RI, neighbors team up to get cheaper wind power from bigger projects - The Providence Journal

RI, neighbors team up to get cheaper wind power from bigger projects

RI is beginning to work with neighbor states on wind power. Here's how it works
Alex Kuffner

PROVIDENCE – Rhode Island is joining with Connecticut and Massachusetts to seek large offshore wind proposals that could supply multiple states in an effort aimed at securing lower energy prices.

The three states on Wednesday announced the agreement for what that they described as the first joint solicitation for bids in the United States, with a goal of bringing down prices through economies of scale.

It comes as the states have either issued new solicitations for more offshore wind power or are preparing to do so in the coming weeks. Three solicitations would total 6,000 megawatts of capacity – enough power for more than 3 million homes.

Under the memorandum of agreement, the states will continue with their individual solicitations and will coordinate schedules to close out the submissions by January or February, evaluate proposals in the spring and select any projects by the summer. Developers will still be allowed to propose projects that would supply only a single state, but preference will be given to multi-state proposals.

“Regional collaboration through this three states MOU will not only help in advancing offshore wind projects of large scale by securing cost-effective energy prices for ratepayers – but it also provides a significant opportunity for long-term economic development that the offshore wind industry will bring to the three states,” Rhode Island Gov. Dan McKee said in a statement.

Offshore wind farms have generally been growing in size as the industry in America matures, helping to drive down the prices of electricity they sell. The nation's first project, completed off Block Island seven years ago, was only 30 megawatts and had a starting price of 24.4 cents per kilowatt hour with an annual escalator built into the contract. A second project to supply Rhode Island that is set to start offshore construction next summer has a 400-megawatt capacity and would sell power at less than half the price.

But developers are starting to run into problems with the contracts they negotiated years ago when supply-chain costs were lower. Inflation has pushed up the costs of construction to the point that two companies behind separate 1,200-megawatt proposals have decided to pay huge penalties to cancel contracts with Massachusetts utilities rather than go ahead under prices that they said wouldn't yield reasonable profits.

But meeting those revenue goals could mean higher prices paid by electric ratepayers. Most recently, Rhode Island Energy turned down a proposal for an 884-megawatt wind farm because it said the price was unreasonable.

The company is working on a larger procurement, for 1,200 megawatts of capacity, in a belief that it would lead to better prices.

The regional agreement is another effort aimed at countering the upward pressure on prices.

Developers typically lease rights to develop areas that can accommodate a couple of thousand megawatts of capacity or more. Opening up the potential for larger projects gives them the possibility of building out their lease areas in one fell swoop instead of in stages, said Chris Kearns, acting commissioner of the Rhode Island Office of Energy Resources.

One potential question in any multi-state bid could come in how economic development benefits are apportioned among the states. While all states in a multi-state bid would be offered the same price, any of them may choose to pay more in exchange for, say, hosting more of the project assembly and staging.

"By working regionally, we hope to secure cost-competitive energy resources that will help make our energy supply more reliable, affordable and clean," Kearns said.