Tuesday, November 10, 2009

NRG and Bluewater: Is There a Catch?

Could this be a trick or a ploy? Could NRG have bought Bluewater Wind to somehow control the growth of windpower? Could NRG have bought the windpower football just to pull it away from Charlie Brown?
I don't think so. NRG VP Drew Murphy yesterday repeatedly spoke of claiming the first mover advantage in talking to local and national media. He noted the proximity of offshore wind to a large load centers—in contrast to onshore wind in Texas and the Midwest which will require billions in transmission lines to get to customers.
Writing in the News Journal, Aaron Nathans spoke with a number of environmentalists whose reactions to the acquisition ranged from suspicious to enthusiastic. One suspicion expressed in comments to this blog and privately, is that NRG would use the acquisition to keep a lid on wind power. For instance, would NRG prefer to sell power from coal rather than sell power from the wind farm?
I discussed this yesterday with Nathans and professor Jeremy Firestone, who said, "You're always going to put the wind onto the system. You'd never turn it off."
I agree. Once the wind farm is built, NRG would want to sell every drop of power it produces. The wind farm's peak capacity will be higher than needed to meet the needs of the power purchase agreements (PPAs) with Delmarva Power, the Delaware Municipal Energy Corporation (DEMEC) and any other customers that sign on in order to ensure a steady flow of power. Once the wind farm's PPA customers needs are met, any additional power generated can be sold to the grid at any price Bluewater can get.

Unlike a coal plant, which would have to burn more fuel to generate more power, there is no marginal cost to selling extra wind power. If the turbines are already spinning, any additional power sold to the grid goes straight to the bottom line—even if it is sold at two cents a kilowatt hour.


Anonymous Edmund Dohnert said...

Given the current economic situation, NRG probably acquired Bluewater for a song. After all, what assets does Bluewater really have? That power purchase contract with Delmarva is less of an asset and more of a piece of paper. Contracts are broken all the time, usually accompanied by expensive lawsuits. A contract really guarantees nothing.

I would agree that if and when the Delaware wind farm is actually built, NRG would want to sell every single kilowatt-hour of energy produced simply because that represents revenue generated by already sunk capital investment.

However, where my nagging concern comes in has to do with how enthusiastically NRG will be in expanding the initial wind farm project and in attempting to build other offshore wind farms on the East Coast. It would be very disappointing if it turned out that NRG's intent was to use the Delaware wind farm project simply as a PR vehicle to show how progressive and 'green' they are, all the while stifling any future Bluewater wind projects, using the rationale that they are not cost-effective.

Often it is better to co-opt and gradually absorb the enemy than to defeat him outright. Let's hope this is not what NRG has in mind.

7:14 PM, November 10, 2009  
Blogger Tom Noyes said...

NRG's Drew Murphy said the company was interested in building more wind capacity. From what I understand the Bluewater wind farm would become more efficient on a unit basis if it is expanded from its current size, though I have not been told what the optimal size would be.

I have no interest in burnishing NRG's public image. I want to see the company build the biggest wind farm the grid can absorb.

4:53 PM, November 11, 2009  
Anonymous Anonymous said...

Months ago, before the bluewater wind acquisition, the CEO of NRG was talking about investing in off-shore wind.


1:35 PM, November 12, 2009  

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