A decadelong effort to establish an offshore wind energy industry in Maine is at a turning point, its future hinging on whether state utility regulators vote to reopen a power contract to test a patented technology for deep-water floating wind farms.
Supporters of the University of Maine-led Maine Aqua Ventus project fear that a vote by the Public Utilities Commission to alter the power-rate terms could doom the venture, just as it reaches critical stages for financing and permits. The project involves two floating wind turbines that the university and its partners are preparing to test off Monhegan Island.
If the project stays on schedule, it likely will be the first full-scale floating wind project in North America. Testing the platform technology is considered key to deploying cost-effective wind farms in deep waters off the East Coast. The 2014 power contract, which would increase consumer electric bills by less than a dollar per month, also is crucial because both public and private investment is tied to it.
The immediate risk, advocates say, is $87 million in federal funding, thousands of hours of research and development and Maine’s reputation as a place to make renewable energy investments.
Longer term, the economic promise of manufacturing floating platforms for the nascent East Coast wind industry, as well as pioneering a new power source that could help electrify Maine and New England at competitive power rates, may be at stake.
Those potential benefits are being brushed aside by Gov. Paul LePage and other critics of the project. In comments supporting reconsideration of the contract terms, LePage’s energy director, Steven McGrath, focuses exclusively on the cost of power from the demonstration project.
He noted that it would be well above current market prices, adding between $172 million and $187 million to Central Maine Power customer electric bills over the 20-year contract period.
For an average CMP home customer, that works out to roughly 73 cents a month in the first year of the project.
This premium had been approved four years ago by the PUC. But at a meeting in January to vote on approving the long-term contract, the terms came under new scrutiny. The three commissioners – each appointed by LePage – voiced concerns that changing economic factors, including lower prices for natural gas and oil prices, warranted another look at the above-market rate.
“We were blindsided by the commission’s deliberations in January,” said Jeff Thaler, UMaine’s associate counsel. It has always been clear, Thaler said, that power from a one-off, 12-megawatt demonstration project would cost way more than electricity from conventional power plants rated at hundreds of megawatts. It’s like comparing the cost of building one custom truck to mass-producing thousands of pickups at an assembly plant.
That theme is highlighted by new projections from a Department of Energy research lab. The contract power rate for the 12-megawatt, two-turbine demonstration project starts at 23 cents per kilowatt-hour in its first year.
The federal energy lab estimates that the rate could fall to 7.7 cents by 2030, at a 100-turbine, 1,000-megawatt floating wind farm. Full-scale mass production would make offshore wind competitive on the grid, Maine Aqua Ventus says, on par with bringing Canadian hydropower into New England over a proposed new transmission line.
No date has been set for deliberations on whether to reopen the so-called term sheet, but some observers anticipate action by late April. And if Maine Aqua Ventus fails then to nail down a binding power contract with CMP, it can’t qualify for an additional $40 million in federal funds essential to attracting private investors.
The schedule already has been pushed back, but more recently, the contract was expected to be finalized this year, for construction to start by 2020.
PUC MAY SEND ‘CHILLING MESSAGE’
After years of anticipation, government and utility policies have set the stage for an offshore wind industry on the East Coast of the United States. The five-turbine wind farm created last year off Block Island, Rhode Island, is the expected precursor to hundreds of turbines and thousands of megawatts of power being installed in the next two decades.
Massachusetts, for instance, has ordered its utilities to purchase 1,600 megawatts of offshore wind by 2027, equal to 10-15 percent of the state’s annual electricity consumption. New York has a 2,400-megawatt offshore wind target; New Jersey wants to develop 3,500 megawatts by 2030.
Much of this energy would come from conventional offshore wind towers, like the ones in Europe, set in the shallow seabed of the Continental Shelf. But the potential exists to anchor floating projects in deep water – out of sight of coastal residents – where wind speeds are more consistent and the power potential is greater.
That’s the market Maine Aqua Ventus is targeting with its technology.
The goal is to fabricate floating platforms on land from concrete and composite materials in a modular assembly plant. The university’s partners in Aqua Ventus include Cianbro Corp. and the French energy and defense company Naval Energies.
In comments filed at the PUC, Maine’s Office of Public Advocate, which represents utility customers, said if only 10 percent of the power production envisioned along the East Coast used this technology, it could require 100-150 floating hulls.
In 2013, Cianbro built a one-eighth-scale hull prototype, which was tested off Castine. A partner in Maine Aqua Ventus, it would fabricate the full-scale hulls at its riverside facility in Hampden. Supporters say building the floating platforms and towing them to wind farm sites around the country can launch a new work sector in Maine.
“The opportunity to be part of the quickly emerging offshore energy field is very important to our company,” wrote Timothy Hodgdon, president and chief executive of Hodgdon Shipbuilding in East Boothbay.
But Hodgdon also warned that the PUC’s action in January “could easily be seen as a withdrawal of support by the state of Maine.”
If the PUC’s approval of the power contract is tied solely to the price of power today, the greater economic potential will be lost, other businesspeople said in comments to the commission.
“If Maine seeks to be ‘open for business,’ the regulatory climate must be conducive to long-term investments.” wrote Robert Peixotto, a former chief operations officer at L.L. Bean.
Peixotto noted that legislative action, popular votes, regulatory signals and financial support have kept the project alive for a decade.
He added: “The approval of the term sheet in 2014 encouraged those planning and financing the project to commit considerable effort and dollars (including millions of dollars of federal grants). To pull back the term sheet after four years of work and investment sends a chilling message to those committed to developing the significant economic, environmental benefits offered by offshore wind to Maine.”
STATOIL VENTURE WAS SPURNED
For some observers, the Maine Aqua Ventus case has a sense of déjà vu.
Nearly five years ago, the Norwegian energy company Statoil withdrew plans for a $120 million demonstration floating wind farm off the Maine coast. Statoil had won a bid for proposals and had negotiated power-rate terms with the PUC. But it left Maine after LePage held hostage a sweeping energy bill in the Legislature and threatened a veto if the PUC didn’t reopen the bidding process. LePage has been a consistent and vocal critic of above-market electric rates for renewable energy projects, and his political maneuver allowed Maine Aqua Ventus to submit a competing application.
Statoil objected to Maine changing the rules in mid-game. A spokesman told the Press Herald at the time: “The change (in Maine law) was definitely something that creates a lot of uncertainty from our point of view. What could happen if we went ahead, and there were new changes in the future?”
In 2015, Statoil announced it would build a larger, $250 million test project in Scotland. Now considered the world’s first commercial-sized floating wind farm, Hywind Scotlandbegan producing power late last year and its output has greatly exceeded expectations.
NO CONSENSUS ON ISLAND
The debate over the value of Maine Aqua Ventus has been complicated by the fact that more than just electric rates are at issue. Because the test site is near an iconic tourist and fishing island, residents and visitors have strong feelings about how the turbines would impact their lives.
“There is plenty of data that is easily accessed that shows that the ocean bottom is much more valuable to fishermen and our state economy as fishing bottom, instead of mooring sites for floating wind turbine platforms,” wrote Glen Libby, a longtime commercial fisherman in Port Clyde.
Libby fears the test project will lead to larger installations, although Maine Aqua Ventus pledges not to do so near Monhegan. He also said the project has created mistrust between UMaine and the fishing industry.
At the same time, the island’s lobster fishing fleet, organized as the Monhegan Fisherman’s Alliance, wants the project to go forward. They acknowledge an impact of having the platform mooring systems in their fishing grounds, but say that’s offset by the so-called Community Benefit Agreement negotiated with Maine Aqua Ventus and approved by plantation voters 40-0 in November.
The deal features a cash payment worth more than $6 million, in lieu of free power through a cable. Among other things, it would help design an island energy system.
But Travis Dow, a Monhegan resident who has been fighting the project, told the PUC: “Monhegan voted to accept the ‘cash option’ benefits package, and were told if we voted not to accept it, that ‘it would be back to the drawing board for the Community Benefits Advisory Committee.’ So those of us that didn’t want any benefits did not vote.”
NEXT STOP COULD BE HIGH COURT
The PUC has had to wade through more than 600 comments filed in the case. They came in two waves – one as the initial term sheet was being negotiated in 2013, and the second starting last February, after the commissioners asked for a new round of public input.
But while these comments can inform the final decision of the commissioners, any ruling has to have a firm legal foundation. The PUC operates in a semi-judicial format, so arguments of law carry weight. In the case, both Maine Aqua Ventus and the public advocate question the commission’s justification for and ability to reopen the terms under a state procedural law that gives the PUC broad authority to make changes in previous orders.
Maine Aqua Ventus also stressed in its comments that the Legislature directed the PUC to “make every effort to finalize a contract” to advance the goals of the state’s 11-year-old Ocean Energy Act. Changing the terms of the 2014 contract would go against that legal mandate, the developer says.
So if the PUC votes to reopen the contract terms, there’s a chance, Thaler said, that the decision could be appealed to the Maine Supreme Judicial Court.