PSC report favors wind -- with gas backup

The First State is a step closer to building the nation's first offshore wind farm.

A Public Service Commission staff report recommended directing Delmarva Power to negotiate with Bluewater Wind LLC to buy power from Bluewater's proposed offshore wind turbines. The report also said Delmarva should negotiate with Conectiv Energy to buy power from a natural gas plant in Sussex County, in part to provide backup for the wind power. The PSC released the 73-page report late Wednesday afternoon.

The wind farm would be half the size of the development envisioned by Bluewater Wind, the New Jersey-based developer. Bluewater had originally proposed a $1.5 billion to $2 billion, 600-megawatt facility with 200 wind turbines sitting 7.2 miles off Bethany Beach or 12.5 miles off Rehoboth Beach. The report suggests the PSC instead approve a 200- too 300-megawatt facility with as many as 100 turbines.

In either case, the turbines would be 406 feet tall, with the top 150 feet being the the thin, spinning blades.

Instead of building at the Hay Road facility as Conectiv proposed, the report recommended Conectiv build a natural gas-fired plant in Sussex County, at a site to be determined.

The report acknowledged the recommendation might be expensive, but called it an innovative, environmentally friendly solution.

"It is a combination that creates a synergistic benefit beyond that of either project standing alone. The wind farm may lack reliability on days when peak load is needed, whereas the gas turbine, while not the worst environmental offender by far, lacks the cleanliness and low fuel costs of a wind farm. The gas turbine provides peak supply, and the wind farm provides clean energy."

The third bidder, NRG, which proposed a coal gasification plant, did not get the blessing of the PSC staffers who wrote the report.

Environmentalists expressed guarded optimism at the recommendation, which now goes to the commissioners for a vote.

"On the face of it, it seems like a sound recommendation," said Alan Muller, executive director of Green Delaware, who cautioned the wind project might not be economical if made smaller than the original proposal. "I think it's a valuable step forward."

Location is important

The report added that adding power in Sussex County could negate the need for an expensive transmission line to import energy into the state.

"This is a great day for Delaware," said Jim Lanard, spokesman for Bluewater Wind, who pointed out the proposal still needs the approval of the commission itself, as well as three other state agencies.

Bluewater still hopes to build the larger wind park, and would attempt to convince Delmarva to accept more electricity, Lanard said. If it fails, Bluewater could seek other customers to accept the electricity Delmarva does not want, he said.

Bluewater has fought previous efforts that would have forced it to scale back its project.

Officials at both Delmarva Power and its affiliate, Conectiv, said they wanted to take time before commenting on the report.

Addressing the expected concerns of the bidders, the report reads: "Delaware generation needs to be the right size, in the right place, available at the right time, and developed with the right pricing structure to meet Delaware's needs -- not the needs of project developers."

Bids went out last year after the Legislature asked the commission, and three other state agencies, to seek a homegrown source of electricity to stabilize and bring down the price of electricity. That's after the removal of rate caps one year ago led to a 59 percent average rate increase for Delmarva Power's residential customers.

The recommendation comes after seven months of deliberations, and a series of public meetings in which speakers overwhelmingly backed the wind farm proposal.

The commission is expected to vote on the bids at its meeting Tuesday. The five commissioners are free to accept or ignore the staff recommendations.

There is some dispute about whether the four state agencies can force Delmarva to sign a contract with one of the bidders. Lanard said the state has the final say; Bridget Shelton, a Delmarva spokeswoman, argued the opposite.

"It's not something they can force us to do," Shelton said. "We've always been of the opinion this would be a collaborative effort."

Delmarva officials have argued that no plant is needed, and that the state can ensure its electricity future with a combination of conservation and competitive buying on the open market. Delmarva's plans also include expectations that a new transmission line would be built through Delaware.

The report calls plans for the transmission line project "currently suspect," referencing PJM Interconnection's lack of enthusiasm for the project. The report suggests conservation alone won't be enough.

Delmarva has argued the new energy would be too expensive. Building and operating the full-size wind farm would cost ratepayers $22 more a month, and $1 more a month for a natural gas plant, Delmarva estimated in March.

If Delmarva got its way, "Delaware will remain exposed to the same volatile energy prices that initiated this effort," the report reads. "There is a limit to how much customers are willing to save, and how long it will take to reach meaningful levels."

The report also raises the question of whether the wholesale electricity market should be reregulated if all of the bids fall through.