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Utilities seek long-term green deals

Power producers submit bids for 10- to 15-year pacts

By Erin Ailworth
Globe Staff / February 3, 2010

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For the first time, the state’s major power companies will make long-term commitments to buy green energy like wind and solar power.

The four investor-owned utilities in Massachusetts - National Grid, NStar, Western Massachusetts Electric Co., and Unitil Corp. - are soliciting bids from producers of energy from renewable resources. Bidders have until Feb. 19 to submit proposals for 10- to 15-year contracts to sell power to the utilities, which do not make their own power, but rather buy and distribute it.

The utilities must enter into contracts with renewable energy suppliers under state environmental legislation passed in 2008. The power companies and the state Department of Energy Resources will choose a short list of bids by early May, and submit contracts for approval in late July.

Since electricity generated from renewable sources is often more expensive than power from fossil fuels, utility officials say more clean energy will mean bigger bills for Massachusetts consumers, who already pay some of the nation’s highest electricity prices.

“We are going to be buying higher priced power than what is currently on the market,’’ said NStar chief executive Thomas J. May, who added that he supports the push for more energy from renewable resources.

Advocates contend that although green energy will mean higher costs, the shift toward more reliance on renewable resources will bring the state such environmental benefits as cleaner air and more stable energy prices.

“We’re not taking into account the real cost of the [traditional] energy we’re relying on,’’ said Sue Reid of the environmental advocacy group Conservation Law Foundation, meaning health, national security, and environmental issues associated with fossil fuels. “If you really took those costs into account, renewables would actually be extremely competitive.’’

Environmentalists also expect the cost of renewables to come down as more and more people choose to use clean energy. Already, wind power is vying with natural gas as the leading source of new electricity generation in the United States, according to the American Wind Energy Association, a trade group. Last year alone, enough wind turbines were built nationwide to power more than 2.4 million homes.

“The cost of power will tend to be higher than traditional sources, but that is a premium we would be paying for the environmental benefit,’’ said National Grid general counsel Ron Gerwatowski.

Locally, utilities already encourage the use of renewable energy through programs like NStar Green and National Grid’s GreenUp, which give customers the option to pay a premium to get power from a renewable source. However, fewer than 1 percent of the 2 million customers served by those utilities participate in such programs.

Governor Deval Patrick has set goals meant to create enough wind and solar power generating capacity in Massachusetts within the next decade to power more than 560,000 homes. Currently, there is enough generating capacity in the state to power nearly 6,800 homes with wind or solar energy.

The state’s effort to have utilities cut deals to buy green energy is expected to help promote the construction of new generating facilities. “Long-term contracts are a fundamental necessity for renewable energy developers,’’ said Nick d’Arbeloff, head of the New England Clean Energy Council. “Often, without them, they have a very difficult time attracting investors.’’

The contracts will help Massachusetts utilities meet a commitment to supply approximately 750,000 total megawatt hours of power from renewable sources, enough to power roughly 100,000 Massachusetts homes a year.

Ian Bowles, secretary of the state’s Executive Office of Energy and Environmental Affairs, called long-term contracts a “significant step’’ toward building the state’s ability to generate its own environmentally friendly electricity.

“We buy $8 billion of power a year,’’ Bowles said, adding that building green energy capacity “is going to be a long-term hedge against fossil fuel prices.’’

The Conservation Law Foundation’s Reid said more wind turbines, solar panels, and other renewables would also keep dollars in Massachusetts, which now imports natural gas and coal.

“With renewables, the fuel is local and free,’’ she said. “You’re not continually exporting dollars outside of the state.’’

Erin Ailworth can be reached at eailworth@globe.com.