Buoyed by new law, wind farm plans advance

Mon, 07/06/2009 - 4:00am

07/04/09 - The developer of two proposed wind farms off the coast of Block Island scored a major victory on June 26 when the governor signed legislation creating a guaranteed market for its electricity.

Developer Deepwater Wind called the measure critical to moving forward with its projects that, if completed, would become the first offshore wind farms in the United States. But the privately financed farms come at a massive cost — at least $1.5 billion — and would sell electricity at above-market rates. The new law requires National Grid, the state’s dominant electricity distributor, to purchase Deepwater’s electricity. In return, National Grid is allowed to collect a profit from customers equal to 2.75 percent of its annual contract with Deepwater.

Three days after the governor signed the law, the Quonset Development Corp. approved a lease with Deepwater for 117 acres at the Quonset Business Park. Deepwater plans to use three separate parcels there to stage offshore wind projects.

On Tuesday, Deepwater Wind Chief Operating Officer Chris Wissemann said last week’s signing quickly bumped the company into the execution phase of its projects.

“That was a big relief,” he said. “That was essentially what we call the opening gate to really starting the business. And without that, we could not have proceeded, frankly, with the Quonset lease. So that was the catalyst to let everyone know how serious Rhode Island is about capturing that opportunity.”

Deepwater foresees one wind farm with about 100 turbines about 15 miles to the east of Block Island. The other farm, with five to eight turbines, would sit about three miles off the southeast coast of Block Island and include a tie-in to the island as well as an electric cable from the mainland. Deepwater officials hope to have the smaller farm operational by 2011 and the larger one running a few years later.

Deepwater officials envision selling electricity to National Grid, which would then sell it to the Block Island Power Co. Each entity would be allowed to add on a profit, with National Grid being required to charge BIPCo — and by extension island customers — higher rates than mainland customers.

That provision soothed concerns from some lawmakers who worried that mainland electric customers would subsidize the cost of an electric cable between the island and the mainland. But even with the extra charge, island customers can expect to pay “way, way, way less” than the 68 cents a kilowatt-hour rates they paid last summer, said Deepwater’s Wissemann. The state Public Utilities Commission would oversee the contracts that establish the rates ultimately paid by customers.

BIPCo Chief Operating Officer Cliff McGinnes said the company planned to meet with representatives from National Grid, Deepwater and New England ISO, the region’s electric grid, to iron out the details of transmitting the electricity. Until then, McGinnes said he could not speculate the final price of electricity.

Also unclear is who will own the cable between the island and mainland. National Grid Deputy General Counsel Ronald Gerwatowski told a Senate committee last month that the company is “interested” in owning the cable, which he estimated would cost $20 million to build. Wissemann said such an ownership structure would make sense, but Deepwater is working with National Grid to “figure out what’s the most logical arrangement.”

The thought of a cable carrying cheap electricity to the island brightened the spirits of the four BIPCo owners. McGinnes said the four have been worried the price of the oil necessary for the company’s generators would spike as it did last summer. BIPCo also wants to avoid the $550,000 to $750,000 cost of replacing its underground storage tanks in 2015.

“Couldn’t be anybody more pleased than the four owners,” McGinnes said about last week’s bill signing.

If the farms and cable become a reality, it would shift BIPCo from an electricity generator and distributor solely to a distributor.

A similar change occurred on Nantucket after National Grid connected the island with an electricity cable. The owners of the island power company then sold the business to National Grid. McGinnes would not explicitly rule out a sale of BIPCo to National Grid, but called it highly unlikely.

“I don’t know why National Grid would want to buy the power company — not enough customers. But who knows, it might serve some other function,” he said.

For now, BIPCo owners were celebrating the passage of the legislation that took two years of negotiations to become law. The governor initially balked at similar legislation last year, saying that National Grid did not deserve an extra profit for buying electricity from renewable energy sources. He vetoed the bill.

But this year the Gov. Donald Carcieri praised the bill. His spokeswoman said this year’s bill afforded customers more protections than last year’s legislation. In a news release, Carcieri called the legislation crucial to meeting his goal of generating 20 percent of the state’s electricity from renewable energy sources.

“This legislation, championed by [Majority] Leader [Gordon] Fox in the House, sends a strong signal that Rhode Island is serious about renewable energy,” he said. “We have the natural resources, a willing and able work force, and now with this legislation, we have the regulatory environment to encourage development. Our state is now in the position to be a national leader in this industry.”

Deepwater tempted lawmakers to pass the bill with the promise of creating up to 800 jobs at Quonset and making the Ocean State the hub of “green” manufacturing. Labor union leaders signed up to urge legislators to send the bill to the governor, and Deepwater hired lobbyist Robert Goldberg to argue its case.

In the House, Fox spearheaded the passage of the bill, while in the Senate, Deepwater found a friend in Sen. Susan Sosnowski, who represents the island and chaired the environmental committee that sent the bill to the floor.

Speaker of the House William Murphy called the passage of the legislation “one of the most significant accomplishments of the legislative session,” according to a news release.

Carcieri signed this bill during the Green Economy Roundtable in Warwick hosted by the Rhode Island Economic Development Corp.