16 Jan 2011

It’s time for all utilities to buy electricity under power purchase agreements

Written by Jim Pierobon

Power purchase agreements – aka “PPAs” – are an established tool for spreading the cost of energy over 20 years or longer as a means of ensuring a revenue stream for renewable energy project developers, stabilizing and predicting energy costs and displacing dirty coal with cleaner sources of electricity. The time has come in just about every state that does not already have them to require regulated utilities to buy power from wind, solar and other renewable sources.

One real-time test case is playing out in Maryland. There, newly re-elected Democratic Gov. Martin O’Malley is set to introduce legislation before the state’s General Assembly to require investor-owned electricity utilities — Baltimore Gas & Electric, PEPCO and Allegheny Power — to purchase power under long-term PPAs.

For utilities accustomed to sourcing their power on the “spot” or very short-term markets, such a proposal will likely be met with disdain if not outright opposition. O’Malley has set ambitious state goals for renewable energy, energy efficiency, greenhouse gas emission reductions and the green jobs that come with them. Whether he succeeds in this contest of wills depends on how serious he is in achieving them. Maryland is an important barometer for other states to watch.

Massachusetts and Delaware already are blazing this trail in part because of influential organizations and lawmakers pushing for cleaner energy. Collectively, Maryland’s lawmakers are more moderate. But this debate will likely hinge on how credible proponents are in connecting cleaner energy with good-paying construction and full-time jobs.

Steelworkers and other wind energy supporters in the Maryland Statehouse. The blue t-shirts read: "Real Jobs. Clean Power." Credit: Chesapeake Climate Action Network

One new alliance making the case has joined steelworkers with the   Chesapeake Climate Action Network and Environment Maryland. Together they marched on the Maryland Statehouse Jan. 13 (photo) and connected the ‘dots’ with their blue t-shirts: “Real Jobs. Clean Power.”

The draft of a bill shared with TheEnergyFix to be offered by a team of lawmakers would require the investor-owned utilities and possibly the Southern Maryland Electric Cooperative (SMECO) to issue a request for proposals by October 2011 and negotiate a long-term power purchase agreement for power to being flowing by 2013.

Whether O’Malley’s approach is similar remains to be seen. But for the Governor and lawmakers to already be on the same page in principle bodes well for a bill’s chances. If a bill along these lines becomes law, the next hurdle for PPAs in Maryland will be what price per kilowatt hour (kwh) the Maryland Public Service Commission will deem acceptable.

The nation’s first offshore wind project, a 24-square-mile tract in Nantucket Sound off Cape Cod, Massachusetts, received its final permit Jan. 7. According to a report in The New York Times, state regulators reached agreement with the on behalf of the “Cape Wind” project owner for utility company National Grid to buy the power beginning at 18.7 cents per kilowatt hour.

Will Maryland regulators be willing to digest a similar price? The chess game is about to begun.