Massachusetts approves offshore wind PPA between Cape Wind, NSTAR

Corina Rivera-Linares | Nov 27, 2012

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Massachusetts state regulators on Nov. 26 approved a 15-year power purchase agreement (PPA) under which NSTAR Electric will buy 129 MW, or about 27.5%, of the power output from Cape Wind Associates’ proposed Cape Wind offshore wind project.

That amount is about equal to 1.9% of NSTAR Electric’s distribution load in 2013, according to the state Department of Public Utilities’ order.

NSTAR merged with Northeast Utilities (NYSE:NU) earlier this year.
The Massachusetts Supreme Judicial Court in December 2011 upheld the legal order's approval of Cape Wind’s PPA with National Grid plc subsidiary National Grid USA for 50% of the project’s power, Cape Wind said.

According to the Nov. 26 order, under the PPA, the facility must meet certain milestones to trigger NSTAR Electric’s purchase obligations, including beginning construction by Dec. 31, 2013, and meeting a deadline for commercial operation of all phases by Dec. 31, 2015.

All milestones are subject to certain extensions: Cape Wind may extend the commercial operation date for one year with no additional security and it may further extend that date for two six-month periods by posting additional security of $645,000 for each six-month period.

Under the PPA, Cape Wind will sell and deliver to NSTAR Electric three products associated with the facility’s output: energy, capacity and renewable energy certificates (RECs).

Project’s transmission plans

In a previous interview with Energy Central’s TransmissionHub, Mark Rodgers, communications director with Cape Wind, explained the project’s transmission plans.

“In our case, when we started out, it was obvious that we didn’t have to build? that kind of [transmission] system in place here,” he said. “So it would be, just as it is typically for a land-based wind developer, our responsibility to provide transmission” to interconnect to the grid.

According to Cape Wind’s final environmental impact report, an electrical service platform (ESP) will have to be installed and maintained within the approximate center of the wind turbine generator (WTG) array.

The report also said the interconnection with the existing NSTAR Electric transmission system will allow renewable energy from the WTGs to be distributed to consumers connected to the New England transmission grid.

Costs associated with the project’s transmission aspect are all Cape Wind’s, Rodgers said.

Details of the PPA

The PPA establishes a base price equal to $187 per MWh for energy delivered in calendar year 2013.

The bundled price is the base price, as adjusted for size, tax credits and financing. The order also noted that the bundled price will be adjusted downward if, at that price, the costs to build and operate the facility are such that Cape Wind's internal rate of return would exceed 10.75%. Also, the bundled price is subject to an annual escalation factor.

The contract price may be adjusted based on changes to the facility’s size. The 2013 base price will be adjusted upward if Cape Wind reduces its nameplate capacity below 468 MW. Specifically, the base price will increase by about 8 cents per MWh for each megawatt reduction in nameplate capacity below 468 MW, but the 2013 size-adjusted base price cannot exceed $193 per MWh.

The PPA includes a mechanism to lower the price of the contract to reflect lower debt financing costs for the facility. If there is reduced financing costs, that will flow to NSTAR Electric’s ratepayers.

On the remainder of the project’s output, Rodgers said, “We are moving forward financing the project on the basis of the PPAs we have, 77.5% translates to 101 wind turbines. When we sell additional power we will seek additional financing for that.”

Cape Wind President Jim Gordon said, “With this decision, Massachusetts electric consumers have secured an abundant, inexhaustible and clean energy resource that provides price stability and avoids all of the external costs of fossil fuels.”


Corina Rivera-Linares is senior analyst for TransmissionHub, a unit of Energy Central

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