1. Introduction

The New York Power Authority (“NYPA”) is the nation’s largest state-owned power supplier, providing low-cost electricity to government agencies, municipal electric systems, rural electric cooperatives and private utilities for resale – without profit – to their customers across New York State. NYPA operates 18 generating plants and owns more than 1,400 circuit-miles of transmission lines. NYPA is also a national leader in promoting energy efficiency and the development of clean and renewable energy technologies, committing over $100 million a year to energy services.

NYPA is considering the prospects of one or more wind generating projects to be developed in the New York State waters of Lake Erie and/or Lake Ontario (“Great Lakes Offshore Wind Project”) and, as such, is issuing this Request for Expressions of Interest (“RFEI”). This initiative has the interest of wind power supporters including National Grid (“NG”), New York State Energy Research and Development Authority, the New York State Department of Environmental Conservation, local and statewide environmental organizations and the University of Buffalo. NYPA will be working with these entities as the RFEI process progresses. 

In connection with NYPA’s commitment to the environment and in support of New York State’s energy goals, particularly the goals of the Governor’s Task Force on Renewable Energy, NYPA is considering the preparation of a Request for Proposals (“RFP”) seeking the development of one or more Great Lakes Offshore Wind Projects that would interconnect with the upstate transmission systems of NG and/or New York State Electric & Gas.  Before making a decision on proceeding with the RFP, however, NYPA seeks technical, financial and other information from the wind power industry and regional stakeholders pursuant to this RFEI. In the event that the decision is made to proceed with an RFP, the information secured under this RFEI would support the preparation of an RFP that would be expected to result in the submission of high quality proposals from capable wind power developers. A decision on whether or not to proceed with an RFP will depend to a great extent on the information provided in response to this RFEI.

Among other things, this RFEI requests information pertaining to the regional economic development benefits that would be attributable to a Great Lakes Offshore Wind Project. Such benefits could include opportunities to manufacture wind project components in New York State, particularly Western New York as well as fostering green jobs in Western New York that would be associated with operating and maintaining the wind facilities and other related support functions.

It should be noted that in the event that NYPA issues an RFP in connection with a Great Lakes Offshore Wind Project, such RFP will not be binding on NYPA and NYPA will have the right, in its sole discretion, to withdraw or modify the RFP and to reject any and all proposals for any reason, including the projected economics of a proposed project.

While it is understood that that sources of renewable energy, such as a Great Lakes Offshore Wind Project, typically incur a price premium, NYPA operates within the competitive electricity market of New York State. It is not financially supported by the State and has no taxing authority. Rather, it raises capital through the issuance of Revenue Bonds which are repaid from revenues from the sale of its power services. In the event that NYPA ultimately elects to purchase energy from a Great Lakes Offshore Wind Project, it will seek to incorporate such purchase into its portfolio of resources for the benefit of its present and/or future customers, particularly upstate customers located in the general region of the Great Lakes Offshore Wind Project, to the extent authorized by current law, or pursuant to other legislation as may be subsequently adopted. If NYPA enters into a PPA for the purchase of Great Lakes Offshore Wind energy, it will seek to use the output of the Great Lakes Offshore Wind Project to meet the needs of upstate customers within the competitive framework of New York State at prices that are economical, stable and predictable over the long run, and, therefore, would expect the Great Lakes Offshore Wind Project owner/operator to adhere to the high reliability standards demanded by the consumers of electricity.

2. Summary of RFEI

The primary goal of this RFEI is to secure information to assist NYPA in deciding the merits of proceeding with an RFP that would ultimately result in a long term Power Purchase Agreement (“PPA”) supporting the installation of a Great Lakes Offshore Wind Project by one or more private developers.  An additional goal of this RFEI is to secure information concerning the most effective terms and conditions of a potential RFP in the event that a decision is made to proceed with such a procurement.

The anticipated project(s) would be located in New York State waters of Lake Erie and/or Lake Ontario and would be utility scale, i.e., at least 120 MW. The selected developer(s) would be responsible for permitting, siting, constructing, operating and maintaining the wind turbines and towers and assuming all development, construction and operating risks associated with the project. The capacity, energy and ancillary services (“Products”) produced by the Great Lakes Offshore Wind Project would be bought/sold pursuant to a long term PPA. 

During the course of this RFEI process, and prior to the issuance of an RFP, NYPA will have siting studies conducted to ascertain optimum areas for a Great Lakes Offshore Wind Project. The studies will review, among other things, the wind resource, impacts on birds, visibility, vessel traffic and bottom conditions. It is anticipated that the results of the studies will be included in the RFP.

3. Key Areas for Respondent Feedback

In this RFEI, NYPA is seeking feedback from experienced, knowledgeable industry participants on all aspects of a Great Lakes Offshore Wind Project. These aspects include technical, commercial, operational, socio-economic, financial and environmental. Respondents are requested to provide information that will assist NYPA in preparing a comprehensive and competitive RFP. It would be appreciated if respondents would include references to specific sections of this RFEI when submitting comments.

3.1 Respondent Information

Please provide the following information:

• Company name, address, and primary contact information including name, title, address, telephone and email.
• Brief (no more than one page) summary of firm’s background and relevant experience.

3.2. Size of Project, Site and Schedule

As previously indicated, NYPA is considering projects of at least 120 megawatts. NYPA is seeking information related to:

• respondents’ opinions on the optimum sized project from a technical, financial and economic perspective;
• respondents’ views as to how large a Great Lakes area (in square miles) would be need to be to site a large scale wind project ;
• respondents’ assessment of the most preferable Great Lakes sites for locating wind turbines;
• respondents’ assessments of the most appropriate interconnection point(s) for the Great Lakes Offshore Wind Project from both an economic and reliability perspective; and
• based on an assumed bid selection date of December 31, 2011, provide a milestone schedule leading to commercial operation of the project and setting forth key target dates including financial close, receipt of all construction permits, commencement of construction and substantial completion.

3.3 Technical Aspects

3.3.1 General

The major components of an offshore wind project include the wind turbine, the support structure (structure between the wind turbine and seabed level), the foundation (structure below sea level) and the connection to the electrical grid. NYPA is seeking technical information on the current and anticipated technical state of the art of all of these elements, particularly with respect to a demonstration of their ability to withstand wave effects, ice issues and a corrosive environment for a period of at least 20 years.

3.3.2 Wind Turbines

With respect to wind turbines, NYPA expects respondents to discuss the commercial availability of turbines that would accommodate the requirements of a project the size that NYPA is envisioning. It must be emphasized that NYPA does not intend to pay for the development of a prototype that may or may not meet its requirements. NYPA’s concept of a utility scale project suggests that the largest commercially available turbine may be required. As such, this RFEI requests information concerning the largest lake-based wind turbine that is currently available (or is expected to be available) on the market as well as the prospects and timing for larger turbines. NYPA is specifically seeking wind turbine related information pertaining to:

·        original equipment manufacturer warranties;

·        maintenance schedules;

·         control and communication systems that monitor turbine status; 

·        availability of spare parts; 

·        performance and degradation curves; and

·        susceptibility to corrosion.

3.3.3 Turbine Support Structure and Foundation

As the project will likely be located in water depths of at least 50 feet, the design and construction of the support structure and foundation are critical to a successful project. It is NYPA’s understanding that to date there have not been many wind projects installed at these depths. However, NYPA also understands much of the technology associated with developing wind projects in such depths has already been developed by the gas and oil industry and that there has been an effort to transfer that technology to the wind industry.   Accordingly, NYPA is seeking information related to:

• what depths respondents consider to be reasonable and feasible for installation of the Great Lakes wind turbines;
• the current status of the development of support structures and foundations that would be installed in depths of 50 feet or more;

• the pros and cons of the various types of foundations under consideration, e.g., monopiles, tripod towers, gravity bases;
• recommendations for the optimal foundations for this project;
• long term ability to endure horizontal loadings of wind, waves and currents;
• susceptibility to corrosion; and
• potential impacts of ice, particularly drifting ice.

3.3.4 Interconnection

Recognizing the significant size of the envisioned project and that it could be located more than five miles offshore, it is likely that there would be more than one injection point and the interconnections would be at voltages 115 kV or higher.  NYPA is seeking interconnection related information pertaining to:

• the use of AC or DC cables for interconnection;
• the need for an offshore substation;
• the location of converter stations (DC option);
• the length and type of necessary cables;
• specific interconnection requirements;
• cable length limitations;
• lake bottom considerations;
• general diagrams of an anticipated Great Lakes wind interconnection including a listing of required equipment;
• impact on pricing and schedule if NYPA assumes responsibility for the installation and ownership of all interconnection facilities, including converter stations; and
• other potential interconnection options.

3.3.5 Comparison to Ocean Based Offshore Wind Projects

NYPA is requesting comments as to the potential advantages of Great Lakes based projects as compared to ocean based offshore projects, specifically with respect to:

·        the degree of difficulty in construction and maintenance;

·        total project costs;

·        coastal management zone restrictions;

·        corrosive effects of salt water as compared to fresh water;

·        water depths at viable sites; and

·        any other comparisons that respondents consider warranted.

3.4 Commercial Aspects

The commercial elements of the project will be incorporated in the PPA. NYPA will include a proposed PPA template in the RFP. Following are the pertinent PPA provisions on which NYPA is requesting information:

3.4.1 Term of PPA

NYPA is requesting information as to the preferred term of service in the PPA. In particular, NYPA is seeking information related to:

• the relationship between the length of the term and the level of pricing; and
• recommendations on terms of service considered acceptable and preferable.

3.4.2 Energy Pricing

3.4.2.1 Pricing Structures

NYPA is seeking comments on the appropriate pricing for wind energy. NYPA is amenable to a range and combination of pricing structures and is seeking information related to the pros and cons associated with the following options:

• $/kW-mo. for capacity;
• $/MWH for energy;
• up-front payments;
• “open-book” arrangements;
• cost pass-throughs;
• pricing incentives;
• range of pricing options based on outcome of specified variables (e.g., with and without the Production Tax Credit);
• recommendations on additional pricing structures to consider; and
• renewable energy credits (“RECs”).

3.4.3 Indicative Pricing

NYPA is seeking indications as to projected levels of pricing for Great Lakes Offshore Wind Project energy including how such pricing compares to expected energy market prices.

3.4.3.1 Federal and State Incentives

NYPA is seeking information related to the expected federal and state incentives potentially available for a Great Lakes Offshore Wind Project, such as the Production Tax Credit and other government incentives, and the impacts of such incentives on pricing. NYPA is also seeking an analysis of potential grants that might be available from the Department of Energy pursuant to the American Recovery and Reinvestment Act for feasibility studies of wind sites and offshore wind projects.

3.4.3.2 Capacity Charges and Ancillary Services

Since the New York State Independent System Operator (“NYISO”) substantially discounts the value of installed capacity from intermittent resources such as wind, NYPA is interested in receiving comments on:

• whether the incorporation of a capacity charge in a wind PPA is appropriate;
• whether the NYISO ancillary services that the project is capable of supplying should be separately priced.

3.4.4 Amounts of Energy and Capacity to be Purchased Under the PPA

NYPA envisions that the full output from the wind project would be purchased under the PPA, but is open to other options.  NYPA is therefore seeking information related to:

• respondents’ interest in maintaining some portion of the project output for it to sell on a merchant basis;
• the projected amount of energy (in megawatthours) on a monthly basis that a Great Lakes Offshore Wind Project would be expected to produce;
• incorporating availability guarantees and minimum production guarantees in the PPA, focusing on how these guarantees should be structured;
• PPA treatment of both forced and scheduled outages; and
• any other matters pertaining to the amounts of energy and capacity to be purchased.

3.4.5 Renewable Energy Credits (“RECS”) and Carbon Offsets

To the extent that the full output of the project would be sold under the PPA, it is NYPA’s position that the Buyer should be entitled to all RECs, any carbon credits under the Regional Greenhouse Gas Initiative and any other environmental benefits attributable to the project.  NYPA is seeking information related to:

• whether this would impact the developer’s ability in any way to finance the project and how, if at all, the pricing that would be affected; and
• the impacts on pricing if the Buyer were to allow the developer to maintain all or a portion of the RECs or other environmental benefits attributable to the project.

3.4.6 Relationship with the NYISO

The PPA will require that the output of the project be scheduled into markets administered by the NYISO. Among other things, the project would need to be registered with the NYISO and the party doing the output scheduling would be required to execute a NYISO market participant agreement. NYPA is seeking information related to:

• whether it is preferable for the developer to bid the products from the project into the NYISO markets or for the Buyer to do so and any financial or other implications associated with which party interacts with the NYISO; and
• the particular ancillary services (reactive supply and voltage support, operating reserves, regulation and frequency response and black start) that the wind project would be able to provide.

3.4.7 Seller Security

The PPA will include a Seller Security provision as part of the PPA. NYPA is seeking information related to the appropriate level of security (in $/MW), whether such level should be reduced during the term of the PPA and the impact on pricing for the following potential requirements:

• maintaining a Letter of Credit, a corporate guarantee from a creditworthy entity or some other form of acceptable security during the project development and construction period to ensure that the developer meets the target commercial operation date (“COD”), as well as some other threshold events leading to COD; 
• maintaining a specific level of security during the term of the PPA to cover the cost of decommissioning and removing the project; and
• maintaining a specified level of security during the term of the PPA to ensure performance.

3.4.8 Operating Criteria

The PPA will include an Operations section as well as an appendix setting forth operating restrictions and conditions.  NYPA is seeking information related to the impacts of including any of the following:

• the limits on availability and dispatch;
• minimum capacity factors;
• start-up and shut-down procedures and other provisions that may limit the availability and generation from the project under certain conditions; and
• any additional operating restrictions or conditions that should be included.

3.4.9 Insurance Requirements

The proposed PPA will include standard insurance and indemnification requirements. NYPA is seeking information pertaining to the following areas:

• additional insurance required because of the nature of the project; and
• indemnification requirements.

3.4.10 Default Provisions

NYPA intends to include its standard Event of Default definition in the PPA and is seeking comments from respondents on the following related matters:

• descriptions of opportunities to cure defaults;
• allowed cure periods;
• lender cure options, including purchasing the project; and
• buyer’s remedies.

3.4.11 Other PPA Provisions

NYPA is seeking information related to any other PPA terms and conditions that should be included in the PPA template to be issued with the RFP.

3.5 Permit/Approval Process

NYPA is seeking information related to:

• the federal, state and local permits needed to develop and operate the project as well as the schedule for when those permits would be required; and
• any particular permitting/approval issues that NYPA should address in the RFP.

3.6. Construction Issues

NYPA is seeking information related to construction, particularly information drawn from any prior experience. Issues to be addressed should include:

• material and equipment availability;

• issues related to a meteorological tower;

• strategies for minimizing the amount of work done in the Great Lakes, including opportunities for New York based manufacturing and/or assembly of equipment;
• location of construction and lay down areas, including port requirements;
• issues associated with laying and burying the cable interconnections;
• insurance matters, including marine labor coverage;
• installation vessel and equipment needed and availability; and
• decommissioning plan for removal of project at end of life cycle, including designation of responsible party.

NYPA is also seeking an estimated construction timeline assuming a bid selection date of December 31, 2011.

3.7 Operational Aspects

The RFP will require developers to describe in detail their comprehensive operations and maintenance program for the project’s full life cycle. NYPA is seeking information related to the inclusion of the following O&M components in the RFP:

• planned turbine and structure maintenance (including periodic turbine overhauls);
• a state-of-the art remote communications and monitoring system;
• a readily available trained maintenance staff (including access vessels, tools and spare parts);
• ongoing structural evaluations of the project;
• scheduled maintenance of the interconnection facilities;
• documented safety and emergency rescue plans;
• maintenance procedures during periods of ice cover; and
• any additional items to be included in the RFP.

3.8 Socio-economic Aspects

The installation of the wind turbines will likely have impacts for local communities. Key to the success of the project is local community acceptance. Therefore, the RFP will require respondents to describe their plans for educating the affected communities on the benefits of wind energy. While NYPA intends to publicly support the project and will endeavor to arrange for meetings between the developer and key constituencies and local, state and federal officials, it will ultimately be the developer’s responsibility to address community issues.  NYPA is seeking information related to the inclusion of the following socio-economic issues in the RFP:

·        safety concerns;

·        tourism effects;

·        aesthetic issues; 

·        minimum distance from shore;

·        impacts on the local economy and jobs, specifically job creation opportunities;

·        impacts on real estate and property values;

·        impacts on commercial fishing and navigation;

·        impacts on real estate and property values;

·        migration patterns of birds; and

·        any other socio-economic issues that should be discussed in the RFP.

3.9 Regional Economic Development Aspects

The incorporation in the RFP of a requirement that the project include local content and be constructed and maintained by local workers would likely encourage economic development within the region. As such, NYPA is requesting comments on the following:

·        a requirement in the RFP that a specified portion of the material comprising the project be sourced locally;

·        a requirement in the RFP that local labor represents a specified portion of the workforce charged with developing and constructing the project and the entire workforce charged with operating and maintaining the project after commercial operation;

·        a stated preference in the RFP for proposals that would establish a wind component manufacturing and technology industry in New York State, particularly in Western New York;

·        a stated preference in the RFP for projects that encourage and support the development of green jobs in Western New York;

·        a stated preference in the RFP for proposals that would develop regional wind industry maintenance facilities and/or training centers in New York State; and

·        a stated preference in the RFP for developers that commit that the vessels required for the construction and maintenance of the wind facilities would be built in New York State.

3.10 Financial Aspects

NYPA is seeking recommendations with respect to the financing arrangements anticipated for the project, both construction financing and permanent financing. This information would include:

• the specific financing plan;
• the minimum PPA term required to support the financing plan;
• the proposed corporate structure;
• the anticipated levels of debt and equity (debt/equity ratio);
• whether private placements are envisioned;
• whether a sale-lease-back arrangement is envisioned;
• the anticipated status of lenders in the PPA (Consent Agreements);
• expected assistance from the buyer in completing financing arrangements; 
• the prospects of a public/private partnership; and
• the ability to finance the project if for example, the buyer purchased 50 percent of the output under a long term PPA and the other 50 percent was marketed by the developer on a merchant basis.

3.11 Environmental Aspects

The Great Lakes Offshore Wind Project would be expected to contribute substantial environmental benefits to the region, but could also have certain environmental impacts at the project site.  As such, NYPA is seeking information related to the various environmental issues perceived to be associated with the project.  Specifically, NYPA is seeking information related to:

·        projected reductions in Greenhouse Gases that would be attributable to the project;

• impacts on aquatic life; 
• impacts on avian migration paths and other avian issues; 
• lakebed issues;
• impacts of construction; and
• any other environmental impacts.

3.12 RFP – Anticipated Content

The RFP will include at a minimum, the following material:

·        minimum and maximum size (MW) requirements;

·        results of NYPA commissioned siting and wind assessment studies;

·        draft PPA template;

·        general proposal evaluation criteria;

·        specifications for proposal contents; and

·        procurement schedule.

NYPA is seeking information related to additional components that should be included in the RFP, such as other required technical information.

3.13 Evaluation Criteria

Following are some of the evaluation criteria that NYPA is considering for evaluating proposals. NYPA is seeking comments on the following and suggestions for additional criteria:

·        experience in developing large wind projects;

·        experience with offshore and/or Great Lakes projects (e.g., oil and natural gas industry);

·        pricing and risks imposed on the Buyer;

·        proposed minimum production guarantee and availability;

·        generation duration curve (projected hourly performance);

·        site selection and interconnection plan;

·        plan for community involvement;

·        permitting/approval plan;

·        operation and maintenance plan and strategy for responding to related issues;

·        methodology for forecasting generation;

·        program for decommissioning and site restoration;

·        financing plan; and

·        responsiveness to RFP requirements.

It should be noted that the ultimate selection of a successful project will be based on the overall quantitative (pricing) and qualitative benefits of a proposal. Key factors in the selection process that will be considered include: the developer’s experience, financial resources and well-being, proposed availability guarantee, the minimum production guarantee and the ability to meet federal and state regulatory requirements in a timely manner. NYPA seeks input from respondents regarding what other factors should be considered in the evaluation process and how they should be weighed.  NYPA’s qualitative evaluation process will review a proposer’s demonstrated understanding of and experience with the approval/permitting process along with the proposer’s strategy for securing the required approvals and permits.

3.14 Additional Items

NYPA is interested in receiving information about the current status of Great Lakes wind development (e.g., maximum turbine size under consideration, the latest advances in support structures and foundations) and other offshore challenges. Finally, NYPA would be interested in responses to the following questions:

·        What key issues has this RFEI not addressed?

·        What additional information should the RFP include to assist developers in preparing a quality proposal?

·        What factors are most important in determining the ability to finance a Great Lakes Offshore Wind Project?

·        What information do potential bidders need with respect to the Great Lakes sites?

·        What can NYPA do to enhance the quality of proposals?

4. Responding to this RFEI

Parties interested in responding to this RFEI should provide a Notice of Intent to Respond to NYPA on or before May 18, 2009, which includes all pertinent contact information (lead contact name, company, phone number and e-mail address). This notice is for administrative purposes only and is not mandatory.

Responses to this RFEI should be sent to the following no later than June 15, 2009:

Mr. Jordan Brandeis

Vice President – Power Resources, Planning and Acquisition

New York Power Authority

123 Main Street

White Plains, NY 10601

5. Freedom of Information Law

Responders to this RFEI are cautioned to clearly label as “proprietary” and “confidential” any specific information or other material that responders consider to be confidential. NYPA is subject to the New York State Freedom of Information Law (“FOIL”) which provides, as a general rule, that NYPA records are accessible to the public, subject only to exceptions enumerated in FOIL which include, but are not limited to, an exception protecting trade secrets. After receipt of a FOIL request for information provided by a responder to this RFEI, NYPA, to the fullest extent permitted by FOIL, would seek to protect the information submitted by the RFEI responder that is marked “confidential” and “proprietary”.