Statoil’s exciting plan to build a demonstration floating-turbine wind power array in deep waters off the Maine coast ran into trouble this week when the state’s Public Utilities Commission took a pass on a chance to approve terms with the developer.
The hangup? While one PUC commissioner strongly supported moving forward with approval, the other two feared the costs of the Hywind project to electrical ratepayers – in the form of power priced at a minimum of $290 per megawatt-hour – would exceed the benefits the state could be assured of accruing from Statoil’s investment.
In the end, the commission didn’t dismiss the project, but agreed [PDF] to table the matter “pending further discussions between Commission Staff and Statoil regarding modifications to Statoil’s proposal to address the comments that the Commissioners made at deliberations.”
A Statoil spokesman, responding to the news, told the Bangor Daily News that the company had been “hoping for a unanimous conclusion … to be able to continue maturing the project,” and would now “evaluate how we can proceed further.”
Statoil wants to build a four-turbine, 12-megawatt project in an area covering about 22 square miles off Boothbay Harbor, which is about 50 miles up the Maine Coast (as the seagull flies) from Portland, Maine.
Statoil’s plan came in answer to a 2010 Maine PUC request for proposals, set in motion by the state’s 2010 Ocean Energy Act [PDF], to build “deep-water offshore wind energy” projects “no less than 10 nautical miles” off the state’s famous coast.
Not only are the wind conditions better farther off the cost, the potential for conflicts with other ocean interests is also minimized. The thinking is that the only way to access those winds is through floating turbines — other substructures would be just too expensive to be feasible.
The U.S. Bureau of Ocean Energy Management in August said it would begin formal assessment of Statoil North America’s lease request, but that won’t matter if the state PUC doesn’t approve of terms with the company.
In a hearing Thursday, Commissioner David Littell argued [PDF] that Statoil was a model company pursuing exactly the type of plan the legislature was getting at when it passed the Ocean Energy Act. Littell noted that Statoil would be spending $120 million of its own capital funds on the project and said:
Statoil has committed to spend at least 40% of capital expenditures and 40% of operations and maintenance expenditures in Maine or on Maine suppliers; employ 150 people in Maine during peak construction; create a project operations center in Maine; utilize at least 20-25 Maine based individuals from five different firms for front-end engineering and design studies; engage in extensive Maine supplier development activities; and continue the R&D collaboration with the University of Maine, including entering into an agreement for the sharing of intellectual property rights with the University of Maine.
But the two other commissioners didn’t see that as enough. Both were appointed by Gov. Paul LePage, who holds wind power responsible for high energy costs in Maine. The governor’s Energy Office director, Ken Fletcher, in September weighed in on the Statoil project, saying [PDF] that the terms of the deal could cost Maine ratepayers $203 million in higher energy costs over the 20-year contract term, while the project was likely to have a net economic benefit of $63 million.
Commissioner Mark Vannoy echoed that line of thinking.
“Statoil and its proponents emphasize that this is a research project and as such its real economic value will be seen in the future beyond the limits and scope of this project,” Commissioner Mark Vannoy said [PDF]. “(But) there is no certainty to such future projections. Further depending on your assumptions and your view of current and future market conditions a reasonable case can be made that there is little likelihood of future investment on the magnitude (billions) necessary to see the projected future returns in the State of Maine.”
Statoil says that in the long run, it sees floating turbines delivering energy at $100/MWh when they move beyond the demonstration phase. “Statoil believes that there is tremendous potential value to Maine associated with the construction of full-scale commercial offshore wind energy parks,” the company wrote in comments delivered to the PUC [PDF].