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R.I. PUC rejects wind power contract

WARWICK -- A proposal to build an eight-turbine wind farm in waters off Block Island is in jeopardy after the state Public Utilities Commission rejected a long-term contract for Rhode Island's largest electric utility to buy power from what was envisioned as the first project of its kind in the United States.

The three-member commission voted unanimously against the power-purchase agreement between developer Deepwater Wind and National Grid during a public meeting Tuesday morning in its Warwick offices. In separate statements during the hour-long hearing that capped nearly four months of deliberations, the commissioners all spoke out against the proposed contract, saying that the price of power agreed to by the two sides was too high and that the overall deal -- according to the standard set by statute -- was not "commercially reasonable."

The decision was a setback not just for the wind farm, but also for the state's plans to create a green energy economy in Rhode Island, centered at Quonset Point, where Deepwater has plans to create an assembly facility. Governor Carcieri, a vocal supporter of the company's proposal, said he was "stunned" by the vote and called it "an extraordinarily short-sighted and narrow-minded decision."

Wind power
by Jerome a Paris (etg@eurotrib.com) on Thu Apr 1st, 2010 at 03:53:32 AM EST
[ Parent ]

Cape Wind Signs Agreement to Buy Siemens 3.6-MW Offshore Wind Turbines
Wednesday, March 31, 2010

BOSTON, MA, MARCH 31, 2010 - Cape Wind announced today it has entered into an agreement with Siemens to supply 130 of its 3.6-Megawatt (MW) turbines for America's first planned offshore wind farm off the coast of Massachusetts and, at the same time, Siemens also announced plans to open a U.S. Offshore Wind office in Boston.

"We are pleased to be working with Siemens which is a market leader in offshore wind and we are thrilled Siemens is bringing clean energy jobs to Massachusetts by opening up its U.S. Offshore Wind office in Boston. This agreement between Cape Wind and Siemens represents a major step forward to jumpstarting the American offshore wind industry and increasing energy independence, creating a healthier environment while producing hundreds of green energy jobs," said Jim Gordon, Cape Wind President.

The Siemens 3.6-MW offshore wind turbines are an industry `workhorse' with 1,000 units sold and 150 units installed and successfully operating.

This is a press release, so this is particularly interesting:

Gerard Dhooge, President of the Boston & New England Maritime Trades Council, AFL-CIO, welcomed the news of the agreement between Cape Wind and Siemens, "Skilled maritime workers are ready to get to work to help install these wind turbines offshore Massachusetts and to build America's first offshore wind farm. Thirty to fifty percent of the members of the Maritime Trades Council are currently out of work so we need these jobs now more than ever."

This has been a very consistent theme in the conference I was in last week - the project developers are openly supporting union work in their projects, and are counting on union political support to get the regulatory framework settled. Leo Gerard, boss of the steelworkers union, was present at that offshore conference and gave a keynote speech.

There may be some tension on the issue of local content (a requirement of the unions, but one very difficult to fulfill for the first projects as the industrial base doesn't exist for all components of a project and will be installed only if the country shows it's serious about large scale development), but overall, it's been interesting to see American businessmen praising unions while Europeans are openly worried about their role...

Wind power

by Jerome a Paris (etg@eurotrib.com) on Thu Apr 1st, 2010 at 05:05:46 AM EST
[ Parent ]
Can't say as I blame the PUC. The offer smells over-priced for guaranteed rate of return to Deepwater investors. It's not clear in the reporting if the rate schedule applies only to the 8-turbine (40WH?) installation or capacity added up to 100 turbines over the 20-year period. If these are the terms for 8-turbines alone, I'd tell Deepwater to go to hell, too.

The crux of the proposed agreement was a sale price of 24.4 cents per kilowatt hour, nearly three times the price National Grid pays for energy from fossil-fuel fired power plants and nuclear facilities [improper project comparison]. Over the 20-year contract, the price would have escalated by 3.5 percent annually, so, by the final year, it would have been 48.6 cents per kilowatt hour. Combined with a 2.75-percent markup on clean energy that National Grid was allowed by Rhode Island law, it would have meant hundreds of millions of dollars in additional costs to the state's 480,000 ratepayers over two decades.

Setting aside NYMBI and EIS window-dressing on 12.9% UE and Carcieri (R) : This 8-turbine "demo" is no simple installation and MOE demo. Look at the JOBSTM bait: Why buy, when you can build it all for much, much more?

Deepwater Wind has pledged a significant private investment in Rhode Island of approximately $1.5 billion with the construction of a regional manufacturing facility in Quonset, and creating up to 800 direct jobs, with annual wages of $60 million. The Quonset facility will manufacture support structures upon which the turbine and its tower are based and will serve the entire northeast...


When the hearings opened on Tuesday, the director of the Energy Council of Rhode Island, a nonprofit organization that represents 35 of the state's leading manufacturers, universities and hospitals, vehemently argued against Deepwater's proposed price. John Farley told the commission that the high price would harm large businesses in Rhode Island that use a lot of electricity.

Moore began the session on Wednesday by responding to Farley's statements, which were made as part of the public comment period and not submitted as formal testimony that could have been reviewed by the commission and other parties beforehand.

He said Farley failed to consider that power from the wind farm could actually lead to some cost savings by displacing the most expensive types of oil-generated electricity sold on the energy spot market. A study commissioned by Deepwater and issued Tuesday found that 40 percent of the additional costs of power from the Block Island project could be offset by what Moore called the price-suppression phenomenon. The Cambridge, Mass.-based Charles River Associates carried out the study and has done a similar analysis for Cape Wind [!], an offshore wind farm proposed in Massachusetts.

Moore was asked several times about Deepwater's projected return on investment for the Block Island wind farm. He said Deepwater estimates a return of between 15 and 18 percent for its investors. He said that range is relatively low considering the high amount of risk [?!] involved in offshore wind farms, which have been built in Europe, but not in the U.S.


FFS. Elsewhere Deepwater claims being awarded DOE grants. How much of its investment capital derive from RGGI proceeds? How many MW available for export to RGGI or other spot exchanges?

Diversity is the key to economic and political evolution.

by Cat on Thu Apr 1st, 2010 at 10:15:29 AM EST
[ Parent ]
That proposal would be all well and good, if ratepayers could count on that counter-cyclical, credit spending government stimulus instead of private investment. But, you know, Keynes's cries are like, whatever, lost in the wind, eh.

Perspective on $0.244/kwh Deepwater - National Grid, Y1

Additional fees and taxes apply to kwh billing. For example, MD is an RGGI member, too. Itemization of Feb 2010 (seasonal residential rate/kwh) is as follows. And this wasn't an actual meter reading; Pepco estimates and bills! har har har.

Distribution Services
 0.02247 (x 460KWH) Energy Charge
 0.00003 (x 460KWH) Demand Side Management Surcharge
 0.00062 (x 460KWH) Franchise Tax (delivery)
 0.00015 (x 460KWH) Universal Service Charge
 0.00533 (x 460KWH) MD Environmental Surcharge
 0.00105 (x 460KWH) MoCo Energy Tax
 0.02040 (x 460KWH) Gross Receipts Tax (%)
(0.00093)(x 460KWH) RGGI Rate Credit
(0.00105)(x 460KWH) Administrative Credit

Generation Services
 0.11579 (x 460KWH) Energy Charge
 0.00016 (x 460KWH) Procurement Cost Adjustment

Transmission Services
 0.00348 (x 460KWH) Energy Charge
 0.0204 (x 460KWH) Gross Receipts Tax (%)
TOTAL       $74.61


0.244 x 460KWH = $103.04 Generation Services, +93%
0.486 x 460KWH = $223.56 Generation Services, +319%


Deepwater's proposal is simply insulting.

Diversity is the key to economic and political evolution.

by Cat on Thu Apr 1st, 2010 at 11:01:25 AM EST
[ Parent ]
  1. you have to compare the number with 20-y indexation to what the prices will be then, so today's number is the relevant one;

  2. you should also compare to what people are paying right now on Block Island itself, which is powered by diesel generators and thus much stiffer bills than onland;

  3. more to the point, this is for a demonstration project (it only applies to the first 25-30MW), so the overall cost is not that big, while the benefits in terms of creating a precedent and demonstrating how the industry can be developed and what it means for all stakeholders are very real (don't rune before you can walk and all that, and show to people what turbines at sea actually look like)

  4. what's required to develop the industry and create the jobs is a credible long term regulatory framework. If the support systems that make a project possible can be killed on a case by case basis, for silly short term reasons, manufacturers will never be interested to set up factories - they need at least 5 years of stable demand to do so...

Wind power
by Jerome a Paris (etg@eurotrib.com) on Thu Apr 1st, 2010 at 12:48:45 PM EST
[ Parent ]

re: Y1 - Y20, pymt pd

current NGrid rate = $0.09532/KWH
(excluding transmission, taxes, fees)
new NGrid rate = $0.244/KWH
(excluding transmission, taxes, fees)

final NGrid rate =
either Y20 $1.43/KWH (Y1 0.09532 + .486);
or Y20 $0.486/KWH (Y1 0.244 + 0.242)

NB. PUC Docket 4111, Y1 $0.244/KWH = $1.35/500KW/mo
on average

Diversity is the key to economic and political evolution.

by Cat on Fri Apr 2nd, 2010 at 10:37:34 AM EST
[ Parent ]
you're comparing retail prices to wholesale prices. NG may sell the power on Block Island at 9.5c/kWh for the generation component, but it is not able to procure is so cheaply at that particular location.

Also, the 24.4c/kWh will be for one of the supply sources of NG and will be mixed with its other sources. It is NG that will bear the possible additional cost on a small fraction of its supplies (possible, because the rest may become more expensive when gas prices go up again, as they will).

Wind power

by Jerome a Paris (etg@eurotrib.com) on Fri Apr 2nd, 2010 at 10:50:48 AM EST
[ Parent ]
Yes, I realize that now -- 0.244/KWH (8-turbine) is "wholesale" or levelized cost of energy distributed across all ratepayers-- after having read document history of NGrid negotiation with Deepwater since Oct 2009. The executed PPA rate moderates Deepwater's initial, inexplicable offer price for New Shoreham at Y1 0.30/KWH (7-turbine). The dramatic arc of haggling with private equity is a fascinating read, against the backdrop of RGGI "fair value."

Interesting, too, was reference to a Ontario Power Authority's Lake Erie PPA, recognizing 40% premium for offshore relative to onshore wind supply. That reference is more apt to NGrid's current supplier and distribution mix. As you know, I guess, NGrid already resells onshore wind at SOS +0.025/KWH - +0.34/KWH.

In any case my interest as always is "billing impact," and here in particular what appears to be amortization of ICC (for 8 3.6MW turbines and one $5M cable) that doesn't necessarily contribute significantly to avoided costs over the period. So I'm wondering, again, Where is Rhode Island's stimulus check? And what is the "feed-in" price at Y20?

And from what component(s) of does Deepwater's 18% ROI over the period derive?

Diversity is the key to economic and political evolution.

by Cat on Fri Apr 2nd, 2010 at 01:55:09 PM EST
[ Parent ]


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