Maryland Looks Into Price Cap As It Promotes Offshore Wind Energy Initiative According To SNL Energy

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Maryland Gov. Martin O'Malley's administration is working on a type of price cap as part of legislation that would require public utilities to enter into long-term power purchase agreements with offshore wind energy projects off the state's coast.

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State Sen. Paul Pinsky said Maryland is an optimal location for offshore wind energy and having a project off the state's coast will allow the state to rely less on coal-fired power plants and meet its renewable portfolio standard.

Maryland Gov. Martin O'Malley's administration is working on a type of price cap as part of legislation that would require public utilities to enter into long-term power purchase agreements with offshore wind energy projects off the state's coast.

During a March 15 state Senate Finance Committee hearing on S.B. 861, Abby Hopper, O'Malley's energy adviser, said all of the state's ratepayers would equitably share in covering the cost related to the PPAs, which the administration has estimated to be $1.44 more per month on an individual residential customer's bill. Under the legislation, the cost would not kick in until 2016, which is when turbines are anticipated to start spinning off Maryland's coast.

"We are looking at a maximum price impact for residential, commercial and industrial ratepayers," she said in an interview with SNL Energy. The administration is still working on the details, though, she said.

The bill was cross-filed with H.B. 1054, which was introduced in February and was sponsored by House Speaker Michael Busch and other lawmakers in the House of Delegates. The House bill was discussed at a House Economic Matters Committee hearing March 3. The bill would require state regulators to develop a process for drafting and issuing a request for proposals. A single RFP would be issued to qualifying offshore wind generators on behalf of the state's investor-owned electric utilities.

At the hearing, Hopper said the administration is seeking an amendment to the legislation that would require developers to include a cost-benefits analysis in their responses to the RFP, including information on wages, for instance.

State Sen. Paul Pinsky, lead sponsor of S.B. 861, said at the hearing that while there are many forms of clean and sustainable energy, such as solar power, there is not a lot of it yet in the U.S. The U.S. is behind Europe, China and others when it comes to offshore wind, he added.
Pinsky noted that Google Inc., which he called "a major player," is interested in developing offshore wind energy in the U.S. Having it enter is a "major boon," he said.

Google is among the backers of Trans-Elect Development Co. LLC's Atlantic Wind Connection, a transmission line to be built along the mid-Atlantic coast at an estimated cost of $5 billion.

Pinsky said Maryland is an optimal location for offshore wind energy and having a project off the state's coast will allow the state to rely less on coal-fired power plants and meet its renewable portfolio standard.

Malcolm Woolf, director of the Maryland Energy Administration, urged lawmakers to pass the bill, saying offshore wind is Maryland's most abundant renewable energy resource. The state will not be able to achieve its RPS mandate using locally produced resources if it does not tap the resources off its shores, he said.

Additionally, offshore wind will help promote resource diversity, Woolf said, noting that the state is powered mostly by coal and nuclear. The recent events in the Middle East and Japan, he said, underscore the dangers of relying on any single fuel source.

Despite the positive testimony from administration officials and others, senators voiced concerns about the high cost of offshore wind energy compared to conventional energy sources. They also stressed the need for public engagement, questioned the reliability of offshore wind energy and wanted assurances that jobs would be in Maryland. Senators also wanted more information on bird migratory patterns in the offshore areas where the wind turbines would be.

One senator asked why Maryland should not wait to build an offshore wind energy project if its costs are expected to decrease in the future as the technology evolves.

Hopper said "the wind will still be blowing" in the future, but the investment decisions are being made now. Essentially, Maryland will miss the economic development opportunities "if we wait to enter into these kinds of contracts," she said.

Report by Corina Rivera of SNL Energy.
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