The deal was reached as part of an agreement that allowed NSTAR to merge with Northeast Utilities. Two years ago, Massachusetts regulators approved Cape Wind’s contract to sell 50 percent of its power to National Grid. According to the company, these combined power purchase agreements are sufficient for construction to begin.

The three hearings will be held in Natick, MA, on May 22, Barnstable, MA, on May 23 and Boston on May 30.

Delaware Official Backs Transmission Backbone

Delaware Natural Resourcs Secretary Collin O’Mara said the Atlantic Wind Connection offshore wind transmission backbone could be a boon to the region even without a local offshore wind project, the Wilmington News-Journal reported today.

Bluewater Wind had planned a project off the Delaware coast, but that project was scuttled late last year.

According to the report, O’Mara said the project could bring down electricity rates. He also cautioned, however, that more negotiation was needed with regional grid operator PJM Interconnection.

Last November, the Bureau of Ocean Energy Management (BOEM) announced that it had received an unsolicited application for a deepwater test project from Norwegian energy giant Statoil. The proposed project would consist of four three-megawatt floating turbines located roughly 12 nautical miles south of Boothbay Harbor in the Gulf of Maine.

Stakeholder reaction at the time of the announcement was mixed, and apparently doubters remain on the Maine Public Utilities Commission (PUC). According to the Aftenbladet report, Statoil officials recently met with the PUC and determined that support at the state level was insufficient to begin construction on the test project.

However, a Statoil executive interviewed by Aftenbladet seemed optimistic about a 2016 production goal for the test project, as well as floating technology in general in the United States.

“The US is more interested in floating windmills than fixed. Statoil will be making a decision in 2014 should the framework conditions be in place. We are now in the process of conducting environmental studies, we have been in contact with an interest association for local organizations, and we know that local industry in the U.S. has the capacity to deliver,” Ståle Tungesvik, Statoil senior vice president for reserves and business development, told Aftenbladet.

The lack of certainty over Production Tax Credits (PTC) and Investment Tax Credits (ITC) may also be delaying the project. According to the Aftenbladet report, Mr. Tungesvik has been in touch with authorities in Washington, D.C., to lobby for the financial support the project needs to progress.

The deal is for 27.5 percent of Cape Wind’s output, according to the report.

Initially reluctant, NStar officials agreed to purchase Cape Wind power in exchange for the state’s approval of a proposed merger with Northeast Utilities.

“We know that it will take a diversified approach using all available renewable resources to meet the state’s climate change goals,’’ NStar spokeswoman Caroline Pretyman said.

Maryland Rally for Offshore Wind

Maryland activists surrounded the Statehouse and cheered Gov. Martin O’Malley’s call for offshore wind, the Washington Post reported today.

The governor’s offshore wind legislation was approved by the House of Delegates and is now in front of the Senate Finance Committee.

“It’s very, very important that you talk with [lawmakers] and that you ask them to support wind power now,” O’Malley said.

According to BOEM, the task force was established to open lines of communication between the bureau and state, local, Native Hawaiian and other federal stakeholders.

“BOEM created this task force at Governor Abercrombie’s request to coordinate and consult with the State of Hawaii and others on potential renewable energy activities on the OCS offshore Hawaii,” said BOEM Director Tommy Beaudreau. “Working closely with stakeholders will allow us to identify and address issues relating to future offshore renewable energy leasing and development in a way that is smart from the start and supports Hawaii’s clean energy goals.”

BOEM had previously convened task forces in Delaware, Maine, Maryland, Massachusetts, New Jersey, New York, Oregon, Rhode Island, Virginia, North Carolina and South Carolina.

Scientists Want to Study Long Term Effect of Offshore Wind Noise

Scientists at the Woods Hole Oceanographic Institution in Massachusetts are questioning the long term effect of offshore wind noise on fisheries, the Vineyard Gazette of Martha’s Vineyard reported on Friday.

“The long-term impacts of these wind farms are just totally unknown,” said Woods Hole Oceanographic Institution biologist Scott Gallagher.

Offshore Wind Wire: Cape Wind recently achieved a significant breakthrough with a tentative agreement for a merged regional utility to buy electricity from the project. The deal means you have buyers for 77.5 percent of the energy output. Is this sufficient to move forward with financing and project development? What is the plan for locating buyers for the remaining electricity?

Jim Gordon: Governor Patrick and NSTAR’s announcement that NSTAR will purchase a considerable portion of Cape Wind’s power represents a big win for the people of Massachusetts and brings closer the new jobs, cleaner air, and greater energy independence Cape Wind will provide.  We are ready to commence the project financing stage.  Meanwhile we will continue pursuing opportunities to market and sell the remaining power.

OWW: When do you expect to begin construction? And when do you expect to begin operation?

Gordon: We expect to begin construction in 2013.  Construction will take 2 ½ years.

OWW:   Last week, Deputy Interior Department Secretary David Hayes said he does not want Cape Wind to be the template for US offshore wind development. Has the federal government done enough to avoid another decade-long permitting saga?

Gordon: I am proud of the role that Cape Wind has played in helping the nation develop a regulatory framework for reviewing offshore wind farms so that they can be approved in much shorter time than was the case for us.

OWW: Given the vast experience you’ve accumulated in offshore wind, are you planning to develop other projects after Cape Wind?

Gordon: By building and successfully operating Cape Wind, America’s first utility scale offshore wind farm, we at EMI will be in a position to be one of the nation’s leading offshore wind developers and yes we will certainly pursue other opportunities.  Offshore wind power is too important to the United States to be limited to one project or a few projects, the potential is to build tens of gigawatts in the years to come.  I’m very excited to move forward.

The Bureau of Ocean Energy Management (BOEM) today announced that it reduced the size of the offshore Wind Energy Area between Rhode Island and Massachusetts by excluding commercially important fishing grounds.

The reduced Wind Energy Area includes approximately 164,750 acres within the original area identified by Rhode Island and Massachusetts in a 2010 memorandum of understanding.

The area is one of several along the Atlantic coast with high wind potential that BOEM is evaluating for commercial wind leasing.

“Today’s announcement is an important step toward development of our nation’s remarkable wind energy resource offshore Rhode Island and Massachusetts,” said Department of Interior Deputy Secretary David Hayes. “The Department will continue to do its part to build a world-class offshore wind industry that provides clean, reliable, home-grown power and the American jobs that come with it.”

The Wind Energy Area will be identified and permitted under the Department of the Interior’s “Smart from the Start” wind energy initiative. BOEM’s decision to remove certain commercial fishing grounds from the proposed Wind Energy Area comes as a result of extensive meetings with the regional fishing industry over the past two years. Other key considerations that will be further analyzed in the environmental assessment include the critically endangered North Atlantic Right Whale, vessel traffic and visual and cultural resources.

Earlier this week, Offshore Wind Development Coalition President Jim Lanard called the Right Whale the most significant environmental challenge facing the industry. He added, however, that the challenge can be overcome with due environmental diligence.

“BOEM identified this Wind Energy Area following extensive collaboration with Rhode Island, Massachusetts and a diverse set of stakeholders, including fishing interests,” said BOEM Director Tommy Beaudreau. “This milestone is ‘Smart from the Start’ because it will help ensure that offshore wind projects are sited in the right places, where the wind energy potential is significant and where environmental effects and potential conflicts with other uses can be minimized and managed.”

According to a press release sent Thursday evening, BOEM Deputy Director Walter Cruickshank and BOEM Renewable Energy Program Manager Maureen Bornholdt will discuss the announcement with stakeholders in a Friday afternoon call.

Bordholdt has been the Bureau’s point person for community relations in the region over the past two years. She has met repeatedly with the fishing community in New Bedford, MA, affluent residents of Martha’s Vineyard and state and industry leaders in Boston to explain federal offshore wind plans and to gather feedback.

[Editor's Note: An earlier version of this article indicated that the announcement would be made during the 4 pm call and that the call was open to the public. BOEM officials have clarified that the call is a "stakeholder" discussion only.]

Offshore wind developer Cape Wind appears poised to secure a second buyer for the electricity to be produced by its proposed project off Massachusetts.

Governor Deval Patrick’s administration and other key players have advanced a plan to allow two major utilities to merge on the condition that the resulting utility agree to buy part of Cape Wind’s output.  While the deal still faces regulatory approval by the Massachusetts Department of Public Utilities, the prospect of having buyers for most of the project’s output is promising for Cape Wind and may enable financing needed for construction.

First proposed in 2001, Cape Wind Associates intends to develop an offshore wind project in federal waters in Nantucket Sound.  The project would cover about 25 square miles centered around Horseshoe Shoal, and would consist of 130 turbines, each of which could be rated at 3.6 MW.  Total nameplate capacity could be as high as 468 MW, but due to cable and transformer losses and station service load the maximum deliverable net capacity is closer to 420 MW.

In average wind conditions, the project is expected to produce 182 MW; according to federal regulators, this average expected production could provide about 75% of the electricity demand for Cape Cod and the nearby islands of Martha’s Vineyard and Nantucket.  Ten years later, Cape Wind has obtained its environmental permits, and in 2010 became the first U.S. offshore wind project to receive a commercial lease from the U.S. Department of Interior.
 
Cape Wind is not a traditional electric utility with a franchised service territory, but rather would be a standalone or merchant generator.  These non-utility projects typically require financing prior to construction, which in turn typically requires a developer to have power purchase agreements (PPA) in place for most if not all of the project’s output.  Cape Wind already had a buyer for half its output, as the Massachusetts Department of Public Utilities approved a PPA between Cape Wind and utility National Grid.  Prices for the National Grid deal start at 18.7 cents per kilowatt-hour, escalating 3.5 percent annually over a 15-year term.  Despite legal challenges, that agreement was upheld by the Massachusetts Supreme Judicial Court in 2011.
 
Though the National Grid deal gave Cape Wind a buyer for 50% of its output, it struggled to find a buyer for the rest of its production.  Other utilities, such as NSTAR, declined to enter into PPAs for the project’s output, turning instead to land-based wind projects for renewable power.  While Cape Wind could sell energy at wholesale into the New England market at the prevailing rates, PPAs with utilities or other electricity suppliers facilitate financing by giving investors greater certainty over a project’s revenue streams.  PPAs can also benefit developers by locking in above-market prices, such as those contained in Cape Wind’s PPA with National Grid, as long as utilities are willing (or required) to enter into such deals to achieve state environmental goals or other objectives.
 
In 2010, utilities NSTAR Electric Company, NSTAR Gas Company, and Western Massachusetts Electric Company along with holding company parent Northeast Utilities petitioned the Massachusetts Department of Public Utilities (DPU) for approval of a proposed $17.5 billion merger.  After over a year of litigation at the DPU, last week Governor Deval Patrick announced that his administration had negotiated an agreement to settle the merger case.  Under the proposed settlement, the utilities would be allowed to merge under a series of specified conditions.  These conditions are designed to create enhanced ratepayer benefit, and include a one-time credit to utility customers totaling $21 million. 
 
The settlement conditions would also require the merged utility to enter into a contract to buy 27.5% of the electricity to be produced by the Cape Wind offshore wind project, or 129 MW, for a 15-year term.  Proponents suggest that offshore wind will be important in helping Massachusetts comply with the Green Communities Act and the Commonwealth’s renewable portfolio standard and thus that it is appropriate to condition the merger on ensuring this benefit.
 
The DPU has asked for initial comments on the settlement proposal by February 27, 2012, with reply comments due by March 2.  If the DPU approves the settlement proposal and allows the merger, NSTAR will have to negotiate the price terms of the PPA with Cape Wind.  While these terms could take any number of forms, the National Grid PPA is seen as a likely model for a subsequent NSTAR PPA, particularly since an NSTAR PPA would be subject to DPU review and approval.
 
All told, the National Grid PPA plus the proposed NSTAR PPA could give Cape Wind a buyer for 77.5% of its energy output.  While there may be no magic threshold at which point the project could complete its financing, the developer likely hopes that a PPA with NSTAR would enable it to move forward with project development.

Todd J. Griset practices energy law with Preti Flaherty Beliveau & Pachios in Maine. He also writes a blog on offshore wind, renewable energy and policy issues.

The three-day conference — being held by GreenPower Conferences — features speakers from US and European developers and senior regulatory officials such as Interior Department Deputy Secretary David Hayes.

On the first panel, Cape Wind President Jim Gordon happily touted his company’s recently annouced power purchase deal with local utility NStar. He told the heavily European audience to open offices in Massachusetts, because “this is where it is going to happen.”

The next question, however, is whether Cape Wind’s good news will translate into renewed momentum. Conference chairman Brian Redmond of CP Energy Group praised Gordon’s “incredible persistence” but asked who will build the industry beyond Cape Wind and Deepwater financer D.E. Shaw.

Offshore Wind Wire is at the conference today and will be updating our readers on our Twitter feed. Follow us at www.twitter.com/windwire.

The agreement is a major breakthrough for Cape Wind, which has an agreement to sell 50 percent of its output to National Grid but has struggled to find a buyer for the remaining electricity.

“Today’s announcement by Governor Patrick represents a major step forward in making Massachusetts a leader in offshore wind power,” said Cape Wind President Jim Gordon. “By including Cape Wind in this utility merger Settlement Agreement, NSTAR and the Patrick Administration are helping ensure that Cape Wind will supply up to 500,000 homes with locally harvested renewable energy and create hundreds of new jobs.”