Tux Turkel: The costs of offshore wind power for Maine electricity customers? Too soon to say

July 30, 2023

Maine passed legislation this month to advance the state’s nascent offshore wind industry, but largely absent were details that would interest anyone who pays an electric bill: What will offshore wind power cost customers?

Negotiations underway at the Public Utilities Commission may commit Maine to a 25-year agreement for buying electricity from a proposed research array of floating offshore wind turbines. The talks are largely confidential, but they suggest the question of cost can’t be answered yet.

Today’s uncertainty could end up being a good thing for electricity customers, years from now. Meanwhile, one public document compares the terms for a proposed contract, and hints at the complexity of making calculations for any future project that would test the emerging offshore wind technology.

The term sheet and subsequent filings show that PUC negotiators and the developer, Pine Tree Offshore Wind LLC, are at odds over key elements.

The disagreements focus on the starting price of the contract and whether it should be set before or after a final investment decision is made; the formula and percentage adjustment for future inflation; how any savings in energy prices might be shared between customers and the developers; and whether the contract should be contingent on the state’s construction of a special port facility for assembling and launching offshore wind components.

Acknowledging that several terms sought by Pine Tree Offshore are “fundamentally different” from those approved by the PUC, the agency last week asked parties in the case to file comments on questions related to those differences by mid-August.

One striking figure is PUC’s estimated starting price of $130 per megawatt-hour, or 13 cents per kilowatt-hour. That refers to the price for power when the project comes online, in about seven years.

It’s hard to make price projections for 2030. The 13 cents estimate is twice the 6.5 cents starting price at Vineyard Wind, the country’s biggest, conventional-technology offshore wind farm, now under construction off Massachusetts. Vineyard’s lower-cost supply contracts were inked before the latest market shift.

But 13 cents is also far less than the 20 cents or so that community solar farms in Maine have been getting under the state’s controversial net energy billing policy.

Both the PUC and Pine Tree Offshore Wind declined to discuss price issues with the Portland Press Herald/Maine Sunday Telegram, citing confidential negotiations. Pine Tree Offshore had its starting price estimate redacted from the public document. But in a letter to the PUC on July 18, Pine Tree Offshore noted that existing price estimates need to be updated to reflect the passage of time and increasing costs for turbines, cables, financing, labor and the intricacies of building and anchoring floating platforms.

‘A PRETTY BIG BUMP’

Those proposed price increases reflect an industry in flux.

There’s a multibillion-dollar surge of investment in wind power development on U.S. waters. But it’s happening just as the global industry is being roiled by supply chain shortages, higher interest rates, inflation and technology improvements.

Three wind turbines stand in the water off Block Island, R.I., in 2016. Michael Dwyer/Associated Press, file

Building and permitting a massive wind farm takes years. Today’s fast-changing market has made some price contracts and bids suddenly uneconomic, leading to high-profile pullbacks in recent weeks.

In Massachusetts, Avangrid ended its power purchase agreement with the state’s major utilities for Commonwealth Wind, set to be New England’s largest offshore wind project with a capacity of 1,200 megawatts, enough to power 700,000 homes. Avangrid, the parent company of Central Maine Power, agreed to pay a $48 million termination fee. It’s expected to rebid the project next year at higher prices.

In Rhode Island, developers of a similar-sized project, SouthCoast Wind, also signaled they would cancel their contract. Rhode Island Energy, the state’s largest utility, also ended a contract for another large project, Revolution Wind 2. The utility determined the price wouldn’t meet a state mandate to reduce energy costs for consumers, according to the Providence Business Journal.

“It’s a bump in the road but a pretty big bump,” said Sam Salustro, vice president for strategic communications at the Business Network for Offshore Wind, a nonprofit trade group working to develop the industry and its supply chain.

Please read the full article at:

https://www.pressherald.com/2023/07/30/the-costs-of-offshore-wind-p...

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