Expert says Rhode Island power purchase agreement too expensive

A power pricing expert testified last week that a proposed offshore wind power purchase agreement between Deepwater Wind and National Grid is too expensive and should not be approved.

Deepwater Wind is planning an eight-turbine project in Rhode Island state waters, near Block Island. The company reached a power purchase agreement last month with National Grid - the utility agreed to pay 24.4 cents per kilowatt hour for electricity from the wind farm. That agreement must be approved by the Rhode Island Public Utilities Commission.

William Short told the commission that the proposed wind farm was too small to be commercially viable. Short, an energy and power marketing consultant based out of New York City, was hired by landowners on Block Island who are opposed to the project.

"The furthest along offshore wind farms off the coast of the Mid-Atlantic and New England states ... are each approximately 450 MW. The [Block Island] Project's proposed size is 1/15th of those projects. The project is too small to have economies of scale," Short said. "The project is nothing more than a demonstration project and as a demonstration project it is far too large."

Aside from Short, testimony to the commission has been generally positive and supportive of the PPA, including endorsements from National Grid, Deepwater and the town of New Shoreham on Block Island. National Grid has said, however, that it might not be willing to pay such a high price on future projects.

Short also criticized the decision to strike a power purchase agreement without factoring in the cost of the undersea cable between Block Island and the mainland. The current PPA only accounts for the undersea cable between the turbines and Block Island.

The second cable would be a transmission line through which power will flow in both directions. The cable would carry excess turbine generated power from the Island to the mainland, and also carry power from the mainland to the Island when the turbines cannot meet the Island's demand. There is currently no cable from Block Island - the community gets its power from a diesel generator on the island.

A National Grid official testified last month that the additional undersea cable could add $30 to $50 million to the overall project cost.

Asked about the second cable, National Grid Deputy General Counsel Ronald Gerwatowski said that "we [National Grid] have the right to own the cable. If we own the cable, the cable will become a part of National Grid's transmission rate base. How the costs will be spread through transmission rates among Block Island, National Grid's customers on the mainland, or any other transmission customers is yet to be determined."

Short argued that in order to accurately determine the cost of the Block Island Project, the cable should be included in the PPA.

"I believe that, in order to perform an apples-to-apples comparison [with other offshore wind projects], one should include the annual carrying costs of this cable investment in the cost of the project," Short said.

The Public Utilities Commission has been holding public hearings to discuss the PPA. The last scheduled hearing is on March 26 on Block Island.