled Outer Continental Shelf sites for energy production. In 2012, Deepwater Wind applied to the BOEM for a right-of-way about eight nautical miles long and 200 feet wide. Before reviewing this application, BOEM was required to determine whether there are other developers interested in constructing transmission facilities in the same area. Therefore, BOEM published a Commercial Renewable Energy Transmission on the Outer Continental Shelf (OCS) Offshore Rhode Island, Notice of Proposed Grant Area and Request for Competitive Interest (RFCI) in the Area of the Deepwater Wind Block Island Transmission System Proposal in the Federal Register on May 23, 2012 under Docket ID BOEM-2012-0009. BOEM also solicited public comment on site conditions and multiple uses within the right-of-way grant area.
Following the public comment period, BOEM determined there was no overlapping competitive interest in the proposed right-of-way grant area off Rhode Island and published a "Notice of Determination of No Competitive Interest" in the Federal Register on August 7, 2012 under Docket ID: BOEM-2012-0068.
Because most of the activities and permanent structures related to the entire wind farm project will be sited in state waters and on state lands, the U.S. Army Corps of Engineers is the lead federal agency for analyzing the potential environmental effects of the project under the National Environmental Policy Act. In September 2014, the Corps completed its Environmental Assessment (EA) for the wind farm and transmission system, and issued a Finding of No Significant Impact (FONSI). BOEM subsequently adopted the Corps EA after conducting an independent review that found no reasonably foreseeable significant impacts are expected to occur as the result of the preferred alternative, or any of the alternatives contemplated by the EA. On October 27, 2014, BOEM issued a FONSI for the issuance of a ROW grant, and approval of the General Activities Plan (GAP), with modifications.
On November 17, 2014, BOEM announced the agency offered the ROW grant to Deepwater Wind for the Block Island Transmission System.
December 8, 2010 - Deepwater Wind proposes expansion of Rhode Island Sound project
Wednesday, December 8, 2010
Renewable developer Deepwater Wind has announced today its plans to double the size of its proposed Rhode Island Sound offshore wind project. Under the current proposal, Deepwater's second-generation development will now consist of 200 turbines to be installed in federal waters off Rhode Island and Massachusetts. Deepwater hopes to commence construction of the project in 2014, bringing the first turbines into operation in 2015.
What price will Deepwater get for its power? Looking at other offshore wind projects is illustrative of the kinds of pricing we might expect. For example, Deepwater Wind is also developing a smaller 8-turbine demonstration project in Rhode Island state waters, the Block Island Wind Farm. The developer has already secured one major state approval to construct the project, although this approval is currently being challenged in state Supreme Court. The Rhode Island PUC has approved a contract with utility National Grid establishing a maximum starting price of 24.4 cents per kWh, with 3.5 percent increases over the the 20-year life of the deal.
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| A recent sunset over Maine's Merrymeeting Bay. |
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