A wind power partnership agreement announced over the weekend could further discussions to alter Maine’s electricity market landscape, officials from one of the companies involved in the deal said Monday.
The newly announced deal still must be approved by federal and state regulators, including the Maine Public Utilities Commission, and involves a complex agreement between First Wind of Boston, Ontario-based Algonquin Power and Utilities Corp. and Halifax-based Emera Inc.
First Wind is the largest wind developer in Maine, with a number of wind farms in operation, under construction and at early stages of permitting and siting.
Emera is the parent company of Bangor Hydro-Electric Co. and Maine Public Service Co. Algonquin owns hydroelectric generating facilities in northern Maine, including Caribou Hydro and Squa Pan Hydro, as well as some thermal power facilities in the region.
The two companies will form a joint venture, Northeast Wind. First Wind and Northeast Wind will create an unnamed operating company that will own First Wind’s wind farms on the East Coast.
The deal gives First Wind desperately needed capital, and gives Emera and Algonquin a serious stake in renewable power generation in the Northeast.
In a conference call for analysts hosted by Algonquin and Emera executives, Emera President and CEO Christopher Huskilon spoke about his company’s interest in seeing Maine’s current electrical market regulations changed. Since 1997, following deregulation of the industry, Maine law has blocked companies that owned power transmission systems from also owning power generation assets in the state. Broadly speaking, that was done to create a competitive generation market.
Utilities like Bangor Hydro have talked about changing those laws for years.
“This allows us to continue to have the right discussion with the various decision-makers in the state, with the MPUC,” said Huskilon in the call. “We think it continues to move the ball down the court.”
Gerard Chasse, president and chief operating officer of Bangor Hydro, expanded the discussion in an interview.
He suggested that allowing transmitters to own generation would be better for taxpayers. Utilities tend to have lower cost of capital, and access to rate-smoothing mechanisms that would help keep electric rates more constant.
Emera has been putting together business deals that, should those laws be changed, would work economically for the company and for its customers, Chasse said.
“We’re strategically buying assets where we can create value for shareholders and ratepayers in the Northeast,” said Chasse. “I think it is part of a bigger vision to bring those assets to bear in a value-added way in the market.”
Having an ownership stake in those wind farms – and future wind farms – is “a good foundation for that discussion to begin,” said Chasse.
“Now we have real assets that we could bring to the table to demonstrate what the value is to customers,” he said.
Chasse said that while Emera will have an ownership stake in Maine wind farms – generators – through Northeast Energy, strict rules put walls between any communications between that part of the business and Bangor Hydro – which is transmission.
The farms in Maine include Mars Hill Wind, Stetson Wind I and II in Danforth, and the under-construction Rollins Wind Project, as well as operations in Vermont and New York.
First Wind will continue to develop Northeast projects, eventually to be transferred to the operating company — providing First Wind with additional revenues to put toward future developments. First Wind has a number of potential projects in Maine that are in various stages of siting and permitting, including one near Rumford, one in Bingham, one on Bowers Mountain in Carroll Plantation, one in Oakfield, and one near Eastbrook on Bull Hill.
Kenneth Fletcher, director of the governor’s Office of Energy Independence and Security, said he thought talks about changing the laws regarding generation and transmission ownership “would be a very interesting discussion.”
“I wouldn’t say absolutely we wouldn’t want to talk about it, or that we will,” Fletcher said. “I think it is something we will probably be considering, without absolutely saying we’re going to do it.”
He added, “The governor’s position is that we need to get the price of electricity down in the state of Maine. That says just about everything’s on the table for consideration.”
Fletcher said the LePage administration was supportive of wind development, and saw it as creating Maine jobs and potentially lowering energy costs.
“When it’s appropriately located and under the right conditions, we feel that’s in general a good thing for the state of Maine as well as the region,” said Fletcher.
Bangor Hydro’s Chasse said development of wind power in Maine may also lead to increased investment in transmission infrastructure. Generally speaking, the industry wants generation to be close to users – big cities and population centers. That’s generally not possible with renewable energy sources like wind and hydro, because they tend to be more remote.
And the nature of wind power is that it is generally intermittent, Chasse said. Both of those factors — the distance to market and the intermittent nature — require a more robust transmission system, said Chasse.
“If the economics work, if there are demonstrable economic benefits or if society supports the need for environmental alternatives to our generation mix, it supports opportunities for us as a business to invest in transmission,” said Chasse.
Bangor Hydro and Emera have a transmission upgrade proposal on the table, the Northeast Energy Link, which is still in conceptual stages.
The development of wind projects in Maine has become controversial in recent years, marked by lawsuits and protests by groups unhappy with their impact on scenery, health and the environment.
To supporters, industrial wind farms create well-paying construction jobs, funnel much-needed tax dollars into host communities and help Maine move toward greater energy independence from fossil fuels. Wind power developers have spent an estimated $1 billion on projects in Maine in recent years.
Christopher O’Neal of Friends of Maine’s Mountains said the deal announced over the weekend would have ramifications for those opposing various wind projects, through the introduction of a large power concern into the mix.
“One of the ways that we have found success in fighting the lesser players in the wind development world has been to fight them every step of the way. Those lesser players like First Wind, Independence Wind, Patriot Renewables are susceptible to resistance,” said O’Neal. “One gets the feeling, though, that if it comes down to Iberdrola, TransCanada and Emera, the fight will be much harder for us.”
The upside, said O’Neal, is that companies like Emera may be “less desparate to scoop up every mountaintop they can find in the scramble for renewable energy credits and federal incentives.”
“They might pick their spots better,” said O’Neal.