The Rhode Island Public Utilities Commission has rejected a power purchase agreement negotiated by Deepwater Wind and National Grid. Their justification is that the agreement did not meet the required standard in state law that a power production project be “commercially reasonable”.
The agreement, which was for the output of 8 large turbines installed off of Block Island, was that National Grid would pay 24.4 cents per kilowatt hour when the turbines began producing power in 2013 and that rate would increase by 3.5% per year. Ostensibly, that escalation clause was to account for the effects of inflation, but I am not sure what is supposed to get more expensive each year for an off-shore wind power system where nearly all of the money for the project is spent before operation starts. That escalation clause would mean that electricity from the project would cost 33 cents per kilowatt hour just 10 years after the initial operation.
Apparently the PUC action came after large power customers pointed out just how much the project was going to cost consumers. I hope that this kind of activism catches on; it is hard to understand why utility companies would agree to pay widely varying rates for power depending on how it was produced.
So far, there has been only one power purchase agreement approved in the United States for a project involving off-shore wind turbines, but that PPA between Bluewater Wind and Delmarva Power was signed in 2008. I am still looking for the exact price arrangements included in that PPA – one source states that the agreement calls for 11.7 cents per kilowatt hour, and another quotes “an inflation-adjusted 10 cents per kilowatt hour for the next 25 years”.
I have found a document that provides additional information about the Bluewater Wind/Demarva Power PPA, but the pricing information is complicated by a discussion about associated Renewable Energy Credits (REC). The document indicates that an integral part of the PPA is the need for action by the Delaware state legislature to give a special 350% REC rate to the Bluewater Wind project and to enable Delmarva Power to spread “both the costs and the associated benefits of the Agreement across Delmarva’s entire customer base through a non-bypassable charge to be established by the Public Service Commission.” I am about as confused as I get when trying to understand how medical insurance rates are calculated.
In any case, prices for off-shore wind are largely academic at this point. There are no off-shore wind projects operating in the United States; there are not even any that are currently under construction. As a guy who has been becalmed for days at a time while sailing on the open ocean, I am still not sure why people think that the winds are that much more reliable out there.
As a guy who has been involved for several decades in the business of maintaining and operating equipment designed for use in the ocean environment, I am also not sure why anyone would want to put complex, large scale equipment out there if they did not have to. It is a darned expensive place to operate and there are a lot of natural forces (wind, sun, waves, and corrosive chemicals) working hard to foil the best efforts of man to be there.
Delaware Online – Wind out of their sails
BusinessWeek – RI regulators reject proposed wind farm contract
News.WBRU (Providence, RI) – RI Regulators Reject Wind Farm
TommyWonk.com blog posts on Bluewater Wind
Renewable Energy World – Transmission Stalls European Offshore Wind Power