Cape Cod Times: “Offshore wind contracts announced”
By Mary Ann Bragg, August 1, 2018 –
With the state’s three electricity distributors filing long-term contracts with public utility officials Tuesday for 800 megawatts of offshore wind energy, the largest purchase of its kinds in the U.S. so far, the proposed price is winning support even among critics of the cost of some other renewable energy projects.
“Your electric bill depends on a lot of things, but a levelized price of 6½ cents is a really good price,” said Christopher Geehern, executive vice president for public affairs and communications at Associated Industries of Massachusetts.
That price of 6.5 cents per kilowatt hour is still more than the average wholesale price of 3.4 cents per kilowatt hour for electricity in the state for 2017 but far below the price proposed for energy from the now-defunct Cape Wind energy project, which the industry group had opposed. It is also less than the total levelized price, which includes all the costs over the lifetime of a project, on the open market for the same period and still expected to save retail customers money.
“This total price is materially below the levelized projected costs of buying the same amount of wholesale energy and (renewable energy certificates) in the market, which is projected to be a total levelized price of 7.9 cents (per kilowatt hour) in 2017 dollars over the 20-year term of contract,” according to a letter of support for the contracts sent from the state Department of Energy Resources to the state Department of Public Utilities.
The levelized price is generally the minimum price at which energy must be sold for a project to break even.
Along with another recent renewable energy bid through state legislation coming in at 5.9 cents per kilowatt hour, levelized to 2017 dollars, Geehern said that clean energy in Massachusetts “has turned a corner.”
“It’s now economically competitive,” said Geenhern, who lives in Marstons Mills. “The state is now in a position where it can continue to migrate toward non-carbon electricity generation without bankrupting the businesses and homeowners who pay electric bills.”
The utility companies Eversource, National Grid and Unitil chose offshore wind developer Vineyard Wind on May 23 from three bidders, and contract negotiations have been underway since that time in collaboration with the state Department of Energy Resources and an independent bid evaluator. On the day the company was chosen, Vineyard Wind Chief Development Officer Erich Stephens said that the company’s low price was likely the key to being chosen.
And as future offshore wind bids are required by state law to be even more competitive, electric rates can be expected to stabilize, said Cape Cod Chamber of Commerce CEO Wendy Northcross.
“The fact that the supply of energy will be diversified, greener with less emissions, and provides potential blue-economy job creation in the supply chain for the Northeast, as Massachusetts is ahead of the curve, is all positive in our view,” Northcross said.
The contracts stem from 2016 legislation that required the electric distribution companies to solicit bids to purchase of up to 1,600 megawatts of offshore wind energy by 2027 through competitive bidding, which drew interest from three offshore wind development companies with leases in federal waters south and southwest of Martha’s Vineyard.
On Wednesday, both Vineyard Wind and state energy officials touted the benefits of monthly savings on electric bills, a boost to the state’s economy and more jobs.
“Vineyard Wind is pleased to offer a competitive price to energy consumers in the Commonwealth of Massachusetts while continuing to advance the clear environmental and economic benefits associated with offshore wind,” said Lars Thaaning Pedersen, Vineyard Wind CEO.
Through the use of federal investment tax credits and a long-term power purchase agreement, Vineyard Wind was able to offer an attractive price to the benefit of consumers while creating value for its shareholders, Pedersen said.
With a total levelized net present value price of 6.5 cents per kilowatt hour in 2017 dollars for clean energy and renewable energy certificates, the contracts are expected to reduce customers’ monthly bills, all other bill impacts remaining equal, according to a notice from the state Executive Office of Energy and Environmental Affairs.
On average, the contracts are expected to reduce customers’ monthly bills, all else being equal, approximately 0.1 percent to 1.5 percent, according to the letter from the Department of Energy Resources.
Overall, the total net benefit, including both direct and indirect benefits to Massachusetts ratepayers over the 20-year contract, is approximately $1.4 billion in 2017 dollars, the notice from state energy and environmental affairs officials says.
“The filing of contracts to deliver 800 megawatts of offshore wind energy generation to Massachusetts is a significant step forward for the Baker-Polito Administration’s efforts to diversify our energy resources and create a clean, affordable and resilient energy future for the Commonwealth,” said Katie Gronendyke, spokeswoman for the state Executive Office of Energy and Environmental Affairs.
The project will save residents and businesses money on their monthly energy bills, boost economic development along the coast and reduce the state’s greenhouse gas emissions, Gronendyke said.
“We’re not privy to the contract details but we do think this is going to be an overall benefit to the Cape and Martha’s Vineyard,” said Cape and Vineyard Electric Cooperative Program and Administration Manager Liz Argo. “While due diligence needs to be performed, ultimately we’ve seen that these kinds of projects are huge local benefits.”
In comparison to pricing in the era of the never-built Cape Wind project on Nantucket Sound, there appears to have been a maturation in the market, Geehern said.
“If you recall, those contracts being at 18 cents and escalated up to more than 30 cents, frankly we’ve come a long way since that time,” he said.
The change can be attributed to “the right players” and a well-thought-out energy law from 2016 that introduces and insists upon competitive bidding, among other factors, Geehern said.
“I think you put all those things together and you’ve really got a very positive outcome,” he said, adding, however, that he is still not sure what will happen to his own electric bill.
Next up, the Department of Public Utilities will hold a public hearing and procedural conference on the contracts, after which a schedule would be established for the proceedings for discovery, evidentiary hearings and the filing of briefs.
Reprinted via Cape Cod Times, which is not affiliated with the Alliance.