PROVIDENCE – Earlier this month, the wholesale price of electricity (including renewable energy certificates) to be generated by the 800-megawatt Vineyard Wind project was revealed to be an average of 6.5 cents per kilowatt hour in constant 2017 dollars over the course of the 20-year contract for the project, lower than the standard average wholesale price of 7.9 cents per kilowatt hour in the Massachusetts market.
The Vineyard Wind project, because it is generated from a pure renewable energy source, will generate an increased REC supply in the state and therefore lower energy market prices, according to the Mass. Department of Energy Resources.
The project was estimated to save the Massachusetts ratepayer approximately 3.5 cents per kilowatt hour over standard energy sources and have a total net benefit of $1.4 billion over the term of the contract, the Mass. DOER said.
Tom Harries, a wind analyst at Bloomberg NEF, said of the deal, “I think the wider industry expected much higher prices. The repercussions of this are it will probably awaken a lot of other coastal states to the value of offshore wind.”
Vineyard Wind LLC is 50 percent owned by funds of Copenhagen Infrastructure Partners and 50 percent by Avangrid Renewables, both Europe-based companies. The contract with the state was the result of a Massachusetts request for proposals that resulted in a number of responses.
The project also includes a $15 million state initiative for offshore wind acceleration, $2 million in workforce development and $3 million for innovations in protecting marine animals.
The project’s rates are significantly lower than the Block Island Wind Farm built by Deepwater Wind LLC, which started wholesale rates at 24.4 cents per kilowatt hour in 2016, with increases of 3.5 percent yearly through the two-decade contract. Deepwater Wind also submitted a response to the Massachusetts RFP, which eventually became the Revolution Wind project that Rhode Island has agreed to support.
The rates for the 400-megawatt Revolution Wind project, to be built and operated by Deepwater Wind, have yet to be finalized. A company spokesperson said that the rates are still being negotiated with National Grid Rhode Island.
Previously, the company told PBN that it expects the rates to be “dramatically lower” than the Block Island Wind Farm energy rates, but did not answer questions about if the rates would be similar to the Vineyard Wind rates.
The company also has had rates approved for its Long Island Power Authority project, the 90-megawatt South Fork Wind Farm, but the negotiations of rates were confidential, per New York law. It has been reported that the deal will deliver wholesale prices of between 16 cents per kilowatt hour and 22.5 cents per kilowatt hour.
In its submission evaluating the Vineyard Wind project rates, the Mass. DOER said that the Vineyard Wind project, specifically the 800-megawatt option (the company submitted a 400-megawatt option), was “superior to other proposals,” which included the Deepwater proposal accepted by Rhode Island, and was “likely to produce significantly more economic benefits to ratepayers” compared to the Vineyard Wind 400-megawatt option.
Massachusetts had first selection in its RFP process that Rhode Island participated in.
Rhode Island’s Revolution Wind project will have up to 50 wind turbines. Construction will begin as soon as 2020, with the potential to begin operation in 2023. The transmission cable is planned to make landfall at Quonset Point, North Kingstown, where it will connect with the mainland grid.
Once the company reaches an agreement with National Grid, the deal will be sent to the R.I. Department of Energy Resources for review.
Previously, a Department of Public Utilities and Carriers spokesman said that Deepwater Wind will be required to demonstrate economic benefits to the DPUC in order for its contract to be approved.
Chris Bergenheim is the PBN web editor. He can be reached at Bergenheim@PBN.com.