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United States

Resounding vote for offshore project -- Delaware agencies not in doubt

A 600 MW offshore wind power project proposed off the Delaware coast by New Jersey-based Bluewater Wind won a significant victory last month after four state agencies concluded a nine-month competitive review process between the offshore project, a coal gasification plant, and a natural gas plant. "The agencies voted unanimously that Bluewater Wind would be the primary provider of electricity under the standard offer supply and ordered the parties to get into a room and negotiate," say Peter Mandelstam, Bluewater Wind's president and founder.

Up for grabs was the right for the winner to negotiate a long term power purchase agreement (PPA) with local utility Delmarva Power & Light (DP&L). The Public Service Commission, the Office of Management and Budget, the Department of Natural Resources and Environmental Control, and the legislature's controller general all stated their preference for the offshore wind bid. "The champagne was out," says Mandelstam.

On June 20, however, DP&L filed a petition challenging the state's ruling. It argues that long term power purchase agreements are potentially more expensive for customers. It also says it does not need all the capacity. Historically, DP&L, the region's primary electricity supplier, has been averse to signing PPAs for longer than a three year period. But when natural gas prices spiked, DP&L had to pass the cost on to ratepayers, raising power prices last year by 69% over the previous year. A consumer backlash ignited a response from state lawmakers resulting in the creation of a new Delaware law forcing the utility to secure 400 MW through a 25 year PPA.

Cone of silence

Bluewater and DP&L are now under a "cone of silence" around the negotiations, says Mandelstam, who will only add that the state agencies allowed for some flexibility on the size and configuration of the project as the two negotiate a possible contract.

The fossil fuel runners-up did not walk away empty handed. The four state agencies also ruled in favour of a possible natural gas facility as back up for the wind. "I'll leave it to the stakeholders and the utility to decide if that's necessary and feasible," says Mandelstam. "But in general we believe you can do wind without back up because the electricity grid provides stability."

Since the offshore bid is in federal waters -- between 12 and 17 miles offshore -- the project's fate is contingent upon new rules and regulations being drafted by the federal Minerals Management Service (MMS) specifically to govern development off the US coast. Through a 2005 energy bill, Congress changed the overview permitting and review agency for offshore wind from the US Army Corps of Engineers to MMS. Guidelines were expected in place by now but the agency's follow-through has been delayed and draft regulations are not expected until late 2008.

Other wind proposals in federal waters, such as the Cape Wind project off the Massachusetts coast and FPL Energy's offshore bid with Long Island Power Authority, are also waiting for the MMS guidelines. They will have priority for review through the agency.

As well as negotiating a PPA with DP&L, Bluewater will complete various environmental reviews in preparation for MMS scrutiny. "Public sentiment was overwhelmingly positive," says Mandelstam. "We are proud that after a year of stakeholder outreach, there was not a single opponent of any regard."

Mandelstam says its too early to say whether his project will be the first offshore in the US. "We're honoured by this victory and this vote [from state agencies] and we're moving forward. If we're first, that's terrific, but I want to see lots of offshore wind in the US. Being first is not as important as doing these projects and the benefits they bring to coastal communities."

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