Offshore wind leaders heartened by natural gas price spike in Northeast

Source: Elizabeth Harball, E&E reporter • Posted: Friday, February 28, 2014

BOSTON — In a panel discussion held here yesterday, high natural gas costs spurred by the Northeast’s frigid winter emerged as a point of hope for the kingpins of the offshore wind energy industry.Jim Gordon, president of the long-delayed Cape Wind project and a former natural gas developer himself, opened his remarks at the Offshore Wind Power USA conference noting that the price of natural gas in New England that morning was $29.75 per million British thermal units, while the price of electricity was $237 per megawatt-hour.”Contrast that to Cape Wind’s power. If it was up and running today, [it] would be $190 per megawatt-hour,” Gordon said.

“I’m worried about the fact that New England is starting to get in an area of overreliance on natural gas,” he added. “… We have a decision to make as to whether we’re going to start tying our energy destiny to building billions of dollars of new pipelines, because that’s what the price of this is going to be. We’re going to tie our future to the Marcellus Shale, the Haynesville Shale [and] Calgary, Alberta.”

Shortly afterward, Deepwater Wind CEO Jeff Grybowski, whose 30-megawatt Block Island Wind Farm near Rhode Island is competing with Cape Wind for the title of first utility-scale offshore wind project in the United States, noted that between Gordon’s speech and his own, New England’s power prices rose by about $30 to $263 per MWh.

“I don’t think I’ve seen the price below about $150 anytime this winter,” Grybowski said.

Natural gas remains a threat

The U.S. Energy Information Administration reports that New England’s high natural gas prices this winter were driven by higher demand during the especially cold days brought on by the polar vortex, leading to congestion on the Algonquin pipeline that serves Boston. Because natural gas now fuels more than half of New England’s power generation, this has a marked impact on electricity prices.

In a report issued last week, the Institute for Energy Research noted that many gas-fired power plants in the Northeast switched out their fuel source to petroleum this January as a result (EnergyWire, Feb. 13).

Offshore wind proponents, of course, see this as another reason to back their industry, as the technology has the potential to provide an easily accessible energy supply to the Northeast’s grid at a fixed price.

“These price spikes are intense, and we have the ability to deploy at very high scales, both in terms of the size of the turbines and the size of the projects, access to very high-quality wind with low surface roughness, and also it is very well matched with load demand of coastal areas,” said Doug Pfeister, acting president of the Offshore Wind Development Coalition.

However, the U.S. government’s support for natural gas isn’t fading away anytime soon, said offshore wind advocate Catherine Bowes of the National Wildlife Federation, leaving offshore wind with an undeniably formidable competitor.

“For those that want to build renewable energy power plants, it’s a real challenge,” Bowes said.

Chris Wissemann, CEO of Fishermen’s Energy of New Jersey, also acknowledged the fuel’s rapid growth as a threat during yesterday’s panel.

“It is really easy to become complacent in the face of natural gas — you see it heralded as our path to energy independence,” Wissemann said. “The fact is, fundamentally, natural gas, as abundant as it is, really needs to be treated as a bridge fuel.”

Where does a ‘bridge fuel’ end?

Rhetoric coming from the Obama administration seems to answer Wissemann’s desires.

“You have to take that phrase ‘bridge fuel’ seriously,” Deputy Energy Secretary Daniel Poneman said during a separate presentation Tuesday, during which he implored the offshore wind industry to lower its capital costs.

“We’ve got to, got to use the opportunity presented by this prodigious outpouring of cheap and greener energy to go the next mile,” Poneman said.

However, it’s not apparent that the Obama administration will favor offshore wind over other fuels as it pursues its goal of sourcing 80 percent of America’s energy from clean sources — including clean coal and natural gas — by 2035.

“We are not overly prescriptive about, to the third decimal place, what is going to be what percentage, but it’s all part of what the president calls his ‘all of the above’ strategy,” Poneman told conference attendees.

But later that day, offshore wind advocates heard perhaps more encouraging words from Ann Berwick, chairwoman of the Massachusetts Department of Public Utilities, which approved Cape Wind’s 15-year power purchase agreement with NSTAR Electric Co. in 2012.

Berwick said other renewable resources like large hydropower, solar and onshore wind had limited potential when it comes to the state’s aims of cutting carbon emissions.

“There is absolutely no getting away from this conclusion: In New England, you can’t decarbonize the electric grid without offshore wind,” Berwick said.

“We view none of the nonrenewable options with enthusiasm,” Berwick added. “Natural gas we see largely as a bridge to renewables — don’t be fooled by all the talk of natural gas as cheap or as a clean fuel.”