Utility National Grid (NYSE: NGG) and offshore wind developers Cape Wind have come to terms for a power purchase agreement (PPA) for the Cape Wind offshore wind farm recently approved by the US Department of the Interior.
Under the terms of the contract, National Grid would purchase 50% of the wind farm’s output including electricity, renewable
energy certificates (RECs), and other potential market attributes for
20.7 cents per kilowatt hour, beginning in 2013. That price, which assumes existing federal
tax incentives, would increase 3.5% per year during the 15-year term of
the contract.
The companies will file a contract with the Massachusetts Department
of Public Utilities today.
Based on its forecasts of what customers will pay for
electricity in 2013, National Grid projects this will translate to a
total monthly bill increase of $1.59, roughly two percent per month, for
a typical residential customer who uses 500 kWh per month.
National Grid noted that it will only be purchasing slightly
more than 3% of its total electricity supply from Cape Wind.
Under the Green Communities Act, all of the Commonwealth’s investor-owned utilities are required to enter into long-term contracts to purchase at least three percent of their electricity supply from renewable generators.
National Grid President Tom King said that if future federal energy or climate change legislation includes a price for carbon emissions, Cape Wind could have a significant price advantage because it is a low-carbon generator.
Monday’s filing actually includes two contracts. The first, if approved, would enable National Grid to purchase 50 percent of the output of the wind farm for its customers. The second contract would facilitate the purchase of the remaining 50 percent by another party or parties.
National Grid is an international energy delivery company. In the U.S., National Grid delivers electricity to approximately 3.3 million customers in Massachusetts, New Hampshire, New York and Rhode Island, and manages the electricity network on Long Island under an agreement with the Long Island Power Authority (LIPA).
In December 2009, National Grid signed a 20-year PPA with offshore wind develper Deepwater Wind to purchase power from a proposed offshore wind farm near Block Island, Rhode Island for 24.4 cents per kilowatt hour (kWh).
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