Bluewater Wind will build 150 turbines off the coast of Rehoboth Beach by about 2014 at an estimated cost of $1.6 billion, according to a statement released by Bluewater.
The statement was released a day before Bluewater and Delmarva Power were set to disclose terms of a power supply agreement.
The wind farm, which would sit about 11.5 miles offshore, would be big enough to provide 30 percent of the power to about 300,000 homes, more than the total number of Delmarva’s Delaware customers, Bluewater reported.
Bluewater’s attorney, Thomas McGonigle, delivered a letter to four state agencies on Thursday afternoon, explaining the highlights of the company’s agreement with Delmarva. The letter comes a day before the agreement was due to be submitted to the state and made public.
“This facility will provide the citizens of Delaware with clean energy at stable prices and will firmly establish Delaware at the forefront of the rapidly growing renewable energy industry,” McGonigle wrote in the letter.
But McGonigle expressed concern over whether Delmarva, ordered into negotiations by the four state agencies, would stand by the agreement.
“Although Bluewater acknowledges and very much appreciates that Delmarva worked diligently during these negotiations, we fear Delmarva may oppose approval of this Term Sheet,” McGonigle wrote. “To that end, Delmarva may argue that this project is too expensive for its ratepayers, citing its own evaluation to support this claim.”
Bluewater spokesman Jim Lanard put it more bluntly: “Our biggest concern is that Delmarva has a secret black box they may use to try to blow up the process.”
Delmarva would pay 10.59 cents per kilowatt hour for the wind energy, McGonigle wrote. That’s 1.05 cents higher than Bluewater’s original bid. The difference is largely due to building a smaller wind farm than the one Bluewater originally proposed, Lanard said.
It’s unclear at this point how that would translate to what an average Delaware resident would pay for his or her electric bill.
McGonigle wrote in the letter that Bluewater wanted to see what other charges Delmarva would factor into the final cost to consumers, but Delmarva would not provide it.
Offshore wind energy is more expensive than coal, which sells on the wholesale market for roughly 4 cents per kwh, but unlike coal, gives off no environmental emissions.
The wind farm is smaller than the 200 turbine facility Bluewater initially proposed last year, but bigger than the 66-100 turbine wind farm Bluewater officials feared the state was asking for. It would be completed two years later than the company originally planned.
Four state agencies could review the terms and conditions of the agreement at Tuesday’s meeting of the Public Service Commission in Dover. If the agencies approve, the parties could move toward a formal agreement later this year.
The wind farm would produce a maximum of 450 megawatts, providing Delmarva with up to 300 mw during any given hour for its residential and small business customers. Bluewater could sell excess power on the open market.
One megawatt is enough to provide enough power for 1,000 small homes.
Because the wind only blows some of the time, the average output of the wind farm would be 126 mw per hour. A small portion of that output would be reserved for the customers of municipal-run utilities, represented by the Delaware Municipal Electric Corporation.
Late last year, the state solicited bids for home-grown sources of electricity. That’s after Delmarva raised residential electricity rates by 59 percent in the wake of rate caps expiring.
In May, the Public Service Commission and three other state agencies ordered Delmarva to negotiate with Bluewater for a 25-year power purchase agreement from an offshore wind farm. The agencies also ordered Delmarva to negotiate with NRG Energy and Conectiv to bid for energy from a proposed natural gas plant that would run when the wind isn’t blowing as much.
Delmarva filed suit to stop the process, saying it could lead its customers to buy too much electricity or pay too much for it. But Delmarva has stayed its suit pending the results of negotiations.
The planned startup for the wind farm would be as early as June 1, 2014, and as late as spring 2015, McGonigle wrote. That’s two to three years later than Bluewater originally proposed finishing the project.
Bluewater attributed the delays, in part, to the state process taking longer than anticipated, causing the company to lose a season of work. Bluewater’s investors, knowing the company would be liable for up to $68 million in penalties if specific milestones are not met, urged Bluewater to issue a conservative timeline, Lanard said.
Still unreleased are the terms of competing power purchase agreements with NRG Energy and Conectiv Energy for natural gas to back up the wind farm. Only one of those two projects will be selected. Those agreements are expected to be released tomorrow.
The wind farm project, at $1.6 billion, will cost Bluewater more than the $900 million Cape Wind project planned for Massachusetts’ Cape Cod.
Bluewater chose Rehoboth Beach over Bethany Beach because it allowed the company to build further offshore, with faster winds, and the ocean bottom offered more places to install the turbines, Lanard said.
The turbines would sit 400 feet above sea level when a blade is at its highest point. Lanard said they would be barely visible from shore on clear days, and invisible on hazy days.
Unresolved issues include whether Bluewater would be liable for delays in the project if they are caused by legal action filed by Delmarva or Conectiv, McGonigle wrote.
The Public Service Commission will meet in Dover on Tuesday to review the agreements.
By Aaron Nathans
The News Journal
13 September 2007
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