Offshore Wind Wire

National Grid has agreed to buy electricity produced by an eight-turbine offshore wind project in Rhode Island state waters, Gov. Donald Carcieri announced yesterday.

“This agreement marks a historic moment for the state of Rhode Island,” Deepwater Wind CEO William Moore said in a statement.  “Our agreement with National Grid is a critical next step in Deepwater’s plans to develop the nation’s first offshore wind farm.”

Deepwater Wind LLC is developing the project near Block Island and expects to begin producing power in 2013.  The power purchase agreement negotiations had stalled in November, but Carcieri said last week that a deal was imminent.

National Grid will buy the energy at 24.4 cents per kilowatt hour in the first year of operation.  In October, Deepwater Wind had been asking for 30.7 cents per kilowatt hour.  The governor’s office estimated that this agreement would increase the average monthly bill for National Grid’s Rhode Island customers by $1.35.  According to the deal, the purchase price wil rise by 3.5% annually.

The Rhode Island Public Utilities Commission must still sign off on the agreement.  In a filing to that commission, National Grid argued that there are cheaper renewable energy sources but the Block Island project is a smart policy move.  The utility specifically asked, however, that this deal not be used to set the bar for future PPAs.

“National Grid’s support is based on the assumption that the Commission, in any order approving the agreement, will distinguish it from other projects that the company may consider in the future,” the letter read.  “National Grid has the obligation to seek contracts from renewable generation for up to 10 percent of its load under the law.  It will be extremely important that, in fulfilling that obligation, National Grid not be required to purchase power at the same price and on the same terms as has been provided for purposes of facilitating this demonstration project …. But if this agreement and its terms are placed in proper context, there is a rational basis for approving it.”

National Grid also recently agreed to enter neogitiations on a power purchase agreement with Cape Wind, the 130-turbine project being planned for Nantucket Sound in Massachusetts.