Four proposed wind farms in Jefferson County will never get off the drawing board unless they can find someone to buy their power. And the most likely buyer — the New York Power Authority — has refused to purchase any electricity generated by wind here.
The decision is in retaliation to the county Legislature's 14-0 vote in March to oppose NYPA's plan to put wind turbines in Lake Ontario.
"We have no plans to enter into any agreement in Jefferson County based on the vote of the county legislature," said Richard M. Kessel, president and chief executive officer of New York Power Authority. "We respect their decision, and we won't place any of our wind turbines in the area, but we won't enter into any agreement with any wind power project in the county."
In Jefferson County, Acciona Wind Energy USA's St. Lawrence Wind Farm, BP Alternative Energy's Cape Vincent Wind Farm and Iberdrola's Horse Creek Wind Farm are still in the local approval process.
But the one approved project that is most threatened by NYPA's refusal is Galloo Island Wind Farm.
Developer Upstate NY Power Corp and backer Pattern Energy Group LP, San Francisco, need to find $500 million from investors just to cover the cost of putting the project on the island.
Investors don't want to bank on the price of electricity alone, because that fluctuates. And right now, electricity prices remain low — 2009 brought the lowest average price for electricity on the wholesale market run by the New York Independent System Operator in its 10-year history.
So to finance its project, Upstate NY Power will need to show it can bring solid returns to banks and other investors for years to come.
To do so, it will need the stability of a power purchase agreement, a guarantee from a utility or large end-user that it will buy Upstate's electricity. Those agreements generally last 10 years.
Without that or a contract with the state for renewable energy credits from the power that is deemed environmentally friendly, it becomes "much more difficult to get financing," said Carol E. Murphy, executive director of the Alliance for Clean Energy New York.
"You need to have something to show the bank," she said.
For electricity producers in New York, NYPA is a natural buyer as the largest state-owned power organization in the country. Jefferson County wind producers won't have that option.
Upstate NY Power representative Robert W. Burgdorf, attorney with Nixon Peabody, Rochester, refused to confirm that the developer has already been turned down by NYPA.
He acknowledged that the developer doesn't have an agreement to sell electricity yet, and added, "It's part of a typical wind project to search for one."
The developer could get an agreement with another utility or end user or try to tap into the state's Renewable Portfolio Standard. Through the New York State Energy Research and Development Authority, the state offers 10-year contracts for renewable energy credits in a competitive bidding process. The electricity is still sold on the state's wholesale market.
The most recent state contracts were announced in March to eight of 29 proposals.
Lewis County's Maple Ridge Wind Farm secured a contract in the first round of the program's funding.
The project also has a 10-year contract with NSTAR Green in Massachusetts to provide 30 megawatts of power to that green arm of NSTAR Electric.
Ms. Murphy said the agreements aren't just good for developers — they're also good for utilities and large users, so they can better predict what their long-range electricity costs will be.
"And for the utility, large user or power authority, it's really a hedge against the volatility of the gas and oil market," Ms. Murphy said.
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