America's First Utility-Scale Offshore Wind Farm Announces Power Purchase Contract

Offshore wind in the United States took another step forward today. Cape Wind has announced the details of their long term power purchase contract with National Grid. During today's news conference call, National Grid President Tom King and Cape Wind President Jim Gordon discussed the significance of this landmark event.

National Grid has agreed to purchase half of the energy that Cape Wind will generate and RECs for 15 years starting in 2013.  Cape Wind will provide National Grid with a bundle of attributes in this agreement that aggregate 20.7 cents per kilowatt hour. The energy price set for 2013 is 12.5 cents per kilowatt hour.

What does this mean?

This means that Cape Wind has moved to the next step in the process of providing alternative energy to up to 75 percent of Cape Cod residents. The contract, to be filed on Monday with the Massachusetts Department of Public Utilities (“DPU”), will increase 3.5% over it's term adding $1.59 to the total monthly bill of the average customer. To those who say they can’t afford this, National Grid says that they can’t afford not to act now. “We need to do more and as we do more, we reduce our costs for all of us,” said Tom King.

National Grid’s projection that their purchase of power from Cape Wind will result in an increase three years from now of $1.59 per month for a typical home’s electric bill is essentially an increase of roughly 5 cents a day. For a nickel a day, Cape Wind is striving to offer cleaner air, new jobs and reduced reliance on oil, coal and gas. As America’s first federally approved utility-scale offshore wind farm continues to move forward, it is important to keep in mind that there are other invisible costs that need to be weighed and balanced. This contract offers a diversification in their portfolio by including the hedge value of a large term contract, environmental attributes, transmission and RECs. With that said, the cost of inaction is indeed higher than a nickel a day.

These long term contracts are essential for offshore wind developers as they need to secure the utility's business in order to attract financing for their projects. Cape Wind is estimated to cost roughly $1 billion. Cape Wind is convinced that they will sell the other 50% of the power for the project. Now that they have their "anchor" customer, National Grid, they have begun negotiations with the banking community and equity investors who have expressed interest as they watch the progress of this project; a mere 9 days after receiving federal approval of this historic project.

The economic recession has had a tremendous impact on our energy prices. The global economic recession has reduced the demand for fossil fuels which, on average, lowers electricity prices, temporarily.  As global economies recover, we can anticipate the prices of gas, coal and oil to rise again.

As a matter of process, state regulators have to approve this contract. It is anticipated that the DPU proceeding will take place in six months and the Attorney General's Office will weigh in with an advising opinion. There will be ample opportunity to discuss and debate the contract as the DPU undertakes it process of review.

National Grid has stepped up to support the project because they believe that the nation must move towards a cleaner, greener economy. They emphasized the need to have the United States lead on comprehensive legislation for energy and climate as well as renewables.  “The American worker and the economy are losing out daily. China invested more than $400 billion in renewables this year whereas the United States only invested $80 billion,” said King.

As the first utility-scale American offshore wind energy facility, this project represents a giant leap forward for our country’s clean energy future.  Cape Wind could jumpstart the U.S. offshore wind industry – paving the way for other facilities to get off the ground nationwide and do it quicker and easier than in the past. It’s more important now than ever to make the right decisions about how to develop energy off our coasts, and doing so in an environmentally sustainable and cost-effective manner is important to Americans. 

For 24/7 information on Cape Wind’s potential clean energy offerings by MW hours and carbon dioxide offsets visit: http://www.capewind.org/