Cape Wind Sets Power Agreement with National Grid, Gets FAA Approval

May 19, 2010

Cape Wind Associates, LLC has reached an agreement to sell half of the power produced by its proposed offshore wind farm to National Grid, a utility serving customers in Massachusetts and three other states. On May 10, National Grid filed with the Massachusetts Department of Public Utilities for approval of its 15-year power purchase agreement (PPA) with Cape Wind Associates. Overall, National Grid will buy about 3.5% of its electricity supply for Massachusetts from the Cape Wind project, fulfilling the state's requirement that all investor-owned utilities buy at least 3% of their electricity supply from renewable generators. National Grid also filed a second agreement to buy the balance of the power produced by the Cape Wind project, with the intent of assigning that wind power to other buyers. The PPAs are a key step in the development of the Cape Wind project, a 468-megawatt wind power facility in Nantucket Sound off the Massachusetts coast. The project won approval from the U.S. Department of Interior on April 28, putting it in position to become the first U.S. offshore wind project. See the article on the Interior Department approval from the May 5 edition of the EERE Network News.

Under the proposed PPA, the utility will initially pay 20.7 cents per kilowatt-hour (kWh) for the wind power in 2013, with the price increasing 3.5% each year. Based on current forecasts, the utility projects that the wind power purchase will add $1.59 to the average bill of a residential customer who uses 500 kWh per month. However, if a price is placed on carbon emissions in the future, National Grid expects the Cape Wind project to have a significant price advantage over conventional power sources. The PPA hinges on several milestones for the Cape Wind project, requiring the company to have all permits, property and site control rights, and financing in place by the end of 2013, and for construction to be underway by then, with commercial operation achieved by the end of 2015. However, the PPA allows the project to be developed in up to 17 phases, each consisting of at least 28 megawatts of wind power capacity. See the National Grid press release, the filing with the Massachusetts Department of Public Utilities (PDF 868 KB), and the Cape Wind fact sheet on the PPA (PDF 391 KB). Download Adobe Reader.

Cape Wind Associates also received approval for the project from the Federal Aviation Administration (FAA) on May 17. An FAA study revealed that the project will have no substantial adverse effect on the surrounding airspace or on the operation of air navigation facilities. The study did find that the wind farm could have an adverse impact on a radar system at Otis Air Force Base, but it also found that a modification to that radar system will likely solve the problem. However, in the unlikely event that a new radar system is needed, Cape Wind Associates has agreed to pay for the acquisition, siting, and installation of the new system. See the FAA "Determination of No Hazard" and supporting documentation on the FAA Obstruction Evaluation/Airport Airspace Analysis Web site, as well as the related statement from Cape Wind Associates.