The high-stakes battle for a multibillion-dollar Massachusetts clean energy contract is heading in an uncertain direction, with National Grid asserting that the bids of one of its largest competitors, Hydro-Quebec, run afoul of the intent of the state law that set the contracting process in motion.
At a closed-door presentation last week to industry officials and in an interview, National Grid officials said the intent of the energy diversity law passed last year was to finance the development of clean energy to help reduce greenhouse gas emissions. Joseph Rossignoli, director of US business development for National Grid, said the hydroelectricity Hydro-Quebec wants to sell to Massachusetts would come from generating facilities that are already open or about to open, and therefore wouldn’t reduce emissions or need financing.
Rossignoli said a study commissioned by National Grid and released last month found that Hydro-Quebec, if it wins the contract, would merely redirect power it is currently sending to New York and Ontario and ship it to New England, which would yield no reduction in greenhouse gas emissions.
“We feel strongly that, to be compliant with the act to promote energy diversity and the Global Warming Solutions Act, the distribution utilities should use their procurement authority to procure only new clean energy resources, not existing ones,” Rossignoli said.
Lynn St.-Laurent, a spokeswoman for Hydro-Quebec, dismissed National Grid’s claim. She said the energy diversity law and the request for proposals it spawned specifically state that hydroelectric generation is eligible to participate in the contracting process. She also cited a provision in the RFP that says a long-term contract must facilitate the financing of “clean energy generation or associated transmission projects.” St-Laurent underlined the “or” in the RFP language, emphasizing that even if a contract isn’t needed to bring Hydro-Quebec’s clean energy generation online, it is needed to build the transmission line necessary to deliver the power to New England.
As part of the clean energy contracting process, Hydro-Quebec submitted six proposals jointly with three different transmission partners – TDI New England, Eversource Energy, and Central Maine Power.
“Hydro-Québec is somewhat taken aback by National Grid’s affirmations,” St-Lauren said in an email. “Hydro Quebec has built 4,500 megawatts of new hydropower in response to several legislative mandates to decarbonize and diversify the power sector in Massachusetts and throughout the Northeast. Another 600 megawatts is currently under construction and will be available by 2020. Because of the long lead times associated with the design and construction of hydropower infrastructure projects, HQ has made ongoing investments in advance of today’s market opportunity.”
St.-Laurent said Hydro-Quebec’s projects are “superior in value” to those put forth by National Grid, which submitted two proposals, one called the Granite State Power Link, which would deliver newly constructed wind power from Quebec, and another called the Northeast Renewable Link, which would provide new wind, solar, and small hydro from New York. “Ironically,” St.-Laurent said, “National Grid assumes that Quebec hydropower would need to supply the Granite State Power Link, if selected, in order for it to be a cost effective option for Massachusetts customers.”
Rossignoli disputed St.-Laurent’s claim. He acknowledged the Granite State Power Link would use only about 40 percent of the capacity of the project’s transmission line, but said the cost of the remaining 60 percent would be borne by National Grid shareholders and not Massachusetts ratepayers. Indeed, Rossignoli assumed Hydro-Quebec will use the excess space on the transmission line to deliver its own power to New England, which would mean the region could sign a contract with National Grid and gain all the benefit of Canadian wind while also paving the way for imports of Canadian hydroelectricity without the need of signing a long-term contract. “We provide the best of all worlds,” he said.
One source familiar with the contracting process said elbows are bound to fly with so much money at stake. By some estimates, the clean energy contracts could be worth $12 billion over their 20-year life. The source said National Grid is making an interesting public policy argument, but suggested the energy diversification law makes no distinction between new and old hydro.
The friction between National Grid and Hydro-Quebec has been building for awhile, with the two companies sparring in August op-eds (here and here) about the value of hydroelectricity from Canada.
National Grid’s latest proposal on the contracting process is also interesting because one arm of the utility is essentially lobbying another arm of the utility to toss the bid of a competitor. Under the terms of the Energy Diversity Act passed last year, National Grid and Eversource Energy were charged with crafting the request for proposals for clean energy and with evaluating the bids. At the same time, other branches of National Grid and Eversource are bidding on the 20-year contracts. (For more on the utilities being on both sides of the negotiating table, click here.)
Rossignoli urged the utilities to make the scoring methodology for the bids public so everyone will know how wind, solar, and hydro are being viewed in terms of their environmental attributes. Under regulations that took effect after the clean energy RFP was issued, the Baker administration created a clean energy standard that could theoretically lead to ratepayer subsidies for hydroelectricity that are somewhat similar to the subsidies that currently exist for wind and solar. How exactly hydro’s environmental attributes would be valued is unclear right now.
Rossignoli said he and his team at National Grid think the scoring process, particularly for the environmental attributes, should be disclosed now to avoid disputes later on in the process. The bid evaluation team, however, has indicated it is unlikely to release the value of the environmental attributes until the contracts are awarded, he said.
“Letting people know what you’ve done after you’ve done it is a prescription for delay,” Rossignoli said.
|Wind Watch relies entirely
on User Funding