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  • 28 Nov 2015

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State says offshore wind project too expensive

COURTESY OF PRINCIPLE POWER - State officials have rejected Principle Power's WildFloat project off Coos Bay, similar to this project pictured off the Portugese coast.SALEM — Oregon utility officials said on Monday they do not want to purchase power from the first offshore wind pilot project proposed for the West Coast, because it would be too expensive.

Seattle's Principle Power needs a commitment by May 2016 that Oregon ratepayers will purchase electricity from the 16- to 24-megawatt project known as WindFloat proposed off Coos Bay, in order to qualify for the remaining $40 million in a grant from the U.S. Department of Energy. The company also needs the guaranteed revenue stream from long-term power purchase agreements to secure financing for the project.

Brendan McCarthy, a registered lobbyist and environmental policy manager for Portland General Electric, said the company just completed a 267-megawatt wind farm in Eastern Washington.

“This is about five times as expensive,” McCarthy said, referring to the cost per unit of power from WindFloat. “That’s concerning.”

McCarthy spoke during a meeting of an advisory committee that Gov. Kate Brown formed in August to help Principle Power secure a power purchase agreement.

Annette Price, director of governmental affairs and a registered lobbyist for Pacific Power, said the utility had good conversations with Principle Power about the project, but “its too expensive for our ratepayers.”

A bill in the Legislature earlier this year would have required Portland General Electric and Pacific Power to purchase electricity from WindFloat under 20- to 25-year agreements. The legislation died in the face of opposition by the two companies, industries that use large amounts of power, the fishing industry and the Citizens’ Utility Board.

Oregon has already helped the project financially. The Oregon Wave Energy Trust, which received $1.96 million from the state during the 2013-2015 biennium, awarded a $99,000 grant to Principle Power which helped the company secure a $4 million U.S. Department of Energy grant, according to Business Oregon.

Monday was the second, and apparently the last, meeting of Brown’s WindFloat advisory committee. On Monday, committee chair and state Rep. Caddy McKeown, D-Coos Bay, instructed members to submit written comments by Dec. 15 to be incorporated into a report to Brown by Jan. 15.

“I was hoping we would not be scheduling another meeting,” said McKeown, who spoke little during the meeting on Monday.

In contrast, committee member state Sen. Betsy Johnson, D-Scappoose, peppered executives from Principle Power with questions throughout the two-hour meeting. Johnson asked how much space each floating turbine would cover — executives said each has a radius of 1,000 feet — and why other investors, including the oil company Shell, cannot fill the project’s funding gap.

“Shell’s got plenty of money,” Johnson said. “I don’t think there’s a lack of interest. Some of us are just concerned, who pays and how much?”

Principle Power CEO Joao Metelo said companies are investing in the technology, but they also need proof that the project can be financed.

The power purchase mandate in the bill in the Oregon Legislature earlier this year, House Bill 2216, could have generated an estimated $23 million annually for the project, said Oregon Public Utility Commission chief operating officer Michael Dougherty. That would have generated a total of $460 million to $575 million for Principle Power, if the utilities had signed 20 to 25-year contracts to buy the electricity.

For residential ratepayers, it could have cost up to 35 cents a month on their power bills.

A two-turbine pilot project could cost $150 million to $180 million, and a three-turbine project could cost $210 million to $250 million, according to a Principle Power presentation.

Johnson also asked Principle Power executives why they were no longer trying to sell power to the Jordan Cove liquified natural gas project, which they were exploring a couple years ago.

Kevin Banister, Principle Power’s vice president of business development in the Americas and Asia, said the company approached multiple industrial power purchasers but “there’s sticker shock for some of those players as well.” Due to delays in the Jordan Cove project, Banister said Principle Power could not secure a power purchase agreement with the developer in time to meet the May 2016 deadline for the federal grant.

Michael Hinricks, director of public affairs for Jordan Cove, gave a different reason why Jordan Cove developers are no longer discussing a power purchase agreement with Principle Power. Hinricks said Jordan Cove was waiting for Principle Power to complete a study of how the offshore wind project would impact the grid.

“There wouldn’t be any (discussions) with us, because we’re waiting on their interconnect study,” Hinricks said. The price of WindFloat’s power was also an issue for the Jordan Cove project, although Hinricks said Jordan Cove’s developers were interested in it because “it’s supporting green technology.”

Jeff Bissonnette, policy director for the Citizens’ Utility Board and a registered lobbyist, said perhaps there might be other ways the state could support the project so ratepayers would not directly shoulder as much of the financial burden. Bissonnette reiterated comments by utility representatives that rates should not be used to pay for research and development projects, nor for economic development.

“It seemed like it was the ratepayers of two utilities being asked to kind of bear this research burden in pushing the technology forward,” Bisonette said. “To the extent there are benefits to the state, that there is interest by the state, why isn’t there more of a discussion of a shared burden?”

Hillary Borrud is a reporter with the Pamplin Media Group/EO Media Group Capital Bureau in Salem.