The States have been busy this year. Maine has been focusing on developing new technologies. Massachusetts and the Cape Wind project have finally (fingers crossed here!) overcome the worst of the legal obstacles but now must find solutions to financial challenges. Rhode Island's Deepwater Wind Block Island project is still ensnared in legal challenges related to financing issues. See the below for more detailed updates.
WindFloat Maine LLC of Camden, a subsidiary of Principle Power Inc., and a member of the DeepCwind Consortium at the University of Maine's Advanced Structures and Composites Center, received a grant of $500,000 from the Maine Technology Institute. The money will be used towards the development of a floating wind turbine platform design, also called Windfloat. WindFloat Maine also brought in a $500,000 matching investment.
The significance of viable floating wind turbine technology should not be underestimated. The turbines that are presently installed at offshore wind farms must be secured to the ocean floor via monopile or gravity offset mechanisms. For this reason, all currently installed offshore windfarms worldwide are installed in waters that are <30 meters. Although new advances in marine turbine technology has made it practicable to install turbines off the eastern seaboard of the United States at depths of up to approximately 40-50 meters.
However, the western seaboard of the United States has significantly steeper ocean bathymetry-- that is, the ocean floor drops off precipitously relatively close to shore. This makes the western seaboard a poor candidate location for offshore windfarms regardless of the available wind resources (and Pacific coastal wind resources are not insignificant). See, e.g., NREL Offshore Wind Resource Map for Washington State. However, proposed floating turbine technology would allow offshore windfarms to be constructed at depths of 40-900 meters, thus effectively opening up the Pacific coast of the United States.
Cape Wind may begin construction as early as this year. However, Cape Wind Associates, LLC, the developer of the 130-turbine 420MW project, may be in trouble if it cannot obtain sufficient financial backing.
At present, half of the power generated from Cape Wind will be sold to National Grid PLC subject to a 15-year power purchase agreement. Cape Wind has not been able to secure a power purchase agreement for the remaining name plate capacity. The guarantee of a back-end revenue stream yielded through a power purchase agreement provides lenders with the assurance and comfort that loans for front-end costs (like construction) will be repaid. Therefore, Cape Wind's inability to secure a PPA for the entirety of its production does not bode well.
The first phase of construction will cost approximately $1.7 billion. Cape Wind now hopes to find a "strategic partner" that would invest a significant portion of the estimated $500 million of equity needed before debt financing can be launched to round out the complete financing package.
On Wednesday April 6, the Rhode Island Supreme Court heard oral arguments in a case wherein the Rhode Island Attorney General along with a variety of intervenors (most vocally, the Conservation Law Foundation (“CLF”), Toray Plastics (“TP”) and Polytop Corp.(“PTC”)) have challenged the legality of an amended power purchase agreement between National Grid and Deepwater Wind (In re: Review of Amended Power Purchase Agreement between Narragansett Electric Company d/b/a National Grid and Deepwater Wind Block Island, LLC pursuant to R.I. Gen.Laws § 39-26.1-7, Docket No. 4185). The power purchase agreement governs National Grid’s purchase of certain quantities of power generated by a proposed 8-turbine offshore wind farm planned to be located off of Block Island in the jurisdictional waters of Rhode Island.
The court's decision is expected within 60 days. If the Supreme Court finds the intervenors’ arguments convincing, it will likely mean that Deepwater Wind’s Block Island wind farm will not get built.
The history of the case is somewhat confusing. Back in December 2009, the Rhode Island Public Utilities Commission received for its review a power purchase agreement between National Grid and Deepwater Wind. This PPA was subject to Rhode Island Gen. Laws § 39-26.1-1 to 8. The relevant provision of the law required National Grid to “solicit proposals for one newly developed renewable energy resources project of ten (10) megawatts or less that includes a proposal to enhance the electric reliability and environmental quality of the Town of Shoreham.” See R.I. Gen. Laws §39-26.1-7(a). Once National grid had identified the project, National Grid was to enter into negotiations with the selected project developer with the goal of “achieving a commercially reasonable contract.” R.I. Gen. Laws §39-26.1-7(b).
During the course of the R.I. PUC’s review of the December 2009 PPA, a variety of intervenors, including CLF, TP and PTC, entered submissions arguing that the December 2009 PPA was not “commercially reasonable.” See R.I. PUC Docket No. 4111. On that basis, the R.I. PUC concluded that the 2009 PPA did not comply with the requirements of R.I. Gen. Laws §39-26.1-7(b), and refused to approve it. See R.I. PUC Opinion.
On April 28, 2010, the Rhode Island legislature adopted revised legislation that significantly altered the Rhode Island Gen. Laws § 39-26.1-1 to 8. See revised legislation here. Most notably, the new legislation (a) specifically authorized National Grid to enter into a PPA for an 8-turbine offshore wind project; (b) changed the criteria under which the R.I. PUC was to review that PPA; (c) and provided explicitly for the same intervenors whom had challenged the original PPA to challenge the amended PPA again within the scope of a streamlined process.
Subsequently, National Grid and Deepwater Wind resubmitted their PPA to the Rhode Island PUC. The intervenors, not surprisingly, again the challenged the PPA. However, instead of challenging the PPA exclusively, the intervenors now also argue that the new legislation is itself illegal.
For a summary of the parties’ arguments, see the Providence Journal.
The statements and views expressed in the postings on the Ocean & Offshore Energy Projects and Policy Blog are my own and do not reflect those of Nixon Peabody LLP. This Blog does not provide specific legal advice. Reading or visiting this Blog does not create an attorney client relationship. This Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.