PUC questions offshore wind project, seeks greater commitment from Statoil

Posted Oct. 04, 2012, at 7:53 p.m.
Last modified Oct. 04, 2012, at 8:33 p.m.

HALLOWELL, Maine — The Maine Public Utilities Commission on Thursday suggested that Statoil North America revise its proposal to provide greater assurances that Maine will reap long-term benefits from a pilot wind energy project off the coast of Maine.

Otherwise, two of the three commissioners said they would not support it.

“The commission will issue a procedural order to suggest ways the term sheet could be improved,” said Karen Geraghty, administrative director of the PUC. She said she expects the order to be released Friday or Tuesday.

After two hours of discussion Thursday, commissioners Mark Vannoy and Thomas Welch said they would not vote for the term sheet as written. They expressed concerns about the impact on ratepayers of the higher cost of electricity generated by the pilot project, which would place four floating wind turbines off the coast of Maine, and about what commitments Statoil could make to extend its relationship with Maine beyond the pilot project.

“Statoil was hoping for a unanimous conclusion from PUC today to be able to continue maturing the project,” Ola Morten Aanestad, Statoil North America’s vice president for communications, wrote in an email. “We now need to take this information we got today back, and evaluate how we can proceed further.”

As a pilot project for more extensive development of offshore wind energy production, Statoil North America proposes to moor four floating turbines in federal waters off the coast of Maine to generate 12 megawatts of energy. On May 2, 2011, Statoil North America submitted a proposal for the project, called Hywind Maine, to the Maine Public Utilities Commission, which had issued a request for proposals after the Legislature passed the 2010 Ocean Energy Act.

Habib Dagher of the Advanced Structures and Composites Center at the University of Maine, which is working with Statoil and independently to refine floating offshore wind energy turbine technology, emphasized that the PUC commissioners did not question the viability of using floating turbines for offshore wind energy generation. He described Thursday’s deliberations as part of a complex negotiation process.

“The commission is looking out for the interests of the state of Maine,” Dagher said Thursday by phone. “I hope we can find a middle ground and move forward.”

“As far as the university is concerned, we would like to see Statoil come to Maine, but the University of Maine is still moving forward with plans to have a prototype turbine in the water during the first quarter of 2013. They are an excellent company,” Dagher said of Statoil. “Having them come here is like having GM or Apple come here. We all want them to come to Maine and invest in Maine.”

In comments responding to the term sheet Statoil submitted in August, Ken Fletcher, director of the Maine Energy Office, raised questions about the impact on ratepayers and the return on Maine’s investment in the project.

“The proposal sets the electricity price at a minimum of $290/MWh, which is significantly higher than historic and current prices,” Fletcher wrote. “Over the 20-year contract term, Maine ratepayers could be required to pay $203 million higher costs.”

“I don’t know if Maine ratepayers can shoulder $10 million per year without more assurance that this will work,” Fletcher told the Bangor Daily News in September, emphasizing that he’s not opposed to offshore wind energy on principle, but that the project must make sense from a business standpoint.

On Thursday, PUC Commissioner Mark Vannoy expressed similar concerns about the risk to ratepayers and the absence of stronger commitment from Statoil that the pilot project will yield greater economic benefits for Maine in the future.

Vannoy said he would like to see Statoil “be more concrete in its benefits for Maine.” He also expressed reservations about whether the technology Statoil is researching would ever lower electricity costs from offshore wind generation enough to produce significant economic development in Maine.

Thomas Welch, chairman of the PUC, also suggested that the commission decline the term sheet at this time, with the suggestion that Statoil make stronger commitments to ensure that Maine be better positioned to benefit from commercialization of the Hywind research and development project.

Welch acknowledged the risk that declining to support the Statoil proposal could deprive Maine of a major opportunity for significant economic development, but “on balance, I find an unacceptably high risk that no or little benefit to Maine will accrue from the term sheet as written,” he said.

Welch then offered specific suggestions for how Statoil could ease his concerns about the risks the project poses to ratepayers. If Statoil presents sufficient means to balance “potential benefits and certain costs” and “shore up the connection between the pilot and substantial benefits to Maine,” Welch said he could support the project.

Commissioner David Littell strongly advocated for the project as a reasonable investment that could provide significant benefits for Maine.

The commission voted unanimously to table action on the term sheet, pending a response from Statoil.

Approval of the term sheet would allow Statoil to enter into a long-term contract to sell electricity generated by the pilot project at above-market prices to one or more of Maine’s investor-owned utilities — Bangor Hydro, Central Maine Power or Maine Public Service Company.

A separate federal process to determine competitive interest and environmental effects of Statoil’s proposal is under way through the Bureau of Ocean Energy Management.

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