A recent sunset over Maine's Merrymeeting Bay. |
Interestingly, back in March 2010, the Rhode Island PUC rejected a similarly priced contract between Deepwater Wind and National Grid, on the grounds that the price was not "commercially reasonable". In recognition that long-term contracting for renewable power is crucial to facilitate the financing and development of projects, the Rhode Island legislature enacted laws providing a statutory definition of "commercially reasonable" ("terms and pricing that are reasonably consistent with what an experienced power market analyst would expect to see in transactions involving newly developed renewable energy resources") and giving the PUC greater scope in its analysis. In response, the PUC approved the Block Island contract at 24.4 cents per kWh.
The recent approval by the Massachusetts Department of Public Utilities of a contract between National Grid and Cape Wind is also illustrative of the current pricing of New England offshore wind contracts. Under that deal, National Grid will buy half of Cape Wind’s output for 18.7 cents per kilowatt-hour, with a 3.5% annual escalator in each of the 15 contract years.
For the Rhode Island Sound project, Deepwater Wind suggested in a press release that its price might be in the "mid-teens" per kWh, provided that federal tax incentives are maintained. This relatively lower price (compared to the Block Island project) may arise from economies of scale. As the Massachusetts DPU observed in its analysis of the Cape Wind contract, the nameplate capacity of the 28.8 MW Block Island project is just 6% of the capacity of Cape Wind's 468 MW, "presumably providing the Deepwater Block Island facility with fewer economies of scale" as compared to Cape Wind. I suspect Deepwater Wind's larger project will benefit from its greater experience in project development by the time it gets to the Rhode Island Sound project. It will be interesting to watch as the Rhode Island Sound project moves forward, and Deepwater Wind lines up a buyer for its power.
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