CLEVELAND, Ohio -- A Norwegian wind farm developer with experience in the North Sea will build the $120 million pilot wind farm planned for Lake Erie.
Fred.Olsen Renewables, the largest independent power producer in the United Kingdom and the fifth largest in Europe, has already partnered with the non-profit Lake Erie Energy Development Co., or LEEDCo.
The two companies have signed an agreement that Fred.Olsen will buy LEEDCo's research assets early next year, said Lorry Wagner, LEEDCo president. He declined, at this time, to reveal the selling price.
LEEDCo. has been planning a six-turbine pilot project in Lake Erie that will be located eight to 10 miles northwest of downtown Cleveland and generate about 20 megawatts of electricity at peak output.
The company has a 50-year lease from the state for the project and is working to complete the more than one dozen permits it needs from federal and state agencies.
The turbines will be slightly larger than the one at Lincoln Electric near Interstate 90, but from shore they will appear to be about the size of half a dime on the horizon.
Fred.Olsen has already incorporated its U.S. subsidiary, Fred.Olsen Renewables USA, that will be headquartered in Cleveland and direct future development.
Fred.Olsen intends to pay for the project with loans it is now discussing with a Cleveland bank and with its own cash.
The company plans to rely on U.S. manufacturers and local labor to build this project and future projects in the Lake. The construction of the pilot project alone is expected to pump $80 million into the regional economy.
LEEDCo's mission has been to prove wind farms can work in the lake and create the conditions to help Northeast Ohio become a wind turbine manufacturing center -- supplying turbines and foundations and installation vessels not only to Great Lakes wind farms, but also to those off the East Coast, which does not have the manufacturing capabilities of the Midwest.
David Brunt, CEO of Fred.Olsen Renewables, said Lake Erie has the long-term potential generating capacity of about five gigawatts of electricity. That's roughly equal to the output capacity of five large nuclear power plants.
"We see potential in this. And we think a pilot project is a great way to start and also the best way for local industry to get involved," he said in an interview.
Fred.Olsen has already on track to spend "several million dollars" in the project, he said, but declined to be more specific. The company paid for the crews and equipment that drilled core samples from the lake bed last summer.
The project is in-line to receive up to $40 million from the U.S. Department of Energy next summer, said Wagner, because some of the ocean-based projects originally designated for the big federal grants are failing for one reason or another and won't get them.
"The DOE needs a success. We are clearly the one project in the country that can deliver that," he said.
The two companies expect the six-turbine LEEDCo pilot project will be generating electricity by the summer of 2018. That power will flow through a Lake bed cable to a substation at Cleveland Public Power and then into the regional grid where any company can buy it.
CPP has agreed to buy 5 megawatts of the 20 megawatts the project will generate. Wagner said American Municipal Power will buy some of the power as will the Lakeshore counties that have joined LEEDCo.
But most of the turbine project power is still up for sale, and Brunt and Wagner said the companies are looking for other utilities or power companies to sign long-term power purchase agreements.
Wagner recently told members of Cleveland City Council's utilities committee that LEEDCo has approached FirstEnergy "many many times and at this point they have refused to participate."
Though the electricity will be more expensive than electricity available from traditional power plants, it will only be a small percentage of the electricity CPP delivers. Residential customers will see an 87-cent increase in their monthly bills, said CPP Commissioner Ivan Henderson.
Wagner said the price of the project's power will be above market prices for the first 10 to 15 years while the company pays off the construction debt but far below market prices after that.
Cleveland Public Power has set a voluntary goal that 15 to 20 percent of the power it sells come from renewable sources, said Henderson.
A state rule requiring Ohio's investor-owned utilities to source 12.5 percent of their power from renewable sources like wind and solar by 2025 is currently frozen following a utility lobbying campaign led by FirstEnergy to repeal the law.
Lawmakers must enact new state renewable energy rules by the end of 2016 or see the old rules come back to life. Gov. John Kasich has threatened to veto any new legislation that permanently eliminates renewable energy mandates.