Millstone, offshore wind among zero-carbon auction winners
Hartford — The state capped off more than a year of debate and speculation about its zero-carbon auction on Friday, picking proposals from two nuclear facilities — including Waterford's Millstone Power Station — nine solar projects and an expansion of the Revolution Wind farm set to deliver electricity from federal waters south of Martha's Vineyard by 2023.
All told, the selected clean energy projects could deliver up to 45 percent of the state's electricity load, more than 11,600,000 megawatt hours. The picks follow the General Assembly's passage of Public Act 17-3 in June 2017, which called on the state to procure more zero-carbon electricity and paved the way for Millstone to compete with higher-priced solar, wind and hydropower after owner Dominion Energy hinted that early retirement of the plant was possible in the wake of historically low natural gas prices.
Energy companies submitted more than 100 proposals in the auction earlier this year. Gov. Dannel Malloy and Department of Energy and Environmental Protection Commissioner Rob Klee said the selections show the state's commitment to combating climate change.
"Make no mistake, we are facing a climate crisis while the future of the planet is at stake," Malloy said in a statement Friday afternoon. "We need to increase investments in clean energy like offshore wind, solar and grid-scale storage."
Klee said recent United Nations and federal reports on climate change "make clear we are running out of time to decarbonize the energy sector."
"The selection of this diverse portfolio of zero-carbon resources ensures that Connecticut is doing its part to address climate change," Klee said.
But Claire Coleman, an attorney with the Connecticut Fund for the Environment, argued while Millstone is an important part of the state's power mix, regulators' picks were still weighted too heavily in favor of nuclear power.
"We're glad the state will see some new solar and wind come online as a result of this procurement, but are still very concerned that as a whole, these choices don't put Connecticut on the road to a clean energy economy," she said. "The future is off-shore wind, solar, geothermal and smart strategies for efficiency and energy storage. But the small investments in these newer resources compared to the heavy investment in nuclear largely don't reflect that. Instead the state has doubled down on the energy sources of the past."
DEEP pushes Dominion to lower prices
DEEP selected a 10-year proposal from Millstone that amounts to about half the facility's 2,100-megawatt output. DEEP treated the selection as two separate bids with separate prices that have yet to be finalized. Over the next three years, when the plant is not considered "at risk" of early retirement because Dominion has already sold electricity capacity to the New England grid, Millstone will receive compensation based on energy-only pricing, DEEP said. Millstone will receive higher prices based on the plant's environmental, economic and grid benefits between 2022 to 2029, which regulators have designated as an "at risk" period for the facility. Dominion earlier this year turned over confidential financial data in an attempt to prove Millstone was at risk of early retirement.
However, prices in Dominion's proposals were a little too high for regulators' liking. Describing Millstone as "an extremely important resource," DEEP called on Eversource and United Illuminating to "negotiate the price downwards to better reflect a reasonable rate of return. Dominion has sought a rate of return that is not in the best interests of ratepayers."
"We remain committed to keeping this valuable zero-carbon resource, provided that it is affordable, as we work towards long-term replacement through smart investments in offshore wind and solar paired with grid-scale storage," Klee said. "At the same time, we believe ratepayers deserve, and can get, a more competitive price for Millstone's output."
Regardless of the state's push for lower prices out of Dominion, the company took the selection as "welcome holiday news," according to Executive Vice President and CEO of Power Generation Paul Koonce.
"We are pleased that Connecticut's regulators have selected Millstone's offer as being in the best interest of customers. DEEP's decision is good news for Connecticut's economy and the environment. Our zero carbon offer brings at least $670 million in net benefits to Connecticut customers," Koonce said in a statement. "We are especially pleased to share this news with the 1,500 women and men that operate the Millstone Power Station. We look forward to executing the contract with Connecticut's utilities shortly."
DEEP asked the utilities and Dominion to hammer out contracts by March 31, 2019.
DEEP also picked Seabrook Station, the nuclear power plant in Seabrook, N.H., to deliver electricity at 3.3 cents per kilowatt hour, which regulators said beats the market forecast and should save Connecticut ratepayers $18 million per year over an eight-year term. The Seabrook contract begins in 2022 and is for 1.9 million MWh. Seabrook did not seek at-risk status in its proposal.
DEEP spokesman Chris Collibee noted that pricing can remain confidential as part of the competitive auction and contract process. DEEP asked bidders to release prices, but Dominion declined, Collibee said.
Asked about pricing, Millstone spokesman Ken Holt noted, "There is still a portion of Millstone's output that is uncontracted. Having pricing announced before a contract is executed could adversely affect Dominion's ability to manage the market exposure of that uncontracted output."
Offshore wind and solar picks
The state could have selected large wind farms proposed by Orsted, the largest offshore wind company in the world, or Vineyard Wind, which was picked as Massachusetts' offshore wind developer. Instead, regulators chose a proposal initially from Deepwater Wind — which was acquired by Orsted earlier this year for about a half-billion dollars — to expand the planned Revolution Wind farm proposed by the Block Island Wind Farm developer. The selection could mean more economic development for New London, which has been proposed as a staging and construction site for offshore wind projects planned along the East Coast.
Officials with the newly combined Deepwater Wind and Orsted, dubbed Orsted US Offshore Wind, said the expansion is enough renewable energy to power 50,000 additional Connecticut homes and displace 3 million tons of greenhouse gas emissions.
"Offshore wind is fast becoming a centerpiece of Connecticut's renewable energy future," said Jeffrey Grybowski, Co-CEO of Orsted US Offshore Wind. "We're proud that our Revolution Wind project will now deliver even more clean energy to Connecticut communities."
Orsted had pledged to maintain Deepwater Wind's initial commitment to invest $15 million into New London State Pier to help develop it into an offshore wind hub. The expansion proposal includes an additional $7.5 million toward that effort; $3 million to fund marine infrastructure to support the port's existing maritime-dependent businesses; and almost $2.5 million in education-related activities with the University of Connecticut, Mystic Aquarium and other partners.
“We have already formed great relationships with Orsted US Offshore Wind, and I’m glad to see their Revolution Wind project receiving support from the state and DEEP,” said Michael Passero, mayor of the city of New London. “New London plans to be at the center of the coming surge in offshore wind development. As there is more push for clean renewable energy, we will be at the table as the go-to port for assembling wind farm projects throughout the Northeast.”
“This is a great opportunity for development and growth in New London,” said Felix Reyes, director of economic development and planning for the city of New London. “We are seeing the next generation of technology being built and assembled in our city, and we are looking forward to what this additional investment will mean for the future of our port.”
Orsted US Offshore Wind will now enter negotiations with Eversource and UI for a fixed-price 20-year contract. Survey work is underway as part of the project's permitting process and installation work should begin by 2022.
Emily Lewis, senior policy analyst at Acadia Center, called the offshore wind procurement "another step forward for Connecticut."
"Adding more offshore wind to the state's clean energy portfolio will continue the momentum of this growing industry," she said. "By carving out a portion of this RFP for offshore wind, the state is working to incrementally build its clean energy economy."
Lewis said it seemed like Connecticut was "being a little shy" to enter the offshore wind game compared to Massachusetts, New York, New Jersey and Rhode Island. She noted the Acadia Center and Connecticut Roundtable on Climate and Jobs called on the state to set "an offshore wind mandate similar to other East Coast states."
"This announcement is good news for our workers and their communities, as it expands the new offshore wind industry's footprint in Connecticut and demonstrates the state's interest in securing a share of the highly-paid offshore wind jobs coming to the Northeast," said John Humphries, lead organizer for the CT Roundtable on Climate and Jobs. "However, this is a very timid step in comparison to other states in the region, and Connecticut needs to make a long-term commitment to a more substantial procurement to attract investments in manufacturing and supply chain activities."
Of the nine selected solar projects, three are based in Connecticut, two will deliver power from New Hampshire and four from Maine. Two of the projects include energy storage plans.
DEEP said the average cost of the nine projects is about 4.9 cents per kilowatt hour, "which is approaching parity with the market price of energy, and represents continued price reductions compared to our last procurement of grid scale solar, as well as additional savings to ratepayers."