Offshore Wind Wire

By Peter Brennan

An energy-pricing expert, hired by the state of Rhode Island, testified last week that the Power Purchase Agreement between Deepwater Wind and National Grid was too high because of excessive profits for the developer.

Rhode Island’s Public Utilities Commission must approve the agreement to buy power from the proposed eight-turbine wind farm near Block Island.  The two sides struck a deal in December, National Grid agreed to pay 24.4 cents per kilowatt-hour in 2013 and that price would rise 3.5 percent each year.

The state’s Division of Public Utilities retained Richard Hahn, a consultant with La Capra Associates of Boston, to review the pricing arrangement.  Hahn said the price was too high because Deepwater was receiving too high a return.

“Based on Deepwater’s own assumptions, the rate of return to the project’s developers is higher than would be expected for other comparable renewable energy projects,” Hahn said in his testimony.  “It appears that the Deepwater project could be developed at a lower PPA price.”

Hahn said that a lower purchase price would reduce the “subsidy … paid by Rhode Island ratepayers through higher electric rates.”

Last month, the Commission received testimony from William Short, an energy pricing expert based in New York City and hired by Block Island residents opposed to the offshore wind farm.  Short told the Commission that the project was too large to be a demonstration project but too small to be commercially feasible.

Both Short and Hahn said that the cost of the transmission cable between Block Island and the mainland will represent an additional cost to ratepayers and should not have been excluded from the power purchase agreement.

The bulk of Hahn’s testimony, however, criticized the relatively high cost of the Deepwater project.

“When compared to other renewable projects, as defined by Rhode Island statute, the Deepwater PPA price is at the very high end of the range,” Hahn said.