New England offshore wind advances

Plans to generate electricity from offshore winds off the southern New England coast appear to be gathering some momentum, as a series of events unrolling this month favor offshore wind development.

On February 3, the U.S. Bureau of Ocean Energy Management took the initial steps in its process to lease sites for offshore wind projects in federal waters off Massachusetts.  BOEM requested information about uses of an area of sea about about 12 nautical miles south of the islands of Martha’s Vineyard and Nantucket, as well as expressions of interest by developers identifying particular sites.  Responses to the call for information and nominations, as the key document is known, are due in mid-March.

Last week, Massachusetts officials announced a proposed settlement that would allow utilities NSTAR and Northeast Utilities to merge, but only on the condition that the resulting utility sign a long-term contract to buy power from the proposed Cape Wind project.  Cape Wind already has a power purchase agreement with utility National Grid for half the project's output; if the NSTAR deal is approved, Cape Wind would have power purchase agreements in place for 77.5% of its expected output.  Proponents hope that this increased certainty around the project's revenues could enable the project to be financed and built.

This week, Boston hosted a major offshore wind industry conference.  Today, the U.S. Bureau of Ocean Energy Management plans to make an announcement "latest milestone in commercial wind energy planning and leasing in the area of mutual interest offshore of Rhode Island and Massachusetts."

None of these steps alone may be sufficient to spur offshore wind development in New England waters, but collectively these steps illustrate how multiple levels of government are promoting offshore wind.  Will their collective result produce power in the near term?

MA utility merger may help Cape Wind

A $17.5 billion merger proposal by two Massachusetts utilities seems more likely to win regulatory approval after yesterday's announcement of a settlement that would provide offshore wind developer Cape Wind a buyer for more of its electricity.

The two utilities, NSTAR and Northeast Utilities, had asked the Department of Public Utilities to approve their merger, but the case dragged on and faced challenges from ratepayer advocates.  Yesterday, Governor Deval Patrick announced that his administration had negotiated an agreement to settle the case.  In exchange for allowing the merger, the proposed settlement contains a number of provisions that are said to create enhanced ratepayer benefit.  For example, the utilities must provide customers a one-time credit totalling $21 milllion, and NSTAR must fund an independent audit of its returns and assets.

The proposed settlement would also require the merged utility to enter into a contract to buy part of the electricity to be produced by the Cape Wind offshore wind project.  NSTAR would enter into a 15-year contract to purchase 129 MW, or about 27.5% of Cape Wind's projected electricity output.  This would be on top of the agreement to sell National Grid buy half of Cape Wind's power for a price starting at 18.7 cents per kilowatt-hour.  The terms of this agreement have yet to be approved by the DPU, but the settlement contemplates that NSTAR could look elsewhere for its renewable electricity if Cape Wind has not started physical construction by 2016.  Buying power from an offshore wind project is seen as important in helping the utilities comply with the Green Communities Act and the Massachusetts renewable portfolio standard or RPS.

If the merger settlement is approved, the utility would then negotiate the terms of a power purchase agreement with Cape Wind and submit them to the DPU for approval.  Would having signed PPAs for 77.5% of the project's output be enough for Cape Wind's project to be financed and built?

August 4, 2011 - Northern Pass transmission project delayed

For the past year, several large New England utilities have been collaborating on a major new transmission project to connect Canadian generators with New England markets. Northeast Utilities and NSTARhave proposed a high-voltage DC transmission line they call the "Northern Pass".  If built as proposed, this $1.1 billion transmission line will be capable of sending about 1200 MW of power from Hydro-Quebec's generation network into New England.  Canada, and Quebec in particular, possess many gigawatts of generation capacity, much of which comes from hydroelectricity.

In the meantime, some project opponents have expressed concerns about local siting issues related to the route the line will take through the White Mountain National Forest, other wild lands, and a number of communities.  Between Groveton, NH, and the Canadian border, no transmission rights of way exist today, meaning about 40 miles of new transmission corridor are needed.  Where this line should run has been a contentious issue.  As a result, the developers have expressed a willingness to consider alternative routes.

At the same time, other opponents have observed that if gigawatts of Canadian renewable power are imported into New England to satisfy domestic renewable power mandates, the region will not see the more localized environmental and economic development benefits from the development of renewable power projects in New England.  Many consider these local benefits key to the value of state renewable portfolio standards.

Now, the Northern Pass developers have announced that a rollback of the project's anticipated startup date to allow for a new route north of Groveton.  On the project's journal website, Northern Pass now states that its "expected in-service date has been modified to 2016, with construction expected in the 2014 – 2016 time frame, compared to the initial range of 2013 – 2015".

April 11, 2011 - Northern Pass transmission

The Northern Pass project - a proposed high-voltage DC transmission line capable of sending about 1200 MW of power from Hydro-Quebec into New England - continues to be controversial.  The $1.1 billion line from the Canadian border has been proposed by Public Service of New Hampshire's parent Northeast Utilities, along with utility NSTAR and Hydro-Quebec.  These utilities promote the line as empowering New England markets to buy renewable power from Canada - primarily from Hydro-Quebec's nearly 40 gigawatts of hydro capacity.  Opponents raise concerns both about local siting issues related to the line - which runs through the White Mountain National Forest and a number of communities - as well as about the impact of importing gigawatts of Canadian renewable power on the development of renewable power projects in New England.

Now, two of New Hampshire's Congressional delegation, Senator Kelly Ayotte and Representative Charles Bass, have sent a letter to Secretary of Energy Chu expressing opposition to the project in its current form based on the public hearings that have been held.  They call on the Department of Energy to study alternatives to building towers along the Northern Pass's route through New Hampshire - alternatives like burying the lines or using existing rights-of-way.  The Congressional delegation points to a need to protect New Hampshire's north country lands as "prime economic assets and pristine landscapes."

If the Northern Pass project is to be developed, proponents may have to navigate the political waters as well as the regulatory process. 

August 3, 2010 - Horsetooth Reservoir; Maine wind; firewood

If you're feeling the heat today, perhaps you'll take comfort in this wintry picture from last January.  You're looking west across Horsetooth Reservoir outside Fort Collins, Colorado.  Horsetooth Reservoir is part of the Colorado-Big Thompson Project, which includes water diversion from the west slope to feed the more populous Front Range area of Colorado.  Horsetooth Reservoir also provides water storage for hydroelectric generation.

The Maine Forest Service is reminding people that there is a ban on using out-of-state firewood in Maine, due to concerns over invasive species including insects and fungal pathogens.  Firewood is a major source of energy in Maine, but pests like the Asian Longhorned Beetle threaten to severely damage Maine's valuable forests.  The Asian Longhorned Beetle is already present in Massachusetts, but has not officially been documented in Maine. Today brings more coverage of yesterday's nomination of David Littell to fill the vacancy on the Maine Public Utilities Commission. Here's an editorial by Norman Kalloch in the Lewiston Sun Journal criticizing what the author sees as hype over wind energy.  He compares current tropes like "Maine is the Saudi Arabia of wind" to past busts, like nuclear power being perceived as "too cheap to meter.  (This isn't Mr. Kalloch's first such editorial; here's one he wrote this spring.)  Here's the punchline: "In reality, commercial wind power is an unreliable, environmentally degrading, overpriced form of power generation. Nothing short of massive amounts of public money can make those projects happen, because no developer in his right mind would undertake a project without public money." We're in for a blast of solar radiation tonight, as ions thrown off by the Sun during Sunday's coronal mass ejection. How about energy efficient street lighting?  The town of Lexington, Massachusetts, has approved a $930,000 plan to replace existing bulbs with compact fluorescent lights (CFLs).  Lexington's 3,400 streetlights have consumed nearly 2 million kilowatt-hours per year; this project will save 1.3 million kWh per year, totalling almost $190,000 annually.  This project is projected to pay for itself within 3.6 years, thanks in part to a $237,724 grant from utility NStar.

May 17, 2010 - Cape Wind inks another contract

The next chapter in the continuing story of Cape Wind: a mirror contract, and questions about the linkage between renewable portfolio standards and power pricing.

National Grid has signed a second contract with Cape Wind, this time to enable National Grid to assign the remaining 50% of the project's output to another wholesale customer -- a "mirror contract" for National Grid's primary $3 billion, 15-year contract to buy 50 percent of the electricity that will be produced by Cape Wind. This would leave National Grid with rights to the entire output of the Cape Wind project.

Mirror contracts are relatively common in the industry. As a financing tool, them allow the project developer to demonstrate to banks and capital sources that they have a guaranteed offtake for 100% of the project's production. This makes banks more willing to finance the project.

So who did National Grid have in mind as the other wholesale purchaser? If you know the regional market, Boston-based utility NStar jumps out as one potential purchaser, although there are of course other possibilities. In fact, National Grid itself apparently has the rights under the mirror contract to retain 100% of the power for itself -- although doing so magnifies its ratepayers' exposure to the elevated costs, triggering a tough burden on National Grid to demonstrate that this is just and reasonable and in the public interest.

Some commenters are noting that the Cape Wind was made possible by the Commonwealth's Green Communities Act and related legislation establishing a renewable portfolio standard (or renewable electricity standard) for the largest investor-owned utilities. But clearly there's a huge price premium figured in over the existing mix of resources -- about 8 cents for power today, versus 20.7 cents and rising for the Cape Wind output. Is a renewable portfolio standard enough to explain the acceptability of this significant price increase? Other states like Maine have had renewable portfolio standards for years, and although some renewables might be priced higher, there has been enough qualified capacity coming online at near-market costs that Maine has not seen much activity from significantly above-market contracts.