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Tuesday, January 3, 2012

2011 Wrap Up, Part 1: Northeast Projects Update

For offshore wind industry participants (and spectators), 2011 was a bit of an emotional roller coaster -- and some of the most intense drama occurred in the last days of December. From Congressional battles over expiring tax incentive legislation, to highly influential and precedential court decisions and project specific developments, the events of 2011 have set the stage for what could become a climactic 2012.

The next several posts will be dedicated to addressing where some high-profile projects left off in 2011 and considering where those projects may go in 2012 by geographical region. This post will discuss New England projects including Cape Wind, Deepwater Wind's Block Island project, and Anbaric Transmission's recently announced Bay State Offshore Wind Transmission System.

Massachusetts - Cape Wind: Another Year of Courtroom Battles Comes to a Close

As has been the case for most of the last decade, the bulk of activity relating to the proposed Cape Wind Offshore Wind farm in 2011 took place in the Courtroom. See e.g, Circuit Court ruling remanding FAA’s No Adverse Effect Decisions. However, in the final days of 2011, Cape Wind secured a favorable ruling from the Massachusetts Supreme Court upholding its proposed power purchase agreement (PPA) with National Grid. See Alliance to Protect Nantucket Sound et al., v. Department of Public Utilities, et al., No. SJC-10934 (Dec. 28, 2011).

On December 28, 2011, the Massachusetts Supreme Court issued its decision to uphold the PPA between Cape Wind and National Grid (National Grid PPA). The National Grid PPA requires National Grid to purchase 50% of the energy, capacity and Renewable Energy Credits (RECs) produced by Cape Wind —i.e., up to 234 megawatts—and will extend for fifteen years beginning on the date that Cape Wind begins commercial operation. The National Grid PPA was the first to be approved under a provision of Massachusetts’ Green Communities Act that allows renewable energy generators to enter directly into long term contracts with utilities.

The lawsuit was filed in late 2010 after the Massachusetts Department of Public Utilities (DPU) issued a formal approval of the PPA. The plaintiff group, comprised of long-standing opposition group Alliance to Protect Nantucket Sound, trade organizations Associated Industries of Massachusetts and New England Power Generators Association, and Canadian energy distributer TransCanada Power Marketing, Ltd, alleged that (1) the National Grid PPA violates the commerce clause of the United States Constitution; (2) the DPU improperly found that the National Grid PPA was in the public interest and cost-effective; (3) the National Grid PPA should have been solicited through a competitive bidding process; and (4) the DPU made a mistake when it both approved a method for recovering project costs from all distribution customers and required the National Grid PPA to include financing provisions sufficient to fund development of a renewable energy generation source.

Massachusetts Supreme Court Justice Margot Botsford wrote in the decision that while the Massachusetts Green Communities Act does not explicitly address the authority of state regulators to approve cost-recovery methods for renewable power:

[I]t is well established that the (Massachusetts Department of Public Utilities)
has the statutory authority to rule on the appropriateness of proposed
cost-recovery formulas…

(T)he department's decision in this proceeding is not precluded by the fact that the proposed cost recovery method is novel, particularly in light of the new emphasis on development of renewable energy in the (Green Communities Act)…

The department permissibly determined that the environmental benefits of (the power purchase agreement) … will accrue to all National Grid customers, and it is therefore appropriate to require all customers to share in the costs of acquiring these benefits, in accordance with departmental precedent…

Although the affirming Supreme Court decision removes the uncertainty associated with outstanding legal challenges to the National Grid PPA, it remains to be seen whether the resolution of that challenge will yield sufficient confidence to inspire another utility to enter into a PPA with Cape Wind for the remaining 50% of its projected output.

Rhode Island- Block Island 5-Turbine Demonstration Project: 2012 Could Be The Year.

Following the resolution of a much belabored challenge to the Rhode Island Department of Public Utilities’ approval of its PPA, Deepwater Wind hopes that 2012 will be the year that they can begin construction on its five-turbine wind farm -- and recent events suggest that they may be able to bring that goal to fruition.

In late December, Rhode Island news sources reported that Deepwater Wind’s Chief Administrative Officer Jeff Grybowski has stated that the company will announce the involvement of a major new investor in early 2012. Although the identity of the new investor has not yet been announced, Grybowski said it is a “major global industrial company that sees a bright future for offshore wind.” The unnamed new investor will partner with investment management firm D.E. Shaw to fund the development of the Block Island wind farm, which is slated to be constructed within three nautical miles of Block Island in Rhode Island state waters.

Also in December 2011, Deepwater Wind hosted a public meeting to ensure sufficient public involvement and support for the proposed 15-mile transmission line that would connect the Block Island wind farm to the grid. The current plan shows the transmission line beginning at the 5-turbine Block Island Offshore wind farm, making landfall at the Narragansett Pier through the seawall and then following a route through Narragansett’s shorefront. The transmission line would and end at a private transmission station in South Kingstown before feeding into National Grid’s network. Deepwater has commited to spending $6 million to conduct environmental surveys of the sea floor and along the entire route where the transmission line would be constructed proposed, and along the route of a 14-mile cable that would link the project, and Block Island, to the Rhode Island power grid.

Deepwater Wind has stated that it hopes to complete the transmission line and the Block Island Wind facility by 2014.

New England Coastal Waters - Anbaric Transmission: An Offshore “Backbone” Transmission Line for the Northeast

Following the positive feedback from government agencies and some industry insiders in response to Atlantic Wind Connection’s proposed “backbone” transmission project for the Mid-Atlantic region (a/k/a, the "Google project"), it was only a matter of time before someone proposed to construct a similar project in the northeast. And so, it was not a huge surprise when Anbaric Transmission, an experienced subsea transmission project developer, announced in mid-November 2011 that it had filed a request for interconnection with the New England ISO for what it calls the “Bay State Offshore Wind Transmission System.”

The Bay State Offshore Wind Transmission system is designed to accommodate 2,000 MW of offshore wind energy and will serve generation developers who responded to the Bureau of Ocean Energy Management’s Requests for Interest for designated Wind Energy Areas off of New England coastlines. See here, pg. 12-14. BOEM has received responses from ten developers proposing to build a total of 8,000 megawatts of offshore wind.

Anbaric Transmission has been involved with two previous subsea transmission projects: the Neptune Regional Transmission System, a 660-MW submarine connection between New Jersey and Long Island, and the Hudson Transmission System, a 660-MW line under construction beneath the Hudson River between New Jersey and Manhattan.

1 comment:

  1. Thanks for your thorough update, Jennifer. Very helpful! Interesting news about Anbaric.