Power That's Too-Pricey
Forget federal resource permits for a minute. Forget the possible impairment of cultural ceremonies. And forget, for just a minute, worries about a coastal view.
What happened this week in Rhode Island to a proposed offshore wind project has immediately endangered one project and makes one wonder what the future impacts are on other projects that have to contend with federal permits and unhappy neighbors. Add state regulators to the list of naysayers if they deem that prices negotiated in the power purchase agreement (PPA) between the project developer and the utility are too high.
The Rhode Island Public Utilities Commission unanimously rejected the PPA negotiated by Deepwater Wind and National Grid for an eight-turbine project off Block Island. The PPA anticipates the turbines would be spinning in 2013, with Deepwater to be paid 24.4 cents per kilowatt-hour, with a yearly 3.5 percent increase thereafter.
Even though Deepwater was building an eight-turbine demonstration project that wouldn't enjoy the economies of scale a larger project would, the commission wasn't buying. The commissioners said the project failed to meet the standard of being "commercially reasonable" set out by state law.
Is the rejection enough to kill the project? Deepwater isn't saying, but they dropped a strong hint.
"We are extremely disappointed in the PUC's decision," said Deepwater Wind CEO William Moore. "This vote is a serious setback to Rhode Island's plans to become the leader in the nation's offshore wind industry. With this vote, the plans to provide Rhode Island with clean, renewable wind power and to establish a green jobs hub at Quonset Point are in jeopardy. Deepwater Wind is now forced to reevaluate our plans for Rhode Island."
National Grid doesn't believe the state statute that mandated it to negotiate clean energy contracts doesn't allow it to reopen discussions with the developer: in other words, a fine mess for project proponents.
The precedent the rejection may set, by no means certain, could dampen enthusiasm elsewhere. It may set a precedent that regulators wouldn't approve an offshore project with well-above market rates for power generation, regardless of how green the project promises to be. Another PPA in Delaware, between Bluewater Wind and Delmarva Power, was signed and approved. The difference there, developers said, is the negotiated price and economies of scale. The negotiated price in 2008 was 11.7 cents per kilowatt-hour for a project of 200 megawatts.
A difference too big to bridge for Rhode Island regulators, even for a demonstration project, apparently.
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Comments
You must be kidding
Please don't tell me that you're questioning why the Rhode Island PUC rejected an offshore wind project for more than twice the going rate (and 3 times the going rate for an onshore project). It sounds to me as though the commissioners were the only rational actors in this deal.