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September 13th, 2012

Deepwater Offshore Wind: Hywind Maine

by Andrew Price, President & COO

Last week I attended the AWEA Regional Wind Energy Summit in Portland, Maine. This two day conference had many great speakers and provided a wealth of information on the current state of the wind power industry in New England.

One topic of particular relevance at the conference was the Hywind Maine project. The Hywind project, proposed by international energy giant Statoil, consists of 4 floating wind turbines, each with a 3 MW capacity. The wind farm would be located more than 10 miles off the coast of Maine in water that is at least 300 feet deep. Statoil and the Maine Public Utilities Commission (MPUC) have negotiated a draft term sheet for the project. A redacted version of the term sheet is available on the MPUC Website. The MPUC is likely to make a decision on the term sheet in the next few weeks or months.

Statoil is seeking a 20 year contract to sell the electricity generated by the 12 MW project to the three Investor Owned Utilities (IOUs) in Maine: Central Maine Power Company (CMP), Bangor Hydro Electric Company (BHE) and Maine Public Service Company (MPS). There are two proposed pricing options in the draft term sheet, one starting at 29 cents per kWh and one at 32 cents per kWh. Each option has an annual escalator equal to the rate of change in aggregate retail sales across the three IOUs. The price for electricity from the project would therefore increase in direct proportion to total retail electric usage in Maine. The 29 cent per kWh pricing option adds an additional 1% annual price escalator. Assuming that the project produces about 41,000,000 kWhs per year, Statoil would collect about $12 million in the first year of operation for sales of electricity. In addition to the electricity sales to Maine IOUs, Statoil would keep any revenue associated with Renewable Energy Credits, Forward Capacity Market value and grants from State, Federal or other sources.

Statoil has committed to keeping at least 40% of its capital expenditures as well as its operations and maintenance expenditures with Maine companies. has also agreed to establish an operations center in Maine and to maintain minimum employment levels in the State. Statoil has also engaged in a research and development initiative with the University of Maine.

Statoil, is best known for oil and gas exploration and production but has some experience with floating offshore wind turbines. In 2009 Statoil installed a 2.3 MW floating turbine off the coast of Norway. This demonstration turbine (pictured) is 6 miles offshore and has delivered about 21,000 MWhs to the Norwegian power grid to-date. Statoil is also involved in offshore wind projects in Europe.

While the estimated cost of the Hywind Maine project has not been made public, Statoil reportedly spent in the neighborhood of $70 million USD (or close to $30 million USD per MW) for its 2.3 MW demonstration turbine in Norway. 

The Hywind Maine project is a direct result of legislation that was enacted in 2010. An Act to Implement the Recommendations of the Governor’s Ocean Energy Task Force established official state goals of 300 MWs of offshore wind by 2020 and 5,000 MWs of offshore wind by 2030. The so-called Ocean Energy Act allowed the MPUC to authorize substantial above market pricing for a small offshore pilot project on the grounds that the rate impact would be small relative to the size of the total retail load in Maine and that a demonstration project would be a pre-requisite to much larger offshore wind farms in the future. The Ocean Energy Act does require that the MPUC find “tangible economic benefits” for any project but does not specify how these benefits should be calculated or over what time period.

Statoil hopes that Hywind Maine will be pilot project envisioned by the Ocean Energy Act. Even if the MPUC approves the negotiated term sheet for the Hywind Maine project, Statoil may decide not to move forward for a number of reasons. Chief amount these potential roadblocks would be a failure by the federal government to extend the federal investment and/or production tax credit for wind power in the US. The Hywind Maine project is targeted to achieve commercial operations during 2016.  

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