Time for Utilities to Buy Electricity Under PPAs

Powerpurchase agreements – aka “PPAs” – are an established tool for spreading the cost of energy over 20 years or longer as a means of ensuring arevenue stream for renewable energy project developers, stabilizing andpredicting energy costs and displacing dirty coal with cleaner sourcesof electricity. The time has come in just about every state that doesnot already have them to require regulated utilities to buy power fromwind, solar and other renewable sources.

One real-time test case is playing out in Maryland. There, newlyre-elected Democratic Gov. Martin O’Malley is set to introducelegislation before the state’s General Assembly to requireinvestor-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” orvery short-term markets, such a proposal will likely be met with disdain if not outright opposition. O’Malley has set ambitious state goals forrenewable energy, energy efficiency, greenhouse gas emission reductionsand the green jobs that come with them. Whether he succeeds in thiscontest 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 partbecause of influential organizations and lawmakers pushing for cleanerenergy. Collectively, Maryland’s lawmakers are more moderate. But thisdebate will likely hinge on how credible proponents are in connectingcleaner energy with good-paying construction and full-time jobs.

One new alliance making the case has joined steelworkers with the   Chesapeake Climate Action Network and Environment Maryland. Together they marched on the MarylandStatehouse Jan. 13 (photo) and connected the ‘dots’ with their bluet-shirts: “Real Jobs. Clean Power.”

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

Whether O’Malley’s approach is similar remains to be seen. But forthe Governor and lawmakers to already be on the same page in principlebodes well for a bill’s chances. If a bill along these lines becomeslaw, the next hurdle for PPAs in Maryland will be what price perkilowatt hour (kwh) the Maryland Public Service Commission will deemacceptable.

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

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

Image: Steelworkers and other wind energy supporters in the Maryland Statehouse. The bluet-shirts read: “Real Jobs. Clean Power.” Credit: Chesapeake ClimateAction Network


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