Deepwater agreement includes second wind farm

Rhode Island is set to get two offshore wind farms, not just one, under the terms of an agreement the state signed earlier this month with its chosen developer for the high-profile energy project.
The 28-page agreement between the state and Hoboken, N.J.-based Deepwater Wind calls for the company to build two developments over the next few years: a 20-megawatt wind farm, consisting of six to eight turbines, to be located three miles off Block Island and put into operation by June 2012; and the 100-turbine, 385-megawatt wind farm in federal waters that will power up to 120,000 homes.
State officials estimate that the larger project will generate 1.3 million megawatt hours of electricity per year, which would provide roughly 15 percent of the electricity consumed annually in Rhode Island. Gov. Donald L. Carcieri has made the wind farm one of the key priorities of his second term. (Massachusetts Gov. Deval L. Patrick last week set a new goal of developing 2,000 megawatts of wind-power capacity by the year 2020; enough to power 800,000 homes.)
Andrew Dzykewicz, commissioner of the R.I. Office of Energy Resources, expects the main wind farm to generate electricity at 7 to 9 cents per kilowatt-hour. Without naming the utility, the agreement calls for National Grid and Deepwater to sign a long-term, power-purchasing contract for at least 15 years to guarantee a stable revenue stream for the project.
In an interview, Chris Wissemann, Deepwater Wind’s chief operating officer, said state officials and executives at his company decided to add the smaller Block Island development to the plan because the larger project is at the mercy of federal regulators, who have yet to issue final guidelines for the construction of offshore wind farms.
“It frankly makes the timing uncertain, so what we talked about was, let’s at least get some portion that satisfies Block Island’s needs for power, and gives us the ability to build something sooner rather than later,” Wissemann said. Block Islanders have long paid some of the highest electricity prices in the country, topping 60 cents per kilowatt-hour last summer.
In the meantime, Deepwater plans to open a Providence office within the next two months that will focus on regulatory matters. The agreement also gives the company a green light to put up a meteorological tower for research purposes.
The information gathered for the Ocean Special Area Management Plan (SAMP), a zoning blueprint for the state’s coastal waters that is being developed by the R.I. Coastal Resources Management Council, also will speed the wind farm’s progress, Wissemann said.
As expected, the agreement calls for Deepwater to base its corporate manufacturing facilities for all projects between Maine and Delaware at Quonset Point, and asks Deepwater to buy its boats and other materials from Rhode Island businesses whenever possible. “The holy grail is attracting manufacturers [to Quonset Point] so that this really becomes an offshore hub for manufacturing, shipping and employment,” Wissemann added.
Wissemann also shed some new light on Deepwater Wind’s finances. D. E. Shaw & Co., the $33 billion New York hedge fund, owns as much of the company as the combined holdings of its other two backers, which are Newton, Mass.-based wind developer First Wind – itself backed by D. E. Shaw – and the hedge fund Ospraie Management.
“Deepwater Wind [has] recruited partners that have the financial wherewithal to go the whole way – not just guys with $10 million to get the permit, but folks with hundreds of millions to really build the project,” he said. “That’s been our model, and that’s why we have D. E. Shaw.”
Nevertheless, some state officials remain concerned about how the project was awarded. On Dec. 10, then-Senate President Joseph A. Montalbano and House Majority Leader Gordon D. Fox wrote a letter to the governor “to express our strong disagreement with your administration’s approach,” which they called “biased and noncompetitive” and “very bad business for the state.”
Montalbano, who lost his re-election bid and no longer serves in the Senate, and Fox said they were concerned that naming a preferred developer would result in higher prices for Rhode Island ratepayers because of a lack of competition, and they asked the governor to reconsider.
Carcieri defended the administration’s selection process and noted that seven proposals had been vetted by a team of experts.
“It was clearly in the best interest of Rhode Island to [choose] Deepwater Wind,” Carcieri wrote. “They offer the lowest energy price, the most proven financial assets and the most readily measurable and tangible economic development benefits.”
He also said the state would welcome proposals from other renewable-energy developers as long as they do not interfere with Deepwater’s project. &#8226