Boston utility NStar has agreed to pay a starting price for power from Cape Wind project that is more than double the cost of conventional energy and would add about $1 to customers’ monthly bills in the first year the offshore wind farm generates electricity, according to a 15-year contract filed with state regulators Friday.
The price, 18.7 cents per kilowatt hour, is similar to the price National Grid agreed to pay when it signed a contract in 2010 to purchase half the power generated by Cape Wind. NStar will purchase 27.5 percent of the wind farm’s total output.
The Massachusetts Department of Public Utilities must still approve the contract.
The utilities pay about 8 cents per kilowatt hour for electricity and NStar originally balked at becoming a Cape Wind customer, arguing the wind farm’s cost was just too high. That position changed last month when, after nearly a year of negotiations, state energy officials agreed to endorse a proposed merger between NStar and Connecticut-based Northeast Utilities if NStar made several concessions, including buying power from Cape Wind.
“We know that it will take a diversified approach using all available renewable resources to meet the state’s climate change goals,” NStar spokeswoman Caroline Pretyman said. “We recognize that renewable energy has a cost associated with it but we see this as an investment in our state’s clean energy future.”
The agreement left little room for NStar to negotiate the price it would pay for the energy, dictating, according to regulatory filings, that the utility’s purchase price “shall be substantially the same” as the price National Grid agreed to pay. NStar also committed to purchasing a comparable amount of power – roughly 2 percent of its load – from another wind project, if Cape Wind hasn’t begun construction by the end of 2015.
“There was a precedent because National Grid had already negotiated a contract so we knew going into it that our contract would be similar to their’s,” Pretyman said.
The price stipulations has left critics questioning the state’s role in bringing about the deal. Customers bills are expected to rise by about $1.08 per month, NStar estimates.
“The ‘negotiation’ around this contract was a complete sham,” said, Robert Rio, a spokesman for the Associated Industries of Massachusetts, a trade group that has long opposed the high price tag for Cape Wind’s power. “We’ll never know what the final [price] number could have been because NStar was hamstrung in the negotiation process.”
Renewable energy proponents, however, see the deal as a coup for Governor Deval Patrick, who insisted that NStar’s $17.5 billion merger to Northeast Utilities should promote cleaner sources of energy.
NStar’s promise was also a milestone for Cape Wind, providing the project with enough assured sales to attract financing. The 468-megawatt wind farm is expected to cost more than $2 billion to build in Nantucket Sound.
Despite the high price of Cape Wind’s power, the wind farm’s supporters have argued that the project will help lower New England energy prices in the long run.
Cape Wind thinks the savings could be substantial. An update of a 2010 study commissioned by Cape Wind estimates that the wind farm will help the region save average $7.2 billion on wholesale energy prices in its first 25 years of operation.
Mark Rodgers, a spokesman for Cape Wind, said the estimates of savings are so large in part because tests show that the offshore wind farm is likely to be extremely productive at some of the power grid’s most “critical times,” such as in the summer, when warm weather prompts people to turn up their air conditioners and wholesale electricity prices spike.
“Cape Wind would have a substantial impact in reducing spot market prices,” Rodgers said. “That ultimately filters back to all of us electricity consumers in New England.”
Rio, meanwhile, said he thinks that any such savings would actually be “incredibly miniscule.” His group has long objected to the high price tag for Cape Wind’s power.
“ I don’t know if you’ll ever be able to make money on this thing,” he said. “It’s real fuzzy math.”