New report: Offshore wind could add 800 jobs; state energy chief seeks ratepayer protection

AUGUSTA, Maine — Statoil North America, the firm that wants to place four floating turbines in the Gulf of Maine as an ocean wind energy pilot project, has offered a professor’s new projections that commercial wind power would add more than 800 jobs and $43 million annually to the state’s economy.

In comments filed Sept. 7 to the Maine Public Utilities Commission, which is considering Statoil’s terms for a long-term contract with one or more of the state’s three major electricity providers, Ken Fletcher, director of the Maine Energy Office, questioned whether the project would yield enough economic benefits to justify what he calculated could be as much as $203 million in added costs to ratepayers over 20 years.

Fletcher also expressed concern that the contract price of electricity generated by the Hywind Maine pilot project, when factored with a tidal energy project in Cobscook Bay, could exceed a rate cap included in the 2010 Ocean Energy Act approved by the Legislature. And he sought firmer assurances that Statoil would build alliances with Maine businesses if the company moved ahead with exploration of larger-scale commercial wind energy generation off the coast of Maine.

On Monday, Statoil submitted two responses to the PUC. The first, written by attorney Patrick Scully of Bernstein Shur on behalf of Statoil, addressed Fletcher’s concerns, as well as those put forth by the Industrial Energy Consumers Group, a consortium of Maine businesses. The second, by Lars Johannes Nordli, vice president of wind business development for Norway-based Statoil ASA, includes a new economic impact study that Statoil contracted from Todd Gabe, an economics professor at the University of Maine.

Scully reiterated Statoil’s position that contract terms the firm submitted Aug. 15 to the PUC for the Hywind Maine pilot project comply with the 2010 Ocean Energy Act because “Statoil has demonstrated the considerable economic benefits to Maine that the pilot project will bring.”

“The Legislature recognized that a subsidy would be necessary to permit the construction of a pilot project off Maine’s coast,” Scully wrote. “It also recognized that the real ‘payback’ for Maine’s investment in this new technology comes with full scale development of floating offshore wind in the Gulf of Maine — development that is far more likely to occur as a result of successful deployment of this pilot project.”

Gabe’s study predicts what those paybacks could be if Hywind Maine leads to a commercial 500-megawatt offshore wind farm using floating turbines as proposed for the pilot project and being tested at the University of Maine’s Advanced Structures and Composites Center. The four turbines in the Hywind Maine proposal would generate 12 megawatts of power, according to Statoil.

Researchers hope to test a smaller model of a floating turbine in the Gulf of Maine, perhaps as early as spring 2013. Statoil aims to place turbines for the Hywind Maine project by summer 2016.

Using floating turbines for offshore wind energy generation remains a developmental technology. Offshore wind farms in Europe use turbines affixed to the seabed.

Gabe estimates that planning and construction of a 500-megawatt ocean wind energy facility with 100 floating turbines about 12 miles offshore would cost at least $1.6 billion. He evaluated two scenarios. One is based on existing state construction, transportation and technical resources. The second reflects an expansion of manufacturing related to turbine construction and delivery.

“Results of the analysis indicate that a commercial-scale offshore wind power project would have an average annual economic impact — including multiplier effects — under the existing supply chain scenario of an estimated $146.5 million in output, 881 full- and part-time jobs, and $43 million in labor income,” Gabe wrote in his study.

If Maine adds turbine and blade manufacturing facilities, for example, Gabe estimates that the impact could rise to $256.7 million in output, 1,386 full- and part-time jobs and $70.8 million in labor income.

In presenting Gabe’s study to the PUC, Nordli wrote that Statoil will “maximize local content in the construction and operation of the Hywind Maine Pilot Project,” and that the firm “will use commercially reasonable efforts to spend in Maine or allocate to Maine suppliers at least 40 percent of the capital expenditures.”

He also wrote that Statoil “bears all of the development and construction risk of investing over $120 million in capital in this pilot project,” and that company officials believe a commercial offshore wind energy farm eventually would provide electricity at a rate of 10 cents per kilowatt hour.

“I think Statoil is beginning to understand that the concerns that we expressed are not because we are opposed to the project, but that we need to see a stronger commitment to current and future investment in Maine,” Fletcher told the Bangor Daily News after reviewing Statoil’s response Tuesday.

“I think we need some assurance that if they don’t decide to build it in Maine and float it out, then we should have some liquidated damages protection,” he said. “They could alleviate our concerns by making strong commitments and contract to limit Maine ratepayers’ exposure. The economic impact makes sense, but we need something a little more definitive. We think ocean wind is a great potential, but this is business.”

Fletcher also suggested that, as allowed by the 2010 Maine Ocean Energy Act, companies and individuals that support the project and perhaps gain from it could contract to buy electricity generated by Hywind Maine at the higher rate. Doing so would mitigate the financial impact on low income ratepayers and small business.

Like Fletcher, the Industrial Energy Consumers Group questioned the impact on ratepayers of higher electricity costs associated with the Hywind Maine project. “The rates proposed in this matter are clearly in excess of any reasonable calculation of avoided cost,” attorneys for the group wrote in a Sept. 7 correspondence urging the PUC to reject Statoil’s term sheet.

The same correspondence also argues that Statoil’s proposal fails to comply with the 2010 Ocean Energy Act and runs afoul of federal law related to setting utility rates.

Scully counters the first argument with a conflicting interpretation of the Legislature’s intent in passing the 2010 Ocean Energy Act. To the second point, he argues that the Statoil proposal for Hywind Maine establishes a contract price rather than a utility rate paid for energy produced by the pilot project.

In an email Tuesday to the Bangor Daily News, a representative of the PUC wrote that deliberations on the Hywind Maine project have yet to be scheduled, but that they would likely occur in October.

A separate federal process to determine competitive interest and environmental effects of a project like Hywind Maine is under way through the Bureau of Ocean Energy Management.