It took significant arm-twisting by the state in 2012 to get NStar to agree to buy the expensive power the now-defunct Cape Wind project would have produced.
The Patrick administration conditioned the merger of the state’s largest electric power company with Northeast Utilities on signing a 15-year contract to buy a quarter of the electricity the nation’s first offshore wind farm would generate – even though the 18.7 cents per kilowatt hour price tag was nearly double that of electricity produced by conventional fossil fuels and came with a mandated 3.5 percent annual increase.
It was the only way to make Cape Wind viable, and was a deal roundly booed by wind farm critics.
Fast forward five years and the renewable energy landscape has changed so dramatically that Eversource (NStar’s new name, post-merger) embraced wind power on its own earlier this month, entering into a 50/50 partnership with the Danish offshore wind power giant DONG Energy to build a wind farm 15 miles south of Martha’s Vineyard.
“I would tell you that the technology is much farther along than I envisioned five or six years ago,” said Lee Olivier, Eversource executive vice president of strategy and business development. Technology improvements and economies of scale as the U.S. renewable energy industry grows have lowered the cost for renewables to produce electricity to the point where it now compares favorably with traditional fuel, experts said.
“For those who denied it was going to happen, they will be proven wrong,” said Olivier, who has been in the power generation business for 40 years, from coal-fired to gas and oil to combined fuel power plants.
Still, the Eversource/DONG collaboration is the kind of deal that flies in the face of doomsday musings over what will happen when President-elect Donald Trump takes office along with his Cabinet of climate change skeptics, including some who think the clean energy industry should be able to survive on its own without federal subsidies.
Although Trump’s position on renewables is largely derived from offhand comments in campaign speeches and tweets about the impact of a wind farm on his golf course in Scotland – and from his Cabinet picks – he appears to be hostile to the industry. He has proposed to bring back coal and other fossil-fuel plants, and seemingly is sympathetic to those in his party and Cabinet who want to reduce, if not eliminate, federal subsidies like tax credits for solar and wind projects. He also has promised to end climate change initiatives like the Clean Power Plan and the UN’s Paris Agreement that push electric power utilities like Eversource toward alternative energy sources.
Candidate Hillary Clinton proposed an aggressive buildup of renewables to where they would account for 33 percent of power generation nationwide by 2027, four times what exists today, with a 274 percent increase in solar capacity by 2020, and a 43 percent increase in wind power, according to an October 2016 report for Standard & Poor Global. Although Trump’s proposals regarding renewables remain nebulous, the S&P report said projected gains in wind and solar power would occur under his administration, but on a reduced scale.
In a December article in Forbes magazine, University of Houston energy fellow Earl Ritchie agreed that renewable energy would continue to grow on its own, without federal incentives. But he cited a National Energy Renewable Laboratory report that said that the growth rate with federal tax programs like the Investment Tax Credit and Production Tax Credit was twice what it would be without them.
Many energy experts side with Secretary of State John Kerry who told delegates in Marrakech last month for COP22, the follow-up to the Paris climate change accord, that renewable energy had a life of its own. The global renewable energy market expanded more than sixfold in the past decade, Kerry said, and global investment was nearly $350 billion last year, with more of the world’s money was invested in renewable energy technologies than in new fossil fuel plants.
“America’s wind generation has tripled since 2008 and that will continue, and solar generation has increased 30 times over,” Kerry said. “And the reason both of those will continue is that the marketplace will dictate that, not the government. I can tell you with confidence that the United States is right now, today, on our way to meeting all of the international targets that we’ve set, and because of the market decisions that are being made, I do not believe that that can or will be reversed.”
Energy experts say that, although a Trump administration could slow progress, states have actually been at the forefront in pushing for cleaner, renewable power generation, with private sector funding far outstripping federal investments over the past five years.
“We’re committed to the path we’re on,” said state Department of Energy Resources Commissioner Judith Judson. “We’ll watch and take into account what happens at federal level and move forward.”
In August, Gov. Charlie Baker signed legislation intended to diversify the state’s energy sources and achieve the goals set out in the state’s 2008 Global Warming Solutions Act of reducing carbon emissions by 25 percent from 1990 levels. It requires power utilities to contract for 1,200 megawatts of clean energy power, most likely hydropower, and mandates that power companies purchase an additional 1,600 megawatts of offshore wind power by 2027.
Under the Patrick administration, and continued by the Baker administration, Massachusetts bounded to the head of the renewable energy class, pursuing policies and offering incentives to encourage the development of clean energy technologies and promote installation at both the industrial and residential scale. We’re certainly no Sunshine State when it comes to sunny days, but Massachusetts is ranked No. 4 in the country for total installed solar power.
The state is also ranked No. 1 in per-capita clean energy venture investment, and a recently released report by the Massachusetts Clean Energy Center, a publicly funded state agency looking to accelerate the use of clean energy technology, showed that in the years following the massive influx of federal dollars from the 2009 American Recovery and Investment Act, private investment in Massachusetts clean energy technology totaled between $500 million and $800 million annually compared with less than $20 million a year in public investment dollars from the state and feds.
According to the report, the clean energy industry is firmly ensconced in the state’s economy, responsible for 2.9 percent of all jobs, with $11.8 billion in economic activity. The number of clean energy jobs in Massachusetts has increased by over 40,000 since 2010 to over 105,000 jobs. Nearly 70 percent of workers earn more than $50,000 a year, more than the state median of $45,573, and 25,390 renewable energy systems were installed by Massachusetts homeowners and businesses in 2016, adding 374 megawatts, enough to power 56,040 homes.
“The upward trajectory in job creation and economic activity is bound to continue,” said Stephen Pike, the Chief Executive Officer of the clean energy center. “There are very solid state policies in place encouraging the development of the industry and the economics of the industry continue to improve as well, making them more competitive.”
The one way Olivier sees the potential for direct interference by the federal government is in the permitting process by the Bureau of Ocean Energy Management. But he can’t reconcile a Trump administration focused on job creation going out of its way to stifle one of the region’s successful industries.
“I struggle to believe that the new administration would do anything to undermine those jobs,” he said. “These employees are well paid with benefits, unionized. I think they would be supportive.”
DONG and Eversource are actually bidding against two other companies for the right to develop an area of ocean off Martha’s Vineyard that was preapproved by the federal government as suitable for wind power. They could erect wind turbines in that area with a total capacity of 2,000 megawatts, but would likely install it in increments, with at least 400 megawatts in the first phase, possibly as 50 8-megawatt turbines standing 550 feet tall.
Industry interest in wind power is growing. Norwegian oil and gas company Statoil bid $42.5 million last week for 80,000 acres of ocean off New Jersey to install up to 3,400 megawatts of wind power. A year ago, 344,000 acres off Atlantic City went for only $1.9 million to two American firms.
“I think there is marketplace recognition of the direction in which our energy future is headed and it’s not towards dirty coal or natural gas, but clean, reliable energy,” said Greg Cunningham, Conservation Law Foundation vice president and director of its clean energy and climate change program.
Cunningham pointed to private sector companies entering into power purchase agreements for clean energy and sustainability policies that exceed standards set by the state and federal governments.
To Eversource, the choice was relatively straightforward. New England was facing the potential retirement of one-third of the region’s 31,000 megawatts of power capacity over the next 10 to 15 years as Brayton Point’s coal-fired coal plant and Pilgrim Nuclear Power Station went offline, and a number of smaller coal- and oil-fired plants producing relatively expensive electricity faced being priced out of the market by cheaper natural gas plants.
“Where do we get this energy? It’s difficult to get a gas pipeline into the region,” Olivier said. Solar power doesn’t have the production potential in New England to meet the demands of the power grid, and onshore wind doesn’t have the room to grow or a consistent wind source.
“All that points to offshore wind,” Olivier said.
Holyoke-based ISO New England oversees the region’s power grid, working to make sure there is enough power to cover peak demand. They are concerned about the future, about how to replace a third of their power capacity, said ISO spokesperson Marcia Blomberg.
As they do periodically, ISO solicits bids for future power production to address potential shortfalls. Recently they received proposals for 11,000 megawatts of potential new power production, about half of which would come from new natural gas-fired plants and 40 percent from wind power, Blomberg said.
Both DONG Energy, which has annual revenues of around $11 billion, and Eversource with over 3.6 million customers, are large enough that they can finance the project themselves, without the need for federal tax credits or other subsidies that were essential to the Cape Wind project, Olivier said.
Offshore wind in the US is still in its infancy, but it has been a staple of the European power grid, where it is heavily subsidized with public money, since DONG built the first offshore wind farm in 1991. On December 12, the first offshore wind farm in the U.S., five turbines off Block Island, finally flipped the switch and started producing electricity at around 12 to 14 cents per kwh. The European offshore wind industry has 3,344 turbines installed producing 11,538 megawatts at an average distance of 26 miles from shore.
Offshore wind energy is much more expensive than onshore, because of the size of turbines and the harshness of the environment for installation and maintenance. DONG Energy is the largest offshore wind power company in the world operating 19 offshore wind farms, and they have seen costs go down. According to spokesperson Lauren Burm, the cost of construction for their latest installation was half what they spent in 2012, and the cost of producing the electricity dropped by 40 percent. Turbines are bigger now, producing as much as 8 megawatts per turbine, nearly twice the average size of those already installed in Europe, and are twice as efficient at producing electricity, Burm said.
Installation costs for offshore and onshore wind have been dropping in recent years, according to a January 2016 report in Windpower Monthly, as has the price of the power produced. Overall, electricity prices from wind power fell 25 percent from 2008 to 2014, according to the report, and the expectation is that it will drop by another 15 percent by 2030. Offshore wind, which does not have the siting problems of solar power and onshore wind, can generate much more power and its prices, which include installation, operating and maintenance, are comparable to new nuclear power plants, without the massive costs and hazards of disposal of radioactive waste.
Onshore wind prices have dropped as low as 6 cents per kilowatt hour, rivaling natural gas, and large-scale solar arrays at 12 cents per kilowatt hour could see those prices halved over the next decade, according to the Windpower Monthly report.
The price drops and power potential have made offshore wind very appealing, and in the first six months of 2016 Europe saw 114 offshore wind turbines come online.
Further cost savings are expected as new technologies emerge, including new energy storage technologies still in the development phase that could erase the one big drawback of renewables: the lack of power generation when the sun isn’t shining or the wind isn’t blowing.
“Our (electricity) use at peak times (like hot summer nights) continues to grow even as overall use has declined,” state Department of Energy Resources Commissioner Judith Judson said. “If we can utilize (storage) technology to use during high peak times we can lower the overall cost of the (power) grid.”
Massachusetts is only the third state in the nation to fund the search for energy storage technologies with a $10 million initiative this year. Olivier said that Eversource is already building more storage when it upgrades power substations, as well as looking for other opportunities.
“The prices in Europe have fallen dramatically,” said Burm. “We are really confident we will see those same numbers once a mature market forms (in the US).”
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