GloucesterTimes.com, Gloucester, MA

October 17, 2012

Gloucester's power play

City estimates turbine deal will save $500K yearly

By Steven Fletcher Staff Writer
Gloucester Daily Times

---- — The city is expecting to save roughly $250,000 on its energy costs this fiscal year after a pair of 2 megawatt wind turbines at Gloucester Engineering are switched on in December.

And City Chief Financial Officer Jeff Towne said he expects the city will save over $500,000 on its electric bill in the 2013-14 fiscal year, all through a power purchase agreement the city signed with Equity Industrial Turbines, a division of the Equity Industrial Partners corporation that owns the Gloucester Engineering property.

The city signed the agreement in January and agreed to purchase all of its electricity from Equity’s twin turbines that are part of the giant structures being delivered to Varian and Gloucester Engineering this week and in the weeks to come.

Mayor Carolyn Kirk said Tuesday she’d like the money that Gloucester saves on its power bill to go toward building a new joint public safety facility. Without the electric savings, she said the city would have needed an override to build it.

“That’s my goal,” Kirk said, “to be able to invest in needed capital projects without going to the taxpayer for an override.”

Gloucester uses just around 11 million kilowatts per hour of electricity each year to power municipal buildings from Plum Cove School to the Wastewater Treatment plant, at a current cost of roughly $1.5 million.

Equity Industrial Partners estimates that the pair of turbines will meet the 11 million kilowatt hour demand, at the least.

“We have a really good sense of how much wind energy potential (is at the site),” said Richard Klieman, Equity’s representative. “It’s one of the windiest land based sites in the state.”

The city saves on its electric bill through what the state calls “net metering credits.”

Equity’s turbines will plug into a city-owned meter, and Klieman said that for each kilowatt hour the turbines produce, the city generates a State Department of Public Utilities designated “net metering credit.”

A credit is roughly 14 cents per kilowatt hour, and is based on a formula that includes National Grid’s supply, distribution, transfer and other rates, said Klieman. As National Grid’s rates increase, so does the value of a net metering credit. And those credits show up against the charges on the city’s electric bill and reduce the overall cost.

The agreement states the city will receive the 20 percent of the net metering credits of the first 9 million kilowatt hours generated, and 75 percent of the remaining kilowatt hours generated. Any credits the turbines generate beyond 100 per cent of the municipal electric need belong to the city, and show up as additional credits on the electric bill balance sheet, said Towne.

Klieman said the remaining 80 percent and 25 percent of credits will go toward paying down Equity’s debt on the project and covering the wind turbine operating costs.

Towne said that the city and Equity negotiated an escrow account that keeps the city from paying more for energy should the price of non-wind energy drop. Klieman and Towne said they don’t expect that to happen anytime soon, but Klieman said Gloucester Engineering will keep $100,000 in that account.

“We’re not going to suffer as a result of the market getting worse,” said Towne.

Gloucester Engineering’s turbines are expected to start operating in December. The parts will come in by truck and barge in the next few weeks, starting on Oct. 23. The current turbine being delivered from the waterfront behind Cruiseport is bound for Varian, also in Blackburn Industrial Park.

National Grid, Towne said, will prioritize energy from the turbines before power plant energy. Every kilowatt hour of wind energy pumped in means a kilowatt hour of fossil fuel energy that isn’t used.

In addition, Equity signed on to a payment in lieu of taxes or pilot agreement, paying the city $40,000 in the first year, with that figure set to increase by 21/2 percent annually in the following years.

Klieman said that public-private partnerships like the Gloucester-Equity Turbines agreement are what make it possible to build wind projects like this. Without incentives for doing so, he said, the Equity project probably wouldn’t have gotten off the ground.

That’s due in part to the fact that municipalities receive better net metering rates than private projects.

“I don’t know if the numbers even work if you don’t have a municipal partner,” Klieman said, “you need that extra incentive to make the numbers work.”

“I think it’s an excellent agreement,” said Candace Wheeler, chairwoman of the city’s Clean Energy Commission.

Steven Fletcher may be contacted at 1-978-283-7000 x3455, or sfletcher@gloucestertimes.com. Follow him on Twitter at @stevengdt.