Jan 16 - Providence Journal

National Grid PLC has dropped its objection to signing long-term contracts with suppliers of renewable energy, a decision that advocates of wind farms say could unleash a flood of proposals in the state.

National Grid is the dominant energy provider in Rhode Island, and environmentalists have said its previous refusal to make long- term commitments to buy renewable energy has discouraged solar-, wave- and wind-energy projects.

Without a promised revenue source, the potential owners of wind farms have had difficulty raising money to build the infrastructure, according to Matt Auten, an advocate at the nonprofit group Environment Rhode Island.

"A lot of the cost of the project is up front," Auten said. "For developers, having a guaranteed income stream makes it easier for them to go out to investors."

The subject of long-term contracts has fueled a bitter dispute between National Grid, a British company headquartered in London, and regional environmental groups.

The state's Renewable Energy Standard law requires National Grid to gradually increase the percentage of energy it buys from renewable sources, and gives the Public Utilities Commission the power to pass rules to promote compliance.

Three advocacy groups - Environment Rhode Island, the Conservation Law Foundation and the Union of Concerned Scientists - have argued that rules later passed by the commission require National Grid to sign contracts lasting 10 years or longer.

The company has disputed that interpretation. Radically fluctuating energy prices, it argued, demand great flexibility in purchasing. "Anything longer than five years exceeds the threshold of speculation that a prudent purchasing plan should not cross," National Grid told state regulators.

The company was pummeled for its position, with environmentalists accusing it of trying to "skirt global warming standards."

"With the expected sea-level rise and temperature increases from climate change, it is utterly ridiculous that National Grid would try and ignore its responsibility to help curb global warming," Jerry Elmer, a Conservation Law Foundation staff attorney, said last March.

This month, National Grid abruptly changed its policy, and advocates are now praising their onetime nemesis.

"I think it's an incredibly great development for the state," said Cynthia Giles, director of the Conservation Law Foundation's Rhode Island Advocacy Center. "This is a big deal in encouraging private developers to come into the state."

In passing the Renewable Energy Standard law, legislators said they hoped to curb the use of costly natural gas and polluting coal- fired plants, while lowering and stabilizing energy costs for Rhode Island residents and businesses. (Although there are continuing maintenance costs for wind-energy facilities, the principal input is free.)

National Grid has been promoting environmental initiatives, such as its pledge to incorporate energy-saving technology in the new regional headquarters it is building in Waltham, Mass. The company recently published a lengthy report detailing its efforts at "environmental stewardship."

Still, National Grid noted its change of policy regarding alternative energy with little fanfare.

Michael F. Ryan, the company's president of Rhode Island distribution, mentioned the decision in brief remarks at a meeting of the Rhode Island Economic Policy Council on Friday. The council includes policymakers and business executives, but its gatherings are sparsely attended and typically draw little attention from the news media.

"In the past, we have been reluctant in getting involved in long- term contracts," Ryan told council members. "We're ready."

In an interview, Ryan attributed the policy change to new leadership at National Grid. The chief executive officer, Steve Holliday, started in January 2007. Tom King, executive director of electricity distribution and generation, was appointed in August.

In addition to promoting alternative energy, Ryan said National Grid hopes to dramatically change its business model to sever the connection between energy usage and profits. Even though National Grid promotes energy conservation, reduced energy usage by customers also reduces revenue, he said.

"We want to make a positive contribution," Ryan said. "We have to somehow find a balance that doesn't imperil stockholders or ratepayers."

He gave few details about a plan that would alter National Grid's billing structure. In its traditional arrangement, the company assesses a delivery charge per kilowatt-hour of energy supplied.

To supporters of wind farms, the implications of National Grid's new alternative energy policy are more clear.

Rhode Island's windy and shallow offshore waters are considered hospitable for wind farms. Support in the legislature and from Governor Carcieri has already attracted interest from at least one company, even though there are no permitting procedures in place for this type of development.

The lack of a committed buyer, however, has remained an impediment.

William J. Fischer, a spokesman for Allco Renewable Energy Group Ltd., which hopes to build a wind farm in Rhode Island, said it would cost $2 billion for enough wind turbines to meet Carcieri's policy goal of using renewable energy to satisfy 15 percent of the state's energy needs.

That kind of money, Fischer said, is not easy to pull together. "You need to send a strong signal to the investment community that Rhode Island is serious about this," he said. "It's very important to have a long-term contract in place. That encourages investment."

Early last year, Carcieri tried to get around the financing problem by calling for the creation of a power authority that would help pay for wind farms using taxpayer-backed bonds and potentially sign long-term contracts to purchase and sell the energy.

Last year, a House committee stripped that plan from a broader energy bill, after it had won support in the Senate. Given National Grid's new stance, it is not clear if the power authority would still be advocated to attract private investment.

"That'd be fine, as long as it accomplishes the goals we're trying to accomplish," Andrew Dzykewicz, the state energy commissioner, said after National Grid's announcement. "We don't have to do it. We have to know what the details are, but it certainly sounds like it would be helpful."

It could also help National Grid. The Renewable Energy Standard law mandated that at least 3 percent of all electricity supplied in the state be generated from renewable resources last year. That requirement will rise by 0.5 percent annually through 2010, then by 1 percent each year from 2011 through 2014, and by 1.5 percent each year from 2015 though 2019.

By then, the law says at least 16 percent of the energy consumed in Rhode Island will have to come from renewable energy sources.

"It's extremely important that more renewable energy gets built in Rhode Island," Auten, of Environment Rhode Island, said. "The current energy mix we have causes excessive pollution, causes global warming and it relies on sources of energy that do not come from this country."

bgedan@projo.com / (401) 277-8072

Journal / Tom Murphy

(c) 2008 Providence Journal. Provided by ProQuest Information and Learning. All rights Reserved.