US Secretary of the Interior Ken Salazar, wearing a white cowboy hat, rode into Boston today to give the Cape Wind offshore wind project the final approval it needs to begin construction this fall. Now all the project is lacking is a buyer for the other half of its power output.
National Grid, the state’s largest electric utility, purchased half of the power in a 15-year deal that was approved by the state Department of Public Utilities in November. National Grid has estimated that the cost of Cape Wind power will be substantially above market prices for electricity for the duration of the contract.
So far, no other buyers have surfaced for Cape Wind, but speculation keeps returning to NStar Corp., the state’s second largest electric utility. Publicly, NStar has shown no interest in buying into Cape Wind, but the Boston-based utility is seeking state approval to merge with Northeast Utilities of Connecticut. Many see the merger bid converging with Cape Wind’s pursuit of a buyer for its power
The DPU adopted a new standard for mergers as it began reviewing the NStar-Northeast Utilities proposal. Previously, mergers were allowed to proceed if the combination did no harm to ratepayers. The new standard requires a merger to provide a net public benefit. No one has defined what “public benefit” means, but speculation is running high that the purchase of Cape Wind power could qualify.
Richard Sullivan Jr., the Massachusetts secretary of energy and the environment, said at today’s press conference with Salazar that defining public benefit will be left to the DPU and declined to offer his own personal definition. But in response to a question about the proposed NStar-Northeast merger, he first noted that the DPU is requiring that the merger benefit the public and then noted that the DPU previously ruled that National Grid’s purchase of Cape Wind power offered significant public benefits.
In its order approving the National Grid contract for Cape Wind power, the DPU ruled that Cape Wind is badly needed if the state is going to reach renewable energy targets under the Green Communities Act.
“The power from this contract is expensive in light of today’s energy prices,” the DPU said in its ruling. “It may also be expensive in light of forecasted energy prices – although less so than its critics suggest. There are opportunities to purchase renewable energy less expensively. However, it is absolutely clear that the Cape Wind facility offers significant benefits that are not currently available from any other renewable source.”
NStar and Northeast Utilities, in their most recent filing with the DPU on the proposed merger, said the corporate combination would yield labor and other savings of $780 million over 10 years. The utilities also said environmental benefits would be substantial, noting they plan to construct a transmission line to import carbon-free hydroelectric power from Quebec. No mention was made of Cape Wind in the filing.
Dennis Duffy, a Cape Wind vice president, said he was “very confident” both that legal challenges wouldn’t delay his project and that the other half of the project’s power output would be purchased. He said discussions are ongoing with potential buyers. However those discussions are resolved, Duffy said, the lack of a second buyer wouldn’t delay the start of construction. “We’d like to have it all sold, but I don’t think that’s a prerequisite,” he said.
Salazar described the wind energy potential along the Atlantic coast as staggering and said he wants to speed up the permitting process for future offshore wind sites. He called the 10-year permitting process for Cape Wind unacceptable.
Sullivan said the Patrick administration is pushing hard for Cape Wind (including seeking a federal loan guarantee for the project) as part of an effort to develop 2000 megawatts of wind power by 2020. Currently, 24 wind turbines have been installed across the state with a capacity of generating 16 megawatts of power. Cape Wind would have an installed capacity of 480 megawatts.
“We’re not afraid to test the water, to be bold,” Sullivan said.