Monday, June 09, 2008

Wind Power: What's the Deal?

Amid the excitement over reports that a deal between Bluewater Wind and Delmarva Power could be in the works, astute readers may be wondering: Haven't we been here before. Isn't there already a deal on the table?
Yes there is. It's called the power purchase agreement or PPA, and it was negotiated last year. Delmarva Power has been doing everything it can to block adoption of the PPA, which it hasn't signed.
Is there reason to think that the company will relent and sign this new agreement? For that matter, how would this agreement, negotiated in Tony DeLuca's office, relate to the PPA that has been on hold since December?
The DeLuca deal would not replace the PPA, but amend it. I would guess that the parties would renegotiate the relevant portions of the PPA, and present it to the four agencies overseeing the procurement process. The General Assembly, either through a resolution or through its leadership, would recommend to Russ Larson, the controller general, that he vote to adopt the amended PPA when it comes before the four agencies for approval.
So will Delmarva agree this time, when it has fought Bluewater Wind so hard for so long? Delmarva Power, which filed a lawsuit to overturn the selection of Bluewater Wind proposal a year ago, was compelled by law to sit down and negotiate. It took the active engagement of an arbitrator to push the parties to hammer out a PPA, which Delmarva still opposed at the end of the negotiations. And even if the General Assembly passes HCR 38, and the four agencies approve the PPA, the lawsuit still sits on a judge's desk waiting to be reactivated.
Why then should Delmarva Power willingly enter into these new negotiations, when it has been so intransigent? HB 6 mandated that Delmarva Power negotiate a PPA. But there is no law requiring the company to sit down with Tony DeLuca, except perhaps the law of self-preservation. Lawmakers are more powerful than regulators. The Public Service Commission administers the law. Tony DeLuca and his colleagues write the law. It's one thing to defy three state agencies. It's another thing entirely to defy the General Assembly, where legislators have been known to introduce bills to punish those who cross them.
As for whether Delmarva Power is just stalling for time, we will know soon enough. Everything I'm hearing tells me that Senator DeLuca wants the matter resolved this week. The General Assembly is grappling with the biggest budget gap in years. Legislators can't leave wind power unresolved, and don't want to have the issue on the table two weeks from now. Delmarva Power faces a decision: Either sign on to the compromise, or see HCR 38 pass the Senate.
The lawsuit doesn't challenge the PPA itself, but the selection of Bluewater. I'm not a lawyer, but I imagine that it would be more difficult to challenge the legitimacy of the selection
after a year of negotiations under the guidance of an arbitrator, and later under the supervision of the Senate majority leader.
If HCR 38 passes and the PPA is approved in its current form, Delmarva could find itself in a weaker position. Which doesn't mean that Delmarva Power wouldn't try. It wouldn't matter whether the company has a good case; it could simply cripple the project by keeping it in legal limbo.
This brings us to Bluewater's motivation for negotiating, rather than simply pushing for a vote on HCR 38. Dropping the lawsuit is central to the deal. Bluewater doesn't make money until it actually builds the wind farm. It doesn't want to spend the next year or longer in a Kafkaesque nightmare in which the entire process is relived in a courtroom.


Anonymous Anonymous said...

I see from the News Journal that Delmarva just signed an agreement with AES for up to 70 MW of wind power from wind farms in PA.

As Delmarva supposedly already has an up to 100 MW wind power agreement with a company called Synergics, it can now claim that it has up to 170 MW of wind power lined up, which (coincidently I'm sure) is almost the exact same amount as Bluewater's proposal.

Clearly, Delmarva is going to make one eleventh-hour push to convince everyone that with these wind-power agreements in hand, there is no longer any need to go with Bluewater. As always, the devil is in the details, and one detail that should be carefully noted is the language 'up to', which if taken literally can mean anything from zero MW all the way up to 170 MW.

8:22 AM, June 10, 2008  
Anonymous Anonymous said...

Everything that everyone writes or says should replace the wording "Off Shore Wind Power" with "In state wind power"

That is the leverage point.

11:32 AM, June 10, 2008  
Anonymous Anonymous said...

Bluewater was to provide 300 MWh, not 170 MWh,

Even at this amount there is still a deficit of 130 MWh between the two plans. That translates as 130 MWh which will augmented by fossil fuel energy costing 3 times as much..

Currently with just two onshore wind deals announced, we will be paying 300% more for the 130 MWh difference between the two plans.

That is a lot of dough... we will pay more for our power than we have to....

1:41 PM, June 10, 2008  
Anonymous Anonymous said...

kavips -

You are correct, the rated capacity of the proposed Bluewater wind farm is 300 MW rather than 160 MW as I had mistakenly stated.

However, as I pointed out here once before, electrical power is given in units of megawatts (MW), whereas the actual quantity of electrical energy provided (i.e., the stuff you pay for in your electric bill) is in terms of megawatt-hours (MWh).

So, when Delmarva says they have contracted for up to 170 MW of power, that is really just power industry jargon for saying that they will purchase a portion of the output (in MWh) of the onshore wind farms equivalent to a generation rate of 170 MW. One hour's worth of the electricity coming from an equivalent 170 MW generator is 170 MWh, two hour's worth is 340 MWh, etc. Delmarva will be buying MWhs not MWs.

Your point about the 130 MW difference is quite valid. Also, we haven't seen the fine print of the contract, and the language of 'up to' worries me a great deal. My gut feel is that this is all just smoke to get Delmarva through this session so they can spend the intevening months attempting to further attack the Bluewater proposal.

And as 'anon' said so succintly above, the important difference is not between offshore and onshore, but rather between instate and out-of-state.

Edmund Dohnert

3:01 PM, June 10, 2008  
Anonymous Anonymous said...

Thank the gods that there are brains around here that can parse this stuff so well. Bless.

11:21 AM, June 11, 2008  
Anonymous Anonymous said...

Where's the muscle to force Delmarva Power to take the deal or say No now? Tick, tick, tick. Get real Deluca. Delmarva and its rich lawyers are never going to play nice. They won't dismiss their lawsuit unless you and Carney put them and their other pals in a corner and tell them what the future will look like if they don't. If things don't break Bluewater's way by tomorrow, approve the contract on Tuesday. Ram it down Delmarva's throat.

4:54 PM, June 11, 2008  

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