PROVIDENCE – National Grid Rhode Island says that its proposed contract with Ørsted US Offshore Wind and Eversource will have a net direct and indirect cost benefit in Rhode Island of $91.6 million in 2018 dollars over the period 2021 through 2045.
The company’s report, produced by consultant Tabors Caramanis Rudkevich to project the full effects of offshore energy projects, said that its direct costs for the project will be $1.334 billion, $974.8 million for the cost of project energy and $359.2 million for the cost of project Renewable Energy Certificates (which are issued to energy generators by ISO New England for energy created by a renewable source and which can be either used by the generator or sold to another user of energy to satisfy state government Renewable Energy Standards and to offset the nature of the electricity it consumes; in this case National Grid assumes it will purchase the RECs from Ørsted/Eversource).
The market value of energy sold from the project is expected to be $908.4 million, while the market value of RECs retired or sold by National Grid is expected to be $430.2 million, for total income for National Grid of $1.338 billion. As a result, the difference between the cost and revenue, i.e. the direct benefit, is expected to be roughly $4.7 million over 20 years, assuming that the value of the RECs are what National Grid expects them to be.
However, in a 2019 rate filing, National Grid said that above-market contract costs related to RECs in any case may be recovered from ratepayers through a rate increase, according to Rhode Island law.
In a report in 2016, the REC compliance cost for National Grid to in Rhode Island was $9.2 million. By contrast, this latest estimate related to the Revolution Wind project projects that the company should expect a benefit from the REC compliance activity to be $71.1 million over the 20-year time frame.
That same report also said that in April 2018, the estimated Renewable Energy Standard compliance cost impacted a 500-kilowatt hour ratepayer by 24 cents annually. However, as recently as 2013 and 2014, the annual cost to the 500-kilowatt hour ratepayer was $30.72 annually. The report also noted that RECs are expected to decline in value over the next few years (potentially linked to the increasing amount of renewable energy projects being built), even as the demand for renewable energy that will be required for companies to be RES energy compliant is expected to increase in almost every New England state going forward.
At the same time, the report, included in a filing with the R.I. Public Utilities Commission, said that the indirect Rhode Island energy market price change impact from the three wind energy projects – the 400 MW Revolution Wind (for Rhode Island), as well as the 800 MW Vineyard Wind and the 200 MW Revolution Wind (for Connecticut) – will be $87 million for the Ocean State. In aggregate, the direct and indirect impacts add up to the $91.6 million figure.
The $87 million indirect impact comes from an anticipated change in the market value of energy. The figure did not specify if this meant a decline in cost of electricity, a decline in the price of natural gas to generate electricity, or a slowdown in the rate of price increases for electricity.
National Grid declined to answer PBN’s questions on specifics of the projections, such as on REC costs, electricity costs from Revolution Wind, or savings specific to Revolution Wind, advising that more details will come out in its dealings and filings with R.I. Division of Public Utilities and Carriers.
The indirect projection could include the assumption that as Massachusetts, Rhode Island and Connecticut move forward with and receive energy from the Vineyard Wind and two Revolution Wind projects, respectively, the resulting drop in demand for natural gas-generated electricity will bring its price down and thus benefit ratepayers.
The filing also included “other benefits” of the wind projects, such as reduction in costs related to emissions and included economic benefits, reduced gas supply cost (for natural gas consumers, such as those who heat their homes with gas), increasing the projected economic impact of the three wind farms to a projected total of $1.1 billion.
“The Revolution Wind project is a dramatic leap forward in our efforts to expand affordable, clean energy in Rhode Island,” stated R.I. Energy Commissioner Carol Grant at the time of the contract announcement. “The project will reduce consumer energy costs while supplying enough carbon-free electricity to meet a quarter of the state’s annual demand. It is a game changer for our energy system, environment, and our economy – one that will cement Rhode Island as a leader in the growing U.S. offshore wind industry and create hundreds of new jobs for our workforce.”
Chris Bergenheim is the PBN web editor. Email him at Bergenheim@PBN.com.