An agency that provides electricity to nine municipally owned distribution utilities in Delaware said Wednesday that it has reached an agreement to purchase power from a group proposing a wind farm off Delaware’s coast.
If it reaches fruition, the agreement between the Delaware Municipal Electric Corp. and Bluewater Wind Delaware LLC would mark the first contract in the nation for the purchase and delivery of energy from an offshore wind park, officials said.
The agreement, valued between $200 million and $300 million over 20 years, is contingent on Bluewater Wind signing a long-term power supply agreement with Delmarva Power as part of an effort by state officials to ensure a stable and sustainable energy supply for Delaware.
The agreement was announced on the same day the state Public Service Commission released a staff report recommending that the commission direct Delmarva Power to negotiate a power purchase agreement with both Bluewater and Conectiv Energy.
It remains to be seen whether the PSC staff recommendation is compatible with the joint venture planned by DEMEC and Bluewater, under which DEMEC would provide over 100 million kilowatt hours of energy annually.
The commission is scheduled to meet Monday to decide among three competing proposals from Bluewater, Conectiv Energy and NRG to enter into a long-term supply contract with Delmarva Power.
NRG has proposed a 580-megawatt expansion of its coal-fired Indian River Power Plant in Millsboro using “clean coal” gasification technology. Conectiv, a sister company of Delmarva Power, has proposed building a 180-megawatt gas-powered generation plant in northern Delaware, and Bluewater Wind wants to build a 600-megawatt windmill farm in the Atlantic Ocean.
An independent consultant for the commission ranked Conectiv’s natural gas project highest, followed by the Bluewater, with NRG coming in last.
In its 73-page report, the commission staff recommends that Delmarva negotiate with Bluewater for an offshore wind farm in the 200-300 megawatt range, and with Conectiv for a 150-200 megawatt gas turbine facility not in northern Delaware, but somewhere in southern Delaware.
“Wind power coupled with the availability of a gas fired turbine provides a secure energy source with minimal environmental impact,” the report said. “… The wind farm may lack reliability on days when peak load is needed, whereas as the gas turbine, while not the worst environmental offender by far, lacks the cleanliness and low-fuel costs of a wind farm.”
The PSC staff noted that the recommendation may not sit well with the bidders and adds another layer of complexity because additional natural gas capacity would be needed to locate a gas turbine in Sussex County.
If the commission accepts the staff recommendation, it may also cause problems for DEMEC’s agreement with Bluewater.
Bluewater Wind president Peter Mandelstam said the power supplied to DEMEC would be the excess remaining after selling about 400 megawatts to Delmarva Power.
“In order to sell the excess, we have to sell the underlying power to Delmarva,” he said.
DEMEC president and chief executive officer Patrick McCullar said that if Delmarva doesn’t participate in the wind project, other potential partners would be sought.
“We strongly believe in the wind farm as a good fit for Delaware,” said McCullar, whose agency represents municipally owned utilities in Newark, New Castle, Middletown, Dover, Smyrna, Seaford, Lewes, Clayton and Milford.
“We think the state should recognize the value of this project and encourage it from their end,” McCullar added.
Meanwhile, NRG regional director Ray Long defended his company’s coal gasification proposal Wednesday in an appearance before the Senate environmental and natural resources committee.
Long said the U.S. has a dependable long-term coal supply, whereas natural gas is subject to price volatility and wind power raises questions about reliability and the need for backup power.
“Wind works when the wind blows,” he said.
Speaking in support of the Bluewater Wind proposal, University of Delaware professor Jeremy Firestone said the additional cost to electricity users over 25 years is estimated to be less than the $500 million that Delmarva Power customers are expected to pay through 2009 following sharp rate increases that took effect last year as the result of deregulation.
Wind power, Firestone added, could make Delmarva Power customers “the envy of the region.”
3 May 2007
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