Depending on whom you talk to, a deal announced this week between four Bay State utilities and three wind energy companies is either proof that Cape Wind is a boondoggle or evidence that it’s needed.
The utilities, which include NStar and National Grid, agreed jointly to buy power from six land-based wind energy projects in Maine and New Hampshire for an average of less than 8 cents per kilowatt hour over the life of the contracts. By comparison, NStar and National Grid agreed separately in the past three years to pay about 19 cents per kilowatt hour for power from the proposed Nantucket Sound wind farm, with an additional 3.5 percent added to the price annually after 2013.
NStar delivers power to Cape Cod and Martha’s Vineyard. National Grid delivers power to Nantucket.
“This isn’t a two-cent difference,” said Audra Parker, president of the Alliance to Protect Nantucket Sound, an anti-Cape Wind group.
The announcement Monday of a price for land-based wind that beats out all other sources but natural gas is further proof that the controversial offshore wind farm is uneconomic, Parker said.
During the life of the contracts for the land-based projects, the utilities have estimated that the average residential customer will save between 75 cents and $1 per month over other sources of energy, in contrast to an additional cost estimate of about $1.50 per month for Cape Wind’s power.
State officials should take another look at Cape Wind, Parker said, adding that it is a high-cost, high-risk project.
But state and Cape Wind officials contend that land-based and offshore wind offer different benefits.
“They’re not the same product,” Cape Wind spokesman Mark Rodgers said.
Offshore wind blows stronger during peak demand periods and can provide power directly to areas of high demand better than remotely located, out-of-state wind farms, Rodgers said.
“That does make it a more powerful product,” he said.
By buying power from both onshore and offshore wind projects, the utilities have increased the diversity of their energy portfolio, Rodgers said.
“You don’t want to put all your eggs in one basket,” he said.
In addition, the cost of land-based turbines and solar panels has come down as more have been installed, and projects like Cape Wind are necessary to reduce the costs of offshore wind similarly, he said.
State policies geared toward diversifying the state’s energy portfolio and increasing the amount of renewable energy have driven utilities to purchase both types of wind power.
“This was actually part of the requirement in the 2012 energy bill that required utilities to buy 4 percent of their load in renewable energy,” state Secretary of Energy and Environmental Affairs Richard K. Sullivan Jr. said about the latest procurement.
The low cost of power from the projects, which are being developed by First Wind, Iberdrola Renewables and Exergy Development Group, includes federal production tax credits that the companies have said they expect to qualify for before the credits expire at the end of the year, Sullivan said.
Gov. Deval Patrick’s administration continues to support Cape Wind because of the local jobs the project will create, Sullivan said.
The majority of Patrick’s goal of 2,000 megawatts of wind energy development inside Massachusetts by 2020 is still expected to come from offshore, Sullivan said.
Investing in wind energy, both on land and at sea, is a good idea while natural gas prices are low as they are now, Sullivan said.
“The pricing of natural gas is going to eventually move up,” he said. It is better to be prepared than to be scrambling for another source of energy when that occurs, he said.
The deal announced this week is the second such procurement NStar has completed under provisions in the state’s Green Communities Act, said James Daly, vice president of energy supply for Northeast Utilities, which merged with NStar in 2012.
The first round included 108 megawatts of land-based wind energy, and this round included 256 megawatts specifically dedicated to NStar’s energy load, which totals about 5,000 megawatts.
Between the two procurements, NStar now has about 7 percent of its load covered by wind energy, Daly said.
The company does not actually supply the power to its customers but rather sells it into the marketplace and then shifts the difference between the purchase and sale price to its distribution customers, he said.
Daly said Northeast Utilities would typically enter short-term contracts of between six months and a year, but state policy that is intended to encourage renewable energy calls for the longer-term deals.
As part of the 2012 merger, Massachusetts officials made NStar buy a quarter of Cape Wind’s power, Daly said.
“We have always had some concerns about the cost of Cape Wind,” he said. “That’s why we didn’t rush to do that contract initially.”
But the state already had found the contract with Cape Wind – which was the same one agreed to by National Grid – would be beneficial to customers, he said, adding that it was never a surprise that offshore wind would be more expensive than onshore wind.
“This just provides the latest comparison to that ongoing debate,” he said.
Cape Wind hopes to secure all of its financing by the end of the year with a construction schedule to follow, Rodgers said.
The price of power from the project could go up further if Cape Wind does not meet deadlines necessary to receive a federal production tax credit set to expire at the end of December.
The project also faces several federal lawsuits from the alliance and other organizations.
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