Wednesday, April 23, 2014
HALLOWELL — Maine's Public Utilities Commission has approved the terms of a project proposal by a Norwegian energy giant that could make Maine a global leader in research and development of offshore wind power.
The four floating wind turbines Norwegian energy company Statoil wants to site 12 miles off Boothbay Harbor would look similar to the Hywind test turbine, now producing power off the coast of Norway.
Photo provided by Trude Refsahl / Statoil
The PUC's 2-1 vote Thursday to support the Statoil Hywind Maine demonstration project means customers will pay slightly higher electricity bills in the near term.
But the commission decided that the cost – about 75 cents a month for the average residential customer – is worth the opportunity to put Maine on the international wind power map.
The decision doesn't guarantee that Statoil will build the project. The contract gives the company room to change course if, for instance, it doesn't win the second installment of a large federal grant or Congress does not renew a key tax credit for renewable energy.
The company's project manager said after the vote that Statoil will review details of the approval, and is "very grateful" that the PUC largely accepted the contract terms.
"This was the biggest hurdle," said Kristin Aamodt, the project manager.
The $120 million project would put four, three-megawatt wind turbines on floating spar-buoy structures tethered to the seabed in 460 feet of water off Boothbay Harbor.
They would be assembled onshore and towed to the site 12 miles out to sea. Power could be flowing into the grid, via undersea cable, by 2016.
The hope is that the pilot project could lead to a commercial-scale, offshore wind park in Maine. Beyond that, advocates envision a local industry and research community to help develop, build and supply an emerging energy sector along the East Coast.
A deep-water wind-power industry, they say, someday could create thousands of jobs and billions of dollars in investment.
That vision guided the thinking of the two commissioners who voted in favor of the project Thursday, Tom Welch, the chairman, and David Littell.
During deliberations, both acknowledged that Central Maine Power Co. customers would pay higher rates in the short term to subsidize the research and development of Statoil's project. But that risk, they said, is tempered by the chances of Maine becoming a "center of excellence" that would create jobs and attract talented young people to an aging state.
Littell likened the potential to the tech industry around Route 128 in Greater Boston or Silicon Valley in California.
Welch and Littell noted that Maine's Ocean Energy Act of 2010, which has opened the door to offshore wind and tidal power development in the state, assumes an element of risk to ratepayers.
That risk was too great for Mark Vannoy, the PUC's newest commissioner and a recent appointee of Gov. Paul LePage. The governor has consistently opposed projects and policies that add to electricity costs, and Vannoy echoed those concerns.
He said he couldn't support the deal without guarantees that Maine would reap economic benefits greater than the burden on customers.
"I don't think this pilot project achieves the goals of the statute," he said, referring to the Ocean Energy Act.
Statoil is a large oil and gas producer that's using its experience in the North Sea to develop renewable-energy projects around the world. It launched the world's first floating turbine three years ago, off Norway.
Wind turbines are common in shallow water off Europe. Now, developers are testing technologies to locate them miles offshore, where the winds are better and coastal residents can't see them. Statoil's project could become the first floating wind turbine park in the United States.
In approving the Hywind Maine project, the commission set conditions that it hopes will hold Statoil accountable for the "good faith" commitments it's making to Maine.
Statoil has promised to use local suppliers in planning and building the project "to the greatest extent possible." Statoil estimates that suppliers would employ 150 people full time during peak construction.
The company also pledged to locate its project operations center in Maine. It already has established a collaborative research and development relationship with the University of Maine's Advanced Structures & Composites Center for materials testing.
Statoil also said it will involve Maine contractors and suppliers in any commercial wind park it builds in the Northeast before 2025. It pledges good-faith efforts to award contracts representing at least 10 percent of capital spending, or $100 million, to qualified Maine-based suppliers and contractors.
Statoil submitted its Hywind Maine proposal last year, as part of a process in which the PUC sought ocean energy development projects. Thursday's vote capped months of give and take.
In October, when state regulators initially reviewed the plan, Welch and Vannoy indicated they couldn't support it without lower power rates and clearly enhanced benefits. This month, Statoil came back with changes meant to address those concerns.
Statoil's proposal includes the rate it would charge CMP for electricity generated by the turbines. Initially, that rate worked out to a total of 29 cents per kilowatt hour, roughly double what Maine's household customers now pay for energy and delivery.
In the proposal approved Thursday, Statoil trimmed the rate to 27 cents. That's still well above market rates and would total more than $186 million over the 20-year contract. But the cost would be spread among CMP customers. For an average household, which uses 550 kilowatt hours a month, it would add roughly 75 cents to an $82.50 bill.
The above-market rate would help provide capital for Statoil to develop a small-scale wind park that would take what the company has learned in Norway to the next step, Aamodt said.
In Norway, the Hywind project has exceeded performance goals, she said, generating power 50 percent of the time while surviving 50-foot waves and hurricane-force winds. But the single 2.3-megawatt turbine was expensive to build, roughly $62 million.
Research and development in Maine would help Statoil reach its goal of producing power at 10 to 15 cents per kilowatt hour in a commercial wind park in this decade.
"The technology is proven," she said. "We know it works. But we want now to cut costs."
During Thursday's deliberations, Vannoy zeroed in on rates by noting that power from Hywind Maine would cost four to six times as much as power from a high-efficiency natural gas turbine. In his view, well-intentioned economic development promises didn't compensate for the impact on customers.
Welch, however, said Statoil's concessions and further reflection on the project changed his mind. He concluded that, even if the pilot project is unsuccessful, the level of economic activity it could create has value beyond electricity rates.
"If the only thing you want to do is get 12 megawatts of electricity for 20 years, this is not what you would do," he said, contrasting Vannoy's example with Hywind Maine's potential.
By comparison, Hywind Maine's capacity for 12 megawatts of power -- 12 million watts -- would be dwarfed by the capacity of Calpine's natural-gas plant in Westbrook, which is rated at 550 megawatts.
Statoil's proposal is one of two that won $4 million grants from the federal Department of Energy last month to showcase innovative technologies and improve performance for offshore wind power. Both projects are competing for final awards of as much as $47 million.
The other project, Aqua Ventus, is led by the University of Maine and a team that includes Cianbro Corp., Bath Iron Works and the Spanish company Iberdrola, the world's largest wind power developer and the parent of CMP. That pilot project would float two, six-megawatt turbines off Monhegan Island.
Staff Writer Tux Turkel can be contacted at 791-6462 or at: