Thursday, April 17, 2014
Norwegian energy giant Statoil's plan to develop a $120 million wind turbine demonstration project off the Maine coast depends on whether state regulators approve the company’s proposed electric rate and contract terms at a meeting Thursday, according to the project’s manager.
“It’s critical for us to have both federal and state support to build the project,” Kristin Aamodt told the Portland Press Herald. “This decision Thursday is very important to be able to develop the project further.”
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. If Statoil is unable at this time to refine its offshore floating wind turbine design in the Gulf of Maine, Aamodt indicated, the company may shift its efforts to Japan or Europe.
Aamodt’s comments come as the Maine Public Utilities Commission is set to deliberate on Statoil’s plans for Hywind Maine.
The project would put four, three-megawatt wind turbines on floating spar-buoy structures that would be tethered to the seabed in 460 feet of water off Boothbay Harbor. They would be assembled onshore and towed to the site. Power could be flowing into the grid, via undersea cable, by 2016.
But the cost of that power to ratepayers, and the extent of the project’s economic benefits for Maine, have become issues at the PUC. Last October, when state regulators initially reviewed the plan, two of the three commissioners indicated that they could not support it without lower power rates and enhanced benefits.
Earlier this month, Statoil came back with changes meant to address those concerns. The company says it cannot make further concessions. On Thursday, the PUC will consider whether Statoil has sweetened the pot enough for Maine to accept the deal.
Wind turbines are common in shallow water in Europe. But developers are testing technologies to locate them miles offshore, where the winds are better and coastal residents can’t see them. Supporters see Statoil’s plan as Maine’s best chance to help attract a deep-water wind power industry that someday could create thousands of jobs and billions of dollars in investment.
“There are not a lot of billion dollar industries knocking on the state’s door,” said Jeremy Payne, executive director of the Maine Renewable Energy Association. “This could decide whether Maine is going to be playing a role in the offshore wind industry, not only in the United States, but across the globe.”
Other countries, including Scotland, also want to develop deep-water wind parks, Payne said.
“We’re in a race with Scotland,” he said. “Maine’s 2010 Ocean Energy Act said we want to an incubator. If we say no, and Scotland says yes, that’s going to be the end of the offshore wind industry in Maine for the foreseeable future.”
But opponents, including paper mills and large power users represented by the Industrial Energy Consumer Group, say Statoil’s proposal is too expensive and fails to provide sufficient assurances of benefits for Maine.
“Simply put,” the group wrote in comments filed Tuesday at the commission, “if we as a state have $100 million or more to spend to address the critical issues of climate change and economic development, is this the best investment we can make, or would we be wiser to consider alternatives, including other renewable technologies, energy efficiency or facilitiating greater use of low-carbon fuels?”
Statoil’s latest proposal also falls short for the administration of Gov. Paul LePage. In comments being filed on Wednesday, LePage’s new energy director, Patrick Woodcock, said that Statoil is signaling a “good faith” commitment to Maine manufacturing. But the wording of the proposals, he said, fails to clearly demonstrate that Statoil will follow through on the investment, as required under Maine’s Ocean Energy Act.
“At a time when bids for manufactured goods can originate throughout the world, it is essential that when ratepayers are subsidizing a project of this magnitude, the investments in Maine be clear and absolute,” Woodcock wrote.
Statoil’s proposal is one of two in Maine that last month won $4 million grants from the federal Department of Energy to showcase innovative technologies and improve performance for offshore wind. They both are competing for final awards of up to $47 million.
The other project, called Aqua Ventus, is being spearheaded by the University of Maine and a team that includes Iberdrola, the world’s largest windpower developer and the parent company of Central Maine Power Co., Cianbro Corp. and Bath Iron Works. That pilot project would float two, six-megawatt turbines off Monhegan Island.
But the Statoil project is under the microscope now, because it submitted a proposal last year to the PUC that included the rate it would charge Maine utilities for the electricity generated by the turbines. That rate worked out to a total of 29 cents per kilowatt hour, roughly double what Maine household customers now pay for energy and delivery.
In its new proposal, Statoil trims the rate to 27 cents/kwh. That’s still well above market rates and would total $186 million over the life of the 20-year contract. But Statoil and its supporters point out that the cost is spread among most Maine power customers. For an average household that uses 550 kilowatt hours a month, it would add roughly 75 cents to an $82.50 monthly bill.
The above-market rate would help provide the 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, roughly $62 million. Research and development in Maine will help Statoil reach its goal of producing power at between 10 and 15 cents/kwh in a commercial wind park later this decade, on par with current household rates in Maine.
“The technology is proven,” she said. “We know it works. But we want now to cut costs. We want to deploy it in a park setting and use it to look at everything around, such as how to build a local supply chain, how to interact with fishermen.”
The commitment to building that local supply chain also will be a key factor in the PUC’s decision. In its new proposal, Statoil says it will aim, “to the greatest extent possible, to utilize local suppliers in the planning and execution phase of the project.” It estimates that suppliers will employ 150 people full time during peak construction.
The company also pledges to locate its project operations center in Maine. It already has established a collaborative research and development relationship with the university’s Advanced Structures & Composites Center for material’s testing.
Statoil also says it will involve Maine contractors and suppliers in any large wind park development it undertakes on the Northeast prior to 2025. It pledged to use good faith efforts to award contracts representing not less than 10 percent of capital spending, or $100 million, to qualified Maine-based suppliers and contractors.
The PUC commissioners will need to decide whether Statoil’s commitments, as written, go far enough to satisfy Maine law and balance ratepayer risk with an acceptable level of economic benefits.
Last October, the PUC’s chairman, Tom Welch, indicated that Statoil’s initial proposal didn’t go far enough. His skepticism was echoed by the newest commissioner, Mark Vannoy. Both men were appointed by LePage.
David Littell, the third commissioner and a holdover appointee of former Gov. John Baldacci, indicated that he supported the project as originally presented.
Last year, the PUC did look favorably on a pilot ocean energy project with above-market rates. The commission approved a contract for Portland-based Ocean Renewable Power Co.’s tidal generator in Eastport. The rate is 21.5 cents per kwh, but the tiny, 180 kilowatt output of the initial phase has little impact on electric bills.
Norwegian company Statoil is considering a test plan for four floating wind turbines off Boothbay Harbor. They’d look similar to this Hywind test turbine, now producing power off Norway.
Trude Refsahl / Statoil