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15-year power deal agreed for Cape Wind offshore wind farm

National Grid will buy 50% of the output of Cape Wind's 130 Siemens wind turbines from 2013 under the agreement

Power utility National Grid has agreed to buy electricity from the nation’s first offshore wind farm, the 468MW Cape Wind project.

The landmark agreement came today, with National Grid promising to buy 50% of the output of the wind project to be built in Nantucket Sound, off the coast of Massachusetts.

The 15-year contract must be approved by the state’s Department of Public Utilities, which will receive the contract on Monday.

The Cape Wind project, which is likely to cost more than $1 billion to build, was given consent by the federal government last week (see this BrighterEnergy.org story).

Its 130 turbines are expected to be installed by the end of 2012, with the National Grid contract starting in 2013.

The agreement would see Cape Wind supplying just over 3% of the utility’s electricity supply.

The remaining 50% output from Cape Wind will be made available for sale to another party or parties, with a separate contract making that possible being filed with the Massachusetts DPU alongside the National Grid contract.

Price

The power purchase agreement between National Grid and Cape Wind Associates, the Massachusetts-based developers of the project, was based on an electricity price of 20.7 cents per kilowatt-hour, increasing by 3.5% a year.

By comparison, an offer of 24.4 cents per kWh, rising by the same rate each year, was deemed to be not “commercially reasonable” for the much smaller Deepwater Wind offshore wind project proposed for Rhode Island waters (see this BrighterEnergy.org story).

Electricity prices are currently around 12.5 cents per kWh, but the Cape Wind price includes Renewable Electricity Credits, for which the deal has budgeted 6.7 cents per kWh.

National Grid said it believed the Cape Wind deal would mean an increase of $1.59 per month for the average electricity bill for its 3.3 million residential customers in Massachusetts, New Hampshire, New York and Rhode Island.

National Grid President Tom King said: “We recognize that all renewable energy, be it on- or off-shore wind, solar or other sources, has a cost associated with it. Carbon-based generation comes with its own set of long-term costs – to our health and our environment. Cape Wind is an investment in our future, and one that we must support if we are to achieve a lower-carbon energy portfolio.”

National Grid’s decision to move forward with this agreement helps put Massachusetts at the forefront of this emerging industry” - Jim Gordon, National Wind Associates

Long-term benefits

Mr King pointed out that if federal energy or climate change legislation sets up a price for carbon emissions, Cape Wind would have a “significant” price advantage compared to conventional electricity.

He said: “We believe this project will provide long-term economic and environmental benefits here, throughout the region and across the nation.”

Cape Wind Associates said it believed that fossil fuel prices would increase over the next decade and a half, and that as a result its offshore wind project would actually achieve cost savings for New England customers.

Commenting on the agreement, Cape Wind Associates President Jim Gordon said: “Cape Wind looks forward to working with National Grid to diversify their energy portfolio with pollution-free, inexhaustible wind off our shore. National Grid’s decision to move forward with this agreement helps put Massachusetts at the forefront of this emerging industry and provides their customers with secure and stable-priced renewable energy.”