Offshore Wind Wire

A power purchase agreement reached early this month between Deepwater Wind and National Grid does not include the expense of a submarine transmission cable to the mainland and that construction could cost ratepayers an additional $50 million, according to a National Grid official.

The agreement was a major step toward the development of an eight-turbine offshore wind project near Block Island, Rhode Island.  On Dec. 9, Gov. Donald Carcieri announced that National Grid had agreed to buy the energy at 24.4 cents per kilowatt hour in the first year of operation.  In a filing to the Rhode Island Public Utilities Commission, National Grid warned that it was not likely to agree to a similarly high price on future projects.

Deepwater plans to build and own a 33 kilovolt submarine cable from the offshore turbines to Block Island, which is not currently connected to the grid.  The company also proposed a 69 kilovolt submarine cable from Block Island to the mainland but that expense was not included in the power purchase agreement.

The cost of the additional underwater transmission could be added to the power purchase agreement or recovered through increased National Grid distribution rates, according to Daniel Glenning, a senior project manager at National Grid.  Glenning’s comments came in prepared testimony to the Rhode Island Public Utilities Commission, which is still reviewing the agreement.

“The first option would have Deepwater or another entity … be completely responsible for constructing, owning and operating the cable.  Under this option, the costs of the cable would be added to the existing pricing,” Glenning said.  “This option would add at least $35-$50 million to the project construction cost to be recovered through the PPA.”

The testimony did not clarify how that additional cost would impact ratepayers.  Under the current terms of the agreement, the average monthly bill for National Grid’s Rhode Island customers will increase by $1.35 in the first year of the wind farm’s operations.

“The second option would have Deepwater or another entity … construct the cable and then turn over ownership and operation of the cable to National Grid,” Glenning said.  “Under this option, National Grid would recover the revenue requirement for its investment through distribution rates under an arrangement that would have to be approved by the Federal Energy Regulatory Commission.”