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Summary:

Massachusetts utility National Grid and Cape Wind announced an agreement for the utility to buy 50 percent of the power generated by the controversial 130-turbine offshore wind project starting in 2013.

Today Massachusetts utility National Grid and Cape Wind announced an agreement for the utility to buy 50 percent of the power generated by the controversial 130-turbine project starting in 2013. For a typical residential customer, that could mean an increase of about $1.59 on their monthly utility bills.

Cape Wind, which plans to complete the offshore wind farm in Nantucket Sound in late 2012, won federal approval last week after nine years in the review process. But even that landmark decision for the project represented only a preliminary step to make the project a reality.

National Grid and Cape Wind will file with regulators for approval of the power purchasing agreement on Monday. Under the terms revealed today, however, National Grid will pay 20.7 cents per kilowatt hour for power and renewable energy credits in 2013. That compares to 24.4 cents per kilowatt hour that National Grid agreed to pay for power from the smaller Deepwater Wind project, under a power purchasing agreement that utility regulators rejected based on the high cost.

According to the Boston Globe, state officials have said National Grid needed a deal in the range of 17-21 cents per kilowatt hour in order for the power from Cape Wind to be competitive with conventional energy sources. So today’s agreement comes in just under that ceiling.

National Grid’s payments per kilowatt hour will increase 3.5 percent each year. But at the 2013 rate National Grid and Cape Wind said they expect residential utility customers who use 500 kilowatt hours per month to see an average increase of $1.59 (or about 2 percent) on their monthly utility bills as a result of the deal.

According to Cape Wind President Jim Gordon, while this agreement covers only half of the planned output (an estimated 91 megawatts), it’s enough to start paving the way to necessary equity investment and financing. He said utilities, retail electricity providers and others have expressed interest in the remaining power, and he’s hopeful that NSTAR or other utilities will “step up and achieve the benefit” of Cape Wind.

National Grid’s executive director Tom King said this morning that with this contract, Cape Wind will contribute about 3-3.5 percent of the utility’s total electric procurement load — a significant step toward the 15 percent of its power that state regulations require the utility to get from renewable sources by 2020.

Of course, with Cape Wind, it ain’t over ’til it’s over. Still ahead are potentially lengthy procedures for winning approval from utility regulators, building out the electrical connections (Gordon said Cape Wind is in the midst of “intensive negotiations” with offshore marine construction firms), ordering and receiving the turbines, and dealing with the lawsuits already filed to stop the project.

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Photo courtesy of Flickr user Phault

By Josie Garthwaite

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