Western Massachusetts Electric Co., National Grid seek to buy wind power as part of 565-megawatt, green-energy deal
Taking advantage of their combined bargaining power, Massachusetts utilities have signed long-term deals to buy wind power at a slightly lower price than conventionally generated power.
Also helping to bring down costs is the economies of larger wind projects, steadier winds in northern New England and better technology in the turbines. The lower costs will be passed on to customers.
“I think the good news, it was below market rates,” said state Secretary Energy and Environmental Affairs Secretary Richard K. Sullivan Jr. “It’s good for the consumer because it is diversifying the portfolio of where our power comes from.”
More than half the region’s power comes from natural gas, and a lack of capacity in the pipelines makes utilities worried that power prices will spike.
The contracts call for six projects to be built in Maine and New Hampshire by wind project developers First Wind, Iberdrola Renewables and Exergy Development Group.
The deals, announced Monday by the state of Massachusetts, involve the purchase of 565 megawatts of wind energy by four utilities including Western Massachusetts Electric Co. and National Grid, enough to power about 170,000 homes, at an average weighted price of just less than 8 cents a kilowatt hour.
The going price right now for Western Massachusetts Electric Co. customers is 8.317 cents a kilowatt hour, said Priscilla Ress, a spokeswoman for the utility. The power deal will save an average Western Massachusetts Electric customer up to $1 a month of a bill of about $89 a month. WMECO has 200,000 customers.
National Grid, which has 1.3 million Massachusetts customers, estimates that the deal will save an average customer on its system 85 cents a month, said Ron Gerwatowski, senior vice president for regulation and pricing at National Grid.
Eighty-five cents a month may sound a little underwhelming. But Robert Rio, senior vice president of energy and environmental affairs at Associated Industries of Massachusetts, a statewide organization that lobbies for lower utility costs for residents and industry, said the deals lock in the prices for 15 to 20 years.
“I don’t think any of us believe fossil fuel prices will stay where they are now,” Rio said.
Previous green energy produced power at higher cost than traditional methods.
The power companies, which also include NSTAR and Unitil, got this good a deal by combining their purchasing power and going out for a competitive bid. By contrast, the controversial Cape Wind project is expected to cost 20 cents per kilowatt hour at first and go up from there.
“This recent agreement is the kind of power the state should be encouraging,” Rio said. “To save people money or at least not to cost them money should be the goal.”
State legislators changed the law last year to allow this type of cooperative competitive bidding, Rio said. Previous state laws calling for increased use of green energy didn’t allow for the practice.
First Wind spokesman John Lamontagne said his company is moving forward with two projects in Maine, a 148 megawatt project in Oakfield that starts construction later this year with 48 turbines and 186 megawatts and 62 turbines in Bingham. That project is still being permitted.
Sullivan said if the projects get under construction this year or in 2014 they can qualify for federal tax credits.
Lamontagne said this wind deal is also economical because of advances in turbine technology making them cheaper and more efficient.
Gerwatowski said the Maine and New Hampshire projects are also more economical because the wind is steadier and stronger there.
But that still doesn’t make wind power an on-demand source like gas or atomic energy. It’s availability still has to be managed on the grid.
“But we are getting better about predicting availability of the wind resource,” Gerwatowski said.
The state’s news release said it is now up to the Massachusetts Department of Public Utilities to review the deals to ensure the procurement is cost-effective for ratepayers. This process includes a public comment period and public hearings for each of the utilities, according to the release.
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