Washington tidal power license surrendered

U.S. hydropower regulators have accepted a Washington public utility district's application to surrender its license for an unconstructed tidal power project.

Public Utility District No. 1 of Snohomish County, Washington was the licensee for the Admiralty Inlet Pilot Tidal Project No. 12690.  The hydrokinetic energy project was to be located on the east side of Admiralty Inlet in Puget Sound, about 0.6 mile west of Whidbey Island. Project works were to consist of two 300-kilowatt OpenHydro tidal turbines, each mounted on a triangular subsea base, adaptable monitoring devices, trunk cables extending from each turbine to an onshore cable termination vault, and transformers and other facilities connecting to Puget Sound Energy’s electrical distribution system.

The Federal Energy Regulatory Commission issued a minor, pilot project license for the Admiralty Island project on March 20, 2014, enabling construction, operation, and maintenance of the project for a period of ten years.

But in September 2014, the licensee was notified that it would not receive additional funding to proceed with the development of the project. Unable to locate alternative funding sources, the licensee determined that the project was no longer financially feasible. The licensee therefore requested to surrender its license.

On December 4, 2015, the licensee filed an application to surrender its license. Two entities filed motions to intervene in support of the license surrender.

On March 21, 2016, the Commission issued its order accepting the Admiralty Inlet tidal project's license surrender. In that order, the Commission noted that no construction or ground-disturbing activity has occurred, that the project site remains unaltered, and that surrendering the license would not affect any environmental resources.  The Commission therefore approved the licensee’s application to surrender its license without condition.

As a result of the order, the license for the proposed Admiralty Inlet Pilot Tidal Project No. 12690 is surrendered, effective at the close of business on March 21, 2016.  The site could still be developed as a tidal power resource, if a future application for development is granted.

Utah oil sands mine slowed

A Canadian company developing an oil sands mining and extraction project in Utah has announced a decision to "reduce the pace of field construction in order to maintain working capital flexibility," based on low oil prices.

Oil sands, also known as bituminous sands or "tar sands", are loose sand or partially consolidated sandstone saturated with a viscous form of petroleum called bitumen.  US Oil Sands Inc. is a Calgary-based company that describes itself as "focused on oil sands exploration and production in Utah."  Its wholly owned United States subsidiary US Oil Sands (Utah) Inc. has bitumen leases covering 32,005 acres of land in Utah’s Uinta Basin.

US Oil Sands' PR Spring Project area consists of 5,930 contiguous acres near the East Tavaputs Plateau in Utah.  According to the company, construction of Phase 1 of the PR Spring Project is approximately 85% complete with costs coming in below budget.  If completed, it would be the first U.S. oil sands mine to enter commercial production.

While the company has not yet entered production, US Oil Sands has described a proprietary extraction process using a citrus-based bio-solvent to extract bitumen from oil sands without the need for tailings ponds.  The company pitched this technique as different from traditional Canadian oil sands production in Alberta, where wastewater management is a controversial environmental challenge.  But the Utah proposal has drawn concern over impacts to groundwater flowing under the Book Cliffs

But the company said it conducted a detailed review of the project "in light of continued low oil prices and the closure of two key contractors’ Utah-based operations."  Specifically, the press release stated, "The low price environment has impacted the Project as two of the Company’s key contractors have closed their operations in Utah and have caused delays to the Project."  Indeed, spot prices for West Texas Intermediate have ranged near $30 per barrel in recent days, with U.S. crude futures falling below $30 earlier this year for the first time since 2003.  The press release also mentions that $10 million in previously-announced royalty financing had not closed, causing the company to explore other options including equity financing.

According to the press release, project work on the PR Spring Phase 1 project will continue at a reduced level, with an expected focus on "critical path items and areas that will lead to the most efficient restart of full construction operations in the future. In spite of delays and increased costs that will occur with restart of full construction operations, the Company is still targeting completion within the original US$60 million approved budget."

How will US Oil Sands survive the low oil price environment?  How will economic, environmental, or other factors affect the fate of Utah oil sands mining?

Vermont resets renewable energy program

The Vermont legislature has voted to create the state's first renewable energy standards for electric utilities.  The bill, H.40, changes the way Vermont encourages the generation and use of renewably derived electricity.

Like most states, Vermont law has encouraged renewable energy development for over a decade.  In 2005 the state legislature created the Sustainably Priced Energy Enterprise Development, or SPEED, program to promote renewable energy development.  Under SPEED, the state encouraged its 18 utilities to enter into long-term contracts for power from renewable energy sources, with a goal that utilities source 20% of their supply from qualifying SPEED resources by 2017.  The SPEED program's goal has been to promote the development of in-state energy sources which use renewable fuels to ensure that to the greatest extent possible the economic benefits of these new energy sources flow to the Vermont economy in general and to the rate paying citizens of the state in particular.

But between recent controversy over possible "double counting" of renewable energy attributes produced and sold by Vermont utilities, and perennial interest in refining state energy policy, this year the Vermont legislature pursued H.40 as an attempt to fix Vermont's renewable energy programs.  H.40 will replace the SPEED goals with a Renewable Energy Standard and Energy Transformation, or RESET, program.  The RESET program includes a renewable portfolio standard requiring that 55 percent of a utility’s electricity come from renewables, including large-scale hydro power, by 2017, increasing 4 percentage points every three years until reaching 75% by 2032.

The bill also gives utilities an entrance into financing thermal efficiency for heating and cooling.  It will require utilities to offer incentives and on-bill financing for projects like weatherization and heat pumps.  To monitor and protect against impacts to customer rates, H.40 requires annual reports starting in 2018 on the RESET program's impact on electric rates, including 10-year forward projections.  It also allows utilities to seek waivers if they can show that compliance would increase electric rates.
 
Previous efforts to institute a mandatory renewable energy standard in Vermont were not successful, but this year versions of H.40 have now been approved by both chambers of the state legislature.  The Vermont House of Representatives passed H.40 on March 10, and the Senate approved an amended version on May 15.

Energy Department offers $4 billion loan guarantee program for renewable energy and efficiency projects

The U.S. Department of Energy has announced a $4 billion loan guarantee program for renewable energy and energy efficiency projects.

The Renewable Energy and Efficient Energy Projects Loan Guarantee program is intended to support the first commercial-scale deployments of the next wave of innovative clean energy technologies. Through the program, the Energy Department solicits applications for loan guarantees.  When a successful applicant borrows money for project finance from a commercial bank, the federal government promises to assume the borrower's debt obligation if that borrower defaults.  This guarantee serves as a credit backstop for the borrower, ultimately reducing its cost of financing because the lender knows it has resort to federal funds if the borrower cannot repay the loan.

The current program follows a series of previous Energy Department loan guarantee programs.  These programs have helped finance projects including the NRG Solar, LLC's 290-megawatt Agua Caliente solar photovoltaic array (the world's largest), NRG Energy, Inc.'s 392-megwatt Brightsource concentrating solar power (CSP) plant (also the world's largest), the 845-megawatt Caithness Shepherds Flat wind project, and Abengoa Bioenergy Biomass of Kansas LLC's cellulosic ethanol plant.  While not all of the previous programs' awardees have been successful -- for example, failed solar panel maker Solyndra -- the Department touts the programs as aligned with President Obama's Climate Action Plan, by supporting investment in domestic energy resources and reductions in greenhouse gas emissions.

To be eligible for the present solicitation (48-page PDF), a project must be located in the United States and meet both of the following criteria:

1. Use renewable energy systems; efficient electrical generation, transmission, and distribution technologies; or efficient end-use energy technologies; and

2. Meet both of the following requirements : a) Avoid, reduce, or sequester anthropogenic emission of greenhouse gases; and b) employ new or significantly improved technology as compared to commercial technology in service in the United States. 

Beyond these general criteria, the Energy Department's Loan Programs Office has identified five target areas for awards:

• Advanced Grid Integration and Storage: mitigating issues related to variability, dispatchability, congestion, and control of renewable energy systems by incorporating technologies such as demand response or local storage, enabling enhanced integration of renewable energy into the grid.
• Drop-In Biofuels: developing biofuels that are more compatible with today’s engines, delivery infrastructure and refueling station equipment, enabling nearly identical bio-based substitutes for crude oil, gasoline, diesel fuel, and jet fuel. 
• Waste-to-Energy: projects using waste materials which are otherwise discarded, such as landfill methane and segregated waste, as energy sources.
• Enhancement of Existing Facilities: incorporating renewable generation technology into existing renewable energy and efficient energy facilities to significantly enhance performance or extend the lifetime of the generating asset. 
• Efficiency Improvements: projects incorporating new or improved technologies to further improve on energy efficiency that would substantially reduce greenhouse gases. 

Under the solicitation, the first round of application materials is due on October 1, 2014.  For more information on the opportunity, contact the Energy Department, or consult a professional experienced with financing and developing energy projects.

The Preti Flaherty team advises our clients on all aspects of energy project development, including the pursuit of federal funding and financial support. For more information, please contact Todd Griset at 207-623-5300.

NJ regulators reject offshore wind project

The New Jersey Board of Public Utilities has voted against extending ratepayer subsidies to an offshore wind project proposed by developer Fishermen's Energy, challenging the project's financial viability.

The New Jersey coast near Atlantic City, seen from above.

Back in 2011, Fishermen's Energy proposed a 25-megawatt offshore wind pilot project to be located off Atlantic City.  The developer applied to the Board of Public Utilities for ratepayer support under New Jersey's Offshore Wind Economic Development Act of 2010.  That law directed the Board of Public Utilities to develop a program to require utilities to source a percentage of the electricity they sell in New Jersey from one or more qualified offshore wind projects.  To track energy from offshore wind, the law envisioned the creation of offshore renewable energy certificates, or ORECs, that could be sold by qualified offshore wind projects to the load-serving utilities.  The concept was that given the relatively high costs and uncertainty of offshore wind, no project could be financed or built without a steady revenue stream from OREC sales.

But the New Jersey project appeared to stall before the Board.  Charged with creating the OREC program and evaluating whether the Fishermen's Energy project could qualify to produce ORECs, the Board was faced with serious technical tasks.  As the regulatory process for the Fishermen's Energy project lengthened -- ultimately stretching to over 1,000 days -- Board staff raised concerns over the financial viability of the project, as well as over the impact of the requested subsidy to ratepayer costs.  Despite trimming the project's estimated costs to $188 million, these concerns remained, leading Board staff to recommend denial of Fishermen's Energy's request for OREC certification.
  
Yesterday, the Board of Public Utilities rejected Fishermen’s Energy’s proposal by a unanimous 4-0 decision.  While the Board's formal written order has not yet been released, expect it to explain the Board's reasoning in more detail when it surfaces next week.  In the meantime, Fishermen’s Energy is undoubtedly considering its options, which may include dropping the project, appealing the Board's rejection, or finding alternative ways to de-risk and finance the project.

NJ board to decide on offshore wind project

Will New Jersey regulators approve key support for an offshore wind project proposed off the Jersey shore?

Many coastal states and nations are placing new focus on energy projects designed to generate electricity from offshore winds.  A project off New Jersey, first proposed in 2011, appeared to make some initial progress, but has since seemed to stall -- due in part to regulatory delays at the state level.  With a decision by the state Board of Public Utilities (BPU) expected this week, will the Fishermen's Energy offshore wind project move forward?

Fishing boats in a small harbor along Maine's midcoast.

The New Jersey coast offers a fairly unique combination of wind resources and proximity to customer demand.  To capitalize on this combination, the New Jersey legislature and government adopted measures promoting the development of the state's offshore wind resource.  For example, New Jersey's Energy Master Plan calls for an ambitious target of 1,100 megawatts of offshore wind installed by 2020.

In response to the opportunity, in May 2011,  Fisherman's Energy submitted an application to the BPU under the Offshore Wind Economic Development Act for an offshore wind demonstration project.  The Cape May, New Jersey-based developer proposed five, five-megawatt wind turbines in state waters about 2.8 miles off the Atlantic City coast, with a total capacity of 25 megawatts and an estimated cost of $200 million to $300 million.  By the end of 2012, the project had won substantially all of the permits necessary for its development and operation, including approvals by the New Jersey Department of Environmental Protection and Army Corps of Engineers -- but a key piece of the regulatory and financing puzzles remains missing.

Under New Jersey law, the BPU may select one or more qualified offshore wind  projects for financial support in the form of a long-term contract to buy Offshore Wind Renewable Energy Certificates, or ORECs, from the developer.  This revenue stream is viewed as essential to enable a developer to finance and construct a project.

But nearly 3 years later, the state OREC review process remains ongoing. Last year, BPU Staff recommended the BPU reject Fishermen’s project on the grounds that it demonstrated no economic benefits but bore unnecessary technology risk due to its selection of XEMC turbines.  But project advocates, including the New Jersey Rate Counsel, support the project for its apparent consumer benefits.  Nevertheless, the BPU has yet to approve an OREC program.

Meanwhile, crucial federal tax incentives such as the renewable energy business investment tax credit have ended.  Many renewable project developers have found these credits essential in building financing packages for their projects over the last years; while the credits may be reenacted in some form, their loss may mean Fishermen's Energy needs to revise its financial projections.

Fishermen's Energy -- and the many other stakeholders following the project -- may soon learn the project's fate.  The New Jersey BPU is scheduled to vote today on whether to approve the project and authorize it to produce and sell ORECs.  Will the BPU grant Fishermen's Energy's request?

Hydropower relicensing surge expected

Hydropower industry experts are gathering near Worcester, Massachusetts, this week for a conference on hydropower re-licensing. Organized by EUCI and hosted by Alden Research Laboratory, the March 18-19 Hydropower Re-Licensing Conference features speakers from federal and state regulatory agencies, owners of hydropower projects, and consultants.

The power of falling water.

Hydropower currently accounts for about two-thirds of all renewable electricity generated in the U.S, with room for growth primarily by expansion of existing facilities at existing storage dams. Most hydropower projects fall under the jurisdiction of the Federal Energy Regulatory Commission, receiving either a license or an exemption pursuant to the Federal Power Act.

Before most existing projects may expand, they need to secure a license amendment from the FERC allowing changes to the project. Planned and upcoming project expansions will drive significant relicensing in the coming years.

The age of the nation's existing hydropower projects will also drive additional relicensing activity in the near term. Of roughly 2,000 existing hydropower licenses and exemptions issued by the FERC, nearly one-quarter will expire within the next 15 years. Since dams have relatively high construction and permitting costs and relatively long useful lives, since demand for renewable electricity remains relatively high, since most dams were built decades ago and since existing licenses typically run for 30 to 50 years, most of these existing dams will likely apply for new licenses before the terms of their existing licenses expire.

For these reasons, expect to see significant re-licensing activity around hydropower projects in the next decade.

Following this week's conference, EUCI will host a workshop on financing new and existing small hydropower projects. A panel of presenters, including Jon Petrillo of Gravity Renewables, Dana Hall of the Low Impact Hydropower Institute, my colleague Peter Brown of Preti Flaherty, and me, will engage with attendees on the ever-important question of how to finance hydropower projects.

For more information about the event, contact me at 207-791-3000 or tgriset@preti.com.

EnergyOcean 2012 conference

Today is the second day of the Energy Ocean International 2012 conference.  The technical program for today includes panels on advances in wave and tidal energy projects, offshore winds, permitting and project finance.

Today's sessions follow many of the themes discussed in yesterday's technical program.  What new technologies are being developed that may enhance the cost-effectiveness of converting energy from the ocean realm into something humans can use?

For technology innovators, what does it take to test and demonstrate a new device, and ultimately convince a project developer that this technology is appropriate for their project?  

For project developers, what are the processes needed to develop a successful project, including securing regulatory approvals, minimizing environmental impacts, and putting together a commercially viable financing package?

Fundamentally, what does the future hold for ocean energy development? How and when can ocean energy projects be environmentally responsible and cost-effective?

By bringing together the broad spectrum of stakeholders interested in ocean energy, perhaps these questions can be answered sooner rather than later.

EnergyOcean International 2012

This week I am attending EnergyOcean International 2012, the ninth annual conference for the offshore renewable energy sector.

This morning's keynote address was delivered by Tommy Beaudreau, Director of the Bureau of Ocean Energy Management. Director Beaudreau gave an overview of BOEM and how its Office of Renewable Energy Programs fits in with other responsibilities like offshore oil and gas leasing and regulation.

Upcoming presentations include a discussion of global offshore renewable energy development, marine spatial planning, best practices for managing interactions between wildlife and offshore projects, an update on what's happening with wave and tidal energy, and a review of successful project finance strategies.

May 23, 2011 - Maine considers RPS changes

The Maine Legislature is considering changes to Maine's renewable portfolio standard.  Since 2007, Maine law has required electricity suppliers to source an increasing portion of their energy from qualified new renewable resources.  This portion of new renewable power is scheduled to increase 1% annually, reaching 10% by 2017.  Proponents point to this long-term state commitment to renewable power as essential to securing financing for new renewable projects in Maine.

The rotunda in the Maine State House.

LD 1570, developed by Governor LePage, proposes to freeze this commitment at the current year's 4%.

You can find the original text of LD 1570 here.  This proposal is generating significant debate over the cost of energy, whether or how much Maine's renewables law increases consumer costs, and the economic development value of siting renewable projects in Maine.

The Portland Press Herald has published an editorial arguing that the Governor has not made the case for freezing the renewable portfolio standard.  The Bangor Daily News ran a similar editorial, noting that the Governor's bill would not make a dent in electricity costs, but would stifle economic growth.

The bill is scheduled for further committee work on Wednesday.

May 16, 2011 - DOE loan guarantee program ramping down

The U.S. Department of Energy's loan guarantee program for renewable energy is preparing to run out of funding and shut down.  Last month, I noted how the Department's "1705" loan program uses loan guarantees to help energy projects get lower-cost financing.  Through the 1705 program, created and funded through the 2009 federal stimulus act, the Department committed $11 billion to support 19 projects ranging from nuclear power to solar, wind to transmission, biofuels to energy efficiency.  Continued funding for the loan guarantee program for 2011 was in doubt during the recent wrangling over the federal budget, but survived the cutting -- through September 30, 2011.

Now, DOE is preparing to close out the 1705 program.  With stimulus act funding expiring September 30, 2011, DOE is pushing to get the funding out the door -- and to turn away applicants who are not yet far enough along in the process.  Because project construction must also commence by September 30, DOE is screening out applicants it deems unlikely to meet that deadline.  While DOE's other loan programs -- the 1703 program for certain clean technologies and the Advanced Technology Vehicle Manufacturing program for fuel-efficient transportation -- will remain in operation, the apparent end of the 1705 program will close the book on an innovative federal incentive for renewable energy development.

April 19, 2011 - 400 MW solar project proposed in California

Last week I noted Google's investment in the 392 megawatt Ivanpah solar project in California.  That project, which is currently under construction in the Mojave Desert, is on track to be the world's largest solar thermal project.  Ivanpah uses heliostat mirrors to focus sunlight on centrally located solar power towers.  The towers use the solar energy to generate steam.  The steam runs through steam turbines and a generator to produce electricity.

"Turn your grocery bags into green energy" - seen at a Vermont market

Now an even larger solar project has been proposed for California -- this time solar photovoltaic.   Developer Pegasus Energy has proposed a 400 MW solar PV power plant on about 2,000 acres in Alameda County California.  The Mountain House Solar Farm would sell power to local utility PG&E, and might break ground in early 2013.

As we often see, the twin challenges of financing and regulatory uncertainty team up to add a wrinkle to these plans.  The developer has built a financing model based on using an incentive authorized by the American Recovery and Reinvestment Act: a cash grant in lieu of the federal 30% business energy investment tax credit (ITC).  That incentive program, known as the 1603 grant program, is currently slated to end this year.  The developer is reportedly hopeful that grant funds will be extended until January 1, 2013, and would be available to help finance the project.  This may be a realistic hope, as the 1603 program has already been extended once (by Section 707 of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010), so renewal is possible.  On the other hand, recent struggles over the federal budget do call into question the continued survival of any given clean energy incentive programs.  Will Congress renew the 1603 energy grant program?

April 7, 2011 - DOE loan guarantees not dead yet

Check out the piece I wrote for the Offshore Wind Wire analyzing the potential value in the race to build larger offshore wind projects and larger turbine generators: cheaper electricity thanks to the economy of scale.

Earlier this week, I looked at the Department of Energy's loan guarantee programs.  In the past 6 years, DOE has backstopped $26 billion in financing for 21 energy projects.  As Congress wrestles with the U.S. federal budget, these loan programs may be on the chopping block; the current Republican draft budget makes significant cuts to DOE's loan program funding.

The battle over DOE's loan programs is not yet over.  Today a dozen Democratic senators submitted a letter urging Senate leadership to preserve the current levels of loan program funding.  Led by Senator Maria Cantwell of Washington, other signatories include Senators Mary Landrieu (LA), Carl Levin (MI), Jeff Bingaman (NM), Ron Wyden (OR), Chris Coons (DE), Barbara Boxer (CA), Tim Johnson (SD), Jeanne Shaheen (NH), Jeff Merkley (OR), Tom Harkin (IA), and Dianne Feinstein (CA).  Will this be enough to sway the Senate to preserve DOE's funding level for its loan programs?

April 5, 2011 - DOE loan guarantees

As Congress wrestles with the U.S. budget, one piece of energy policy that is under fire is the Department of Energy's Loan Guarantee Program.  A loan guarantee represents a commitment by the government to cover a borrower's debt to a commercial lender in the event that the borrower defaults.  Loan guarantees thus allow the government to function as a financial backstop to ensure lenders that their loans will be repaid.  In practice, this can result in a lower cost of money for project developers.  Since the Energy Policy Act of 2005, the U.S. Department of Energy has used loan guarantees to help energy projects get financed, committing over $26 billion to support 21 projects ranging from nuclear power to solar, wind to transmission, biofuels to energy efficiency.  For example, last year I wrote about a DOE loan guarantee for a trio of solar projects in the Mojave desert.  (I also noted President Obama's announcement of loan guarantees for a nuclear power plant in Georgia, touted at the time as part of the "nuclear renaissance".)

In recent years, DOE has operated three loan programs, two of which derive their names from the legislation enacting them.  First, DOE's 1703, loan guarantee program is used to support innovative clean energy technologies that can't find conventional private financing due to high technology risks.  These technologies must avoid, reduce, or sequester air pollutants or anthropogenic emissions of greenhouse gases, and must truly be innovative: technologies with more than three implementations that have been active for more than five years are not eligible.  Second, DOE's 1705 program was added through the 2009 stimulus legislation; the 1705 program backstops certain renewable energy systems, electric power transmission systems and leading edge biofuels projects that commence construction no later than September 30, 2011.  Third, DOE offers support through its Advanced Technology Vehicles Manufacturing (ATVM) Loan Program, which makes direct loans to support the development of advanced technology vehicles and associated components in the United States. 

As Congress continues to refine the federal budget, will DOE's loan guarantee programs make the cut?

July 30, 2010 - what is PACE financing?

Solar energy in action over Bush Key in the Tortugas, off Florida.

Today, a look at a tool that can be used to help finance renewable energy or energy efficiency projects: PACE.

What is PACE financing?


PACE, short for "Property Assessed Clean Energy", refers to one policy mechanism available to support the development of more renewable energy and energy efficiency projects. Essentially, a property owner can borrow money (often at low rates through municipalities) to develop the project; the property owner then pays back the loan through your property tax bills over a long time (often 15 to 20 years). If the property changes hands, so do the energy improvements -- and so does the PACE loan obligation.


This idea, which started in Berkeley, California, is one way to help finance renewable generation or energy efficiency retrofits. Municipalities can raise money through bond issues, generally with no recourse to the municipality. PACE thus represents a new twist on an old tool: land-secured special financing districts.

Landowners like PACE too. Repayments are designed to have a smaller footprint than the cost of the energy saved; homeowners or businesses thus see their expenses go down, even while spending capital to improve their building energy efficiency.

One challenge that has arisen is that mortgage-market megaplayers Fannie Mae and Freddie Mac have expressed concerns about the security of PACE loans because they aren't necessarily subordinate to mortgages. Existing lenders are worried that landowners' PACE obligations to municipalities may trump lenders' mortgage interests in the property. This may be easy to fix, as Maine has done by making PACE loans subordinate to existing mortgages. However, without federal-level action (and the Senate energy bill doesn't include PACE at the moment) the lenders' resistance is throwing a bit of a wet blanket on the opportunities posed by PACE.

Here's an interesting High Country News article about dams in the American West, covering issues including dam failure and flooding, dam removal, fish passage, and energy policy.

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.