Cape Wind, the first offshore wind farm in the US to win regulatory approval, has found a buyer for half of the electricity it will generate, when completed.
Investor-owned energy company National Grid announced a power purchase agreement with Cape Wind Associates, the project’s developers, on Friday. The deal, which came less than ten days after Cape Wind won regulatory approval, is a critical milestone for the project because it shows potential investors that there are utilities interested in buying its electricity.
The utility agreed to buy electricity from the farm at 20.7 cents a kilowatt hour, a roughly 8-cent premium over non-renewable electricity. That translates into about $1.59 per month for the typical customer, or about a nickel a day to turn on the A/C guilt-free. The contract is for 15 years, and prices will rise at a 3.5 percent annual rate.
Cape Wind has a simple break-down (PDF) on its website of how it arrived at the kwh price, as well as a comparison with the costs and risks associated with natural gas, which is currently wind power’s main competitor in the power generation market.
There once was a utility from Nantucket…
National Grid serves approximately 3.3 million customers in Massachusetts, New Hampshire, New York and Rhode Island. The closest market served by National Grid is the nearby island of Nantucket. Cape Cod, which gave the project its name, would not be served by this agreement.
The PPA was filed with the Massachusetts Department of Public Utilities on Monday. Under Massachusetts law, all investor-owned utilities like National Grid must get 3 percent of their electricity from renewable sources.
The 130-turbine farm hopes to go online by the end of 2012, and is expected to generate an average of 182 megawatts of power. On April 28 Interior Secretary Ken Salazar finally gave approval to Cape Wind after a nine year battle with local opposition.
Opposition groups, including a Native American tribe, plan to launch legal challenges.