High stakes in Public Utility Commission’s offshore wind vote

More than 70 people turned out for an informational session Monday, June 25, 2012, hosted by Statoil North America, which seeks to build a four-tower pilot deep-water wind generation project off the Maine Coast.
Christopher Cousins | BDN
More than 70 people turned out for an informational session Monday, June 25, 2012, hosted by Statoil North America, which seeks to build a four-tower pilot deep-water wind generation project off the Maine Coast. Buy Photo
Posted Jan. 23, 2013, at 12:46 p.m.

In his Jan. 3 video titled “The Truth About Taxes,” Gov. Paul LePage said, “Investment capital goes where it’s welcome and stays where it’s appreciated.”

On Thursday, the Maine Public Utilities Commission can demonstrate that Maine welcomes international investment by approving Statoil North America’s revised term sheet for the Hywind Maine offshore wind energy project. Doing so will allow Statoil to move ahead with testing the feasibility of generating electricity from four floating turbines moored in federal waters off Maine’s coast.

Conversely, rejecting the proposal would convey to investors, entrepreneurs and the global energy market that Maine places provincial concerns over big-picture thinking and lacks appreciation for the economic benefits of research and development. The stakes of the Statoil deal extend far beyond the 27 cents per kilowatt-hour of energy generated by what could be the first North American test of floating-turbine technology.

Investment rarely comes without risk. Ken Fletcher, former director of the Maine Governor’s Energy Office, and Thomas Welch, chairman of the PUC, laid out those risks — primarily to the state’s electricity consumers — in reaction to Statoil’s original terms for a 20-year contract to sell energy generated by Hywind Maine to Bangor Hydro, Central Maine Power or Maine Public Service Co.

Statoil, a Norway-based multinational energy developer, responded to those concerns in a revised term sheet submitted to the PUC on Jan. 14. Key revisions include a reduction in the price of electricity produced and, more importantly, language designed to allay concerns that Statoil will jilt Maine after refining floating-turbine technology here.

The revised term sheet states that Statoil will use “good faith, diligent efforts” to award contracts representing 10 percent of capital expenses, up to $100 million, to Maine-based companies for any commercial wind farm it launches between Maine and Maryland until 2025. Further, “Maine employees will, if otherwise qualified and competitive, have an advantage over other bidders in [Statoil’s contractor] evaluation process,” the revised term sheet states.

On its own, the pilot project will create jobs for 150 people in Maine during its construction phase, with Statoil committing to “commercially reasonable efforts” to direct 40 percent of capital expenses, operating and maintenance costs to Maine businesses.

Given the state’s lingering economic malaise, we understand that those entrusted with representing Maine people’s interests would seek to minimize electricity consumers’ exposure to risk from a 20-year, multimillion-dollar contract. But the competitive nature of the global market makes it unrealistic to assume that a business would be willing to take on 100 percent of the risk in any investment in innovation.

If Maine rebuffs Statoil, some other state or nation will jump in to seize the opportunity. Last year’s decision by Kestrel Aircraft to build its airplane-manufacturing facility in Wisconsin after that state offered better enticements than Maine provides a hard, recent lesson.

Offshore wind energy development takes advantage of the state’s existing resources in ways that few other manufacturing start-ups could. With positive initial returns from a tidal energy project in Cobscook Bay and ongoing research at the University of Maine’s Advanced Structures and Composites Center, which plans a separate Gulf of Maine floating-turbine test at a site called Aqua Ventus I, the Hywind Maine pilot positions Maine to be an international leader in ocean-based energy technology development. The U.S. Department of Energy recognized that potential by including Hywind Maine and Aqua Ventus I on its list of seven possible recipients of $47 million, four-year innovation grants.

Statoil, with more than 40 years of experience in global energy development, adds important business acumen and enhanced credibility to Maine’s efforts to convert ocean-based energy research into commercial success. A fall 2012 U.S. Bureau of Ocean Energy Management review revealed no competitors to Statoil’s proposal to develop wind energy off Maine’s coast. No one is waiting with a better offer if the PUC rebuffs Statoil on Thursday. The PUC succeeded in spurring Statoil to improve its offer, but it’s time to seal the deal.

The Conservation Law Foundation, which reaffirmed its support for Hywind Maine in comments filed Friday to the PUC, estimates the impact of Statoil’s revised energy price would cost between 65 cents and 75 cents per household per month. The Maine Public Advocate’s Office, which represents the interests of those consumers, also endorses Statoil’s proposal. We do, too.

http://bangordailynews.com/2013/01/23/opinion/editorials/high-stakes-in-public-utility-commissions-offshore-wind-vote/ printed on July 31, 2014