January 24, 2013
Maine

Divided regulators approve offshore wind energy project

By Robert Long, BDN Staff | The Bangor Daily News | Jan. 24, 2013 | bangordailynews.com

The Maine Public Utilities Commission voted 2-1 on Thursday morning to allow Statoil North America to move ahead with plans for an offshore wind energy pilot project in federal waters off the coast of Maine.

PUC Chairman Thomas Welch, who had expressed reservations about the deal in October and urged Statoil to revise its term sheet to address concerns about pricing and long-term economic benefits to Maine, cast the deciding vote.

Commissioner David Littell joined Welch in voting for the proposal. Commissioner Mark Vannoy voted against accepting the revised term sheet. Vannoy said he doesn’t doubt that Statoil will succeed, but he questioned whether the price of energy generated by floating offshore wind turbines could ever become competitive with other sources.

Welch, who in October had said he would vote against the term sheet as it was originally submitted, said Thursday that Statoil’s proposed contract modifications and public comments submitted in response to the revisions helped change his mind.

“It was a difficult decision,” Welch said. “I was disappointed that the firmness of the commitment for the future of the project was not what I described earlier. Nevertheless, the price reductions and indications of future activities in Maine, recognizing that those are speculative” were enough to convince him that Statoil’s proposal complies with the intent of the 2010 Ocean Energy Act, which the Legislature passed to encourage development of energy production in Maine waters.

The decision did not please Gov. Paul LePage, who blasted it in a release Thursday afternoon.

“Today’s decision by the PUC and any policy that raises electricity costs is irresponsible. Maine has the 12th-highest energy costs in the country and this vote forces Mainers to pay even higher prices for the next 20 years,” LePage said. “Furthermore, to attract business, we must be competitive and foster an environment that attracts investment to lower energy prices, not raise them. This vote will exacerbate our economic challenges, and it compounds Maine’s competitive disadvantages.”

Welch and Littell on Thursday acknowledged those concerns, which had been presented before the hearing in comments by Patrick Woodcock, director of the Maine Governor’s Energy Office, but said the project’s potential to push Maine toward becoming a leader in developing offshore wind technology warranted support.

Both acknowledged that the Maine Ocean Energy Act assumes some risk in projects such as Statoil’s, and that, although it was difficult to quantify the project’s risks and benefits, the potential for long-term economic gains outweigh the risk.

In comments submitted to the PUC, the Conservation Law Foundation estimated that electricity from the project would add 65 to 75 cents to an average monthly bill.

As a pilot project for more extensive development of offshore wind energy production, Statoil North America proposes to moor four floating turbines in federal waters off the coast of Maine to generate 12 megawatts of energy. On May 2, 2011, Statoil submitted a proposal for the project, called Hywind Maine, to the PUC, which had issued a request for proposals after the Legislature passed the 2010 Ocean Energy Act. Statoil was the only company to respond.

Statoil’s revised proposal, submitted Jan. 14, cuts the energy cost from $290 per megawatt-hour to $270 per megawatt-hour and adds a “good faith” commitment to involve Maine contractors in any commercial wind farm Statoil develops along the Atlantic Coast from Maine to Maryland before 2025.

Proponents maintain the pilot project could eventually add $43 million annually to Maine’s economy and create opportunities for Maine businesses to establish themselves as part of a supply chain for offshore wind energy production, which would add momentum to efforts aimed at making Maine a hub for offshore wind energy development technology.

In its revised term sheet, Statoil states that it will make “commercially reasonable efforts” to direct at least 40 percent of its capital expenditures for the pilot project to Maine companies, employ at least 150 people during its construction phase, place the operations center in Maine and contract with Maine consultants.

Thursday’s PUC decision allows Statoil to move ahead with a 20-year contract to sell electricity from its offshore wind experiment to Central Maine Power, which had expressed a number of concerns about the deal in comments submitted to the PUC. The project still must pass state and federal permitting requirements.

Maine’s two other investor-owned utilities, Bangor Hydro and Maine Utility Co., argued that a Dec. 31 contract in which the two utilities agreed to accept the entire obligation for a tidal power project in Washington County reflects “an understanding that it would not be responsible for any obligation under the Statoil contract.” The PUC commissioners indicated Thursday that they would accept that interpretation, leaving CMP as the utility to do business with Statoil.

Commissioners suggested a number of changes Thursday to the term sheet to ease CMP concerns. They also advocated for the elimination of a clause that would free Statoil from its commitment to Maine businesses if compelled by another state’s local authority to do so as a condition of placing a commercial wind farm there.

Democrats in the Maine Legislature and the Sierra Club praised the decision Thursday.

“We spend a lot of time talking about bringing good business and jobs to Maine – and now we have a billion dollar company that is committed to hiring local workers for this project and any of their other projects between here and Maryland,” said Assistant House Majority Leader Rep. Troy Jackson, D-Allagash, who also serves on the Energy, Utilities and Technology Committee.

Welch described offshore wind energy technology development as a tool to help keep talented young people in Maine by helping the state become a center of research and expertise on the topic.

“I have no doubt that the pilot will bring substantial knowledge to Maine,” he said, calling that concentration of expertise in Maine the “most valuable aspect of the contract.”