AWEA - National Grid contracts for Deepwater’s Rhode Island Offshore Project

Inking only the second contract of its kind, Deepwater Wind and National Grid have signed a 20-year power purchase agreement for the energy coming from a proposed small offshore wind project off the coast of the Rhode Island’s Block Island, Governor Donald Carcieri (D) announced.

Deepwater Wind plans to develop the Block Island Wind Farm in state waters, about three miles off the southeastern coast of the island. The “demonstration project” will include up to eight turbines that will provide power at mainland rates for the island’s residents, who now pay some of the nation’s highest electric prices, according to the governor’s office. The wind farm will provide approximately 1% of Rhode Island’s energy needs.

Under the terms of the agreement, National Grid will purchase the energy generated from Deepwater Wind’s Block Island Wind Farm at a cost of 24.4 cents per kWh in the first full year of operation, which is expected to occur in 2013, escalating at 3.5% per year. For 2013, the contract, which requires the approval of the Rhode Island Public Utilities Commission, would translate into an increase on the typical 500-kWh residential customer monthly bill for National Grid customers of approximately $1.35 per month.

Deepwater Wind, which is backed by onshore developer First Wind, later plans to build a large-scale wind farm, with about 106 turbines, located in federal waters about 15 miles from land. The governor’s office noted that the energy cost for the utility-scale “Rhode Island Wind Farm” will be lower than that of the Block Island Wind Farm because of the economies of scale, the shortening of the supply chain from a more developed industry, and the creation of a robust, sustainable local workforce. Deepwater must execute a separate power purchase agreement for the power generated from the larger wind farm.

“This is a tremendous accomplishment and ensures that Rhode Island remains the leader in developing the nation’s first offshore wind farm,” said Carcieri, who spoke at AWEA’s Offshore Wind Power Workshop in Boston, Mass., last week. “I commend National Grid and Deepwater Wind for recognizing the importance of this agreement both to the ratepayer and the Rhode Island economy. Investing in renewable energy reduces our exposure to the volatility of energy prices on the world market, and this agreement establishes confidence in the financial feasibility of the project.”

The only other PPA for offshore wind power was signed in 2008 between developer Bluewater Wind and Delmarva Power for the wind energy coming from Bluewater’s proposed project off the coast of Delaware. Just last week, in news surrounding the active AWEA offshore workshop, Massachusetts Governor Deval Patrick (D) announced that developer Cape Wind and National Grid will enter PPA negotiations for power coming from Cape Wind’s proposed project off the coast of Massachusetts. Yet more offshore news came this week, with U.S. Interior Secretary announcing that the Minerals Management Service will establish a new Mid- and North Atlantic offshore renewable energy regional office (see story below).

Last summer, Deepwater Wind reached an agreement to develop 117 acres at Quonset Point, in North Kingstown, R.I., as a hub of manufacturing operations for the offshore wind industry.

“This agreement marks a historic moment for the state of Rhode Island,” said Deepwater Wind CEO William M. Moore. “Our agreement with National Grid is a critical next step in Deepwater’s plans to develop the nation’s first offshore wind farm off the coast of Block Island and to establish a regional green-industry hub at Quonset Point, bringing hundreds of new, good-paying jobs to Rhode Island. We now look forward to participating in the public hearing process before the Public Utilities Commission.”